Get ready for another tricky tax season.
Some last-minute tax legislation by Congress has once more turned something predictable and tedious into something that's confusing and, well, tedious.
This time, it waited so long to pass legislation to stop the spread of the alternative minimum tax that the IRS hasn't fully updated its systems yet. Millions of taxpayers who file certain forms must wait until Feb. 11 to get their returns processed. That's sure to delay some refunds.
On the upside, Congress created new tax breaks for homeowners. One is designed to help people hit by the subprime lending crisis.
Some tax breaks are here only for this tax season. They may be resuscitated later, though. Appearing and disappearing tax breaks have become the norm in recent years. It keeps tax book writers busy, but confuses everyone else.
"This is just no way to run a tax system. People can't follow this. You can't
plan," says Barbara Weltman, author of J.K. Lasser's 1001 Deductions & Tax Breaks. "You need some kind of permanence."
To help you navigate taxes this season, here are things you need to know:
Think twice about filing early
The IRS won't be able to process five forms related to the alternative minimum tax legislation until Feb. 11. You don't have to owe AMT to be affected.
The forms: Form 8863 for education credits; Form 5695 for residential energy credits; Form 8396 for mortgage interest credit; Schedule 2, Form 1040A for child and dependent care expenses, and Form 8859 for a first-time homebuyer credit for D.C. residents.
The IRS will reject returns with one of these forms if they are electronically filed before Feb. 11. File a paper return early with one of these forms and your return will be held by the IRS and processed later. About 13.5 million taxpayers file these forms, although most aren't early filers, the IRS says.
There are other reasons not to rush.
More financial institutions than usual may be asking for extra time to get 1099 investment income forms into the hands of taxpayers. The deadline is Jan. 31.
Also, Social Security said last week it will be sending out corrected 1099-SSA forms to about 2.7 million beneficiaries - including 32,936 Marylanders - by the end of the month. The incorrect forms over-reported benefits received for some in Medicare's Part C and D programs.
Mortgage debt forgiveness relief
