Late Tax Changes Mean IRS Forms are Wrong
There is a general implicit agreement between Congress and the IRS regarding tax changes. Congress agrees to make all tax code changes before November, but broker the agreement this year.
If you think you are the only one with tax deadlines, you are not. In a wickedly funny twist, the IRS also has them. Specifically, they have to get all the tax forms for the year printed up by November of the previous year. Since there are millions of tax forms that have to be produced, Congress makes an effort to make the relevant tax changes before forms have to be printed each November. Well, not this year. Before losing control of Congress, the Republicans went nuts. While this has caused a problem for the IRS, it has really caused a problem for you. Why? Well, the tax forms are wrong in certain areas. Here are some highlights.
1. Sales Tax Deduction Under a 2004 law, you could deduct the total state sales tax you paid for the year instead of state income tax. This was a boon for those living in states with low or no income taxes such as Florida and Texas. The deduction was set to expire at the end of 2005. Last minute legislation by Congress extended it through 2007. The deduction is not, however, listed on the tax forms. To claim it, fill in the amount on line 5 of Schedule A and write ST next to the box.
2. Education Tuition and Fees Deduction Another last minute bit of legislation. Congress is allowing up to a $4,000 deduction for these items. The tax forms are unclear on this, so you need to claim the deduction on line 35 of the 1040 form, the only form you can use. If you are claiming the deduction for tuition and fees, enter the amount and a T in the space to the left of the line. This is another deduction that can only be claimed on form 1040. Since it can be as high as $4,000, it is worth it.
3. Educator Expense Deduction If you are an educator and used your own money to pay for classroom resources, you can get a deduction of up to $250. To claim it, you must use form 1040. The form is wrong, so you need to enter the amount on line 23 which reads Archer MSA Deduction. Add an E if you are just claiming the educator expense deduction. If you are also claiming the Archer deduction, write in a B
People love to complain about how difficult it is to understand tax forms. In general, they are right. This year, however, the blame falls directly on Congress, not the IRS.
Richard A. Chapo is with BusinessTaxRecovery.com - providing daily tax tips.
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