The Internal Revenue Service has found that changes in Form 8863, Education Credits, are delaying more than 600,000 tax returns, many of which appear to come from H&R Block.
The IRS acknowledged in an email Friday that it revised the form for tax year 2012 “to help taxpayers and tax preparers understand the qualifications for the American Opportunity Tax Credit. Checkboxes for lines 23-26 were added to confirm basic qualifications for taxpayers claiming this credit. If these lines are left blank, there will be a delay in the processing of the taxpayer’s return. To avoid delays, ensure your clients complete Form 8863 correctly.”
The IRS originally warned about the delays last month, telling preparers that they needed to fill out Yes or No in response to certain questions asking whether students had completed four years of post-secondary education before 2012 and whether they had ever been convicted before the end of 2012 of a federal or state felony for possession or distribution of a controlled substance (see IRS Warns of Problems with Education Credit Filings).
With so many changes looming for 2013, it’s easy to forget that there were some significant tweaks to the Tax Code for 2012. Here’s a list of eleven changes to keep in mind before you file your 2012 tax return, due April 15, 2013:
1. Payroll tax credit will still affect self-employed taxpayers. The expiration of the payroll tax credit for 2013 was big news – but don’t forget that the credit was still in place for 2012. While that means nothing for employees subject to withholding (no additional breaks on your federal income tax return since you’ve already received the benefit of the payroll tax credit in your withholding), if you were self-employed you will receive an adjustment on your self-employment (SE) taxes when you file your federal income tax return. Your SE tax will be reduced by 2%; the SE tax rate of 12.4% is reduced to 10.4%.
2. Forms W-2 have more information this year. Under the Affordable Health Care Act, most employers are required to report the value of health care benefits received by an employee on a 2012 federal form W-2 (a few small businesses are still exempt from reporting under the transitional relief offered by IRS). The amount will be reported in box 12 with Code DD and should include both the portion paid by the employer as well as any amount paid in by an employee. Even though it appears on a W-2, this amount remains federal income tax free for 2012.