Like it or not, the rules for filing your taxes change every year. Even experts have to relearn the ropes annually, with law changes, new forms, and other hurdles posing a constant challenge.
With just over a month to go before the filing deadline, here's a gallery of some of the more important changes hitting taxpayers this year. For a more complete list, look at the IRS' summary of tax law changes.
This Year's Tax Changes
2012 Tax Rule Changes: What You Need to Know
Each year, many figures that are important for tax purposes get adjusted for inflation. For the 2011 tax returns you're filing now, the adjustment was 1.5%, giving you a small extra break compared to last year.
If you have to report gains or losses from sales of stocks, mutual funds, or other investments, you'll notice the Schedule D form you have to complete has changed. In addition, the new Form 8949 allows you to plug in information that your broker is now required to provide to you for certain investment sales. Given that this is a new procedure, you'll want to double-check to make sure your broker has given you accurate numbers.
If you deduct mileage for business purposes, you'll have to deal with two separate rates: $0.51 per mile for the first half of 2011 and $0.555 per mile for the second half of the year. Similar changes happened for mileage for medical or moving purposes.
Most workers had the lower amount of payroll tax withholding reflected in their paychecks. But if you're self-employed, you'll need to adjust the amount of self-employment tax you pay to reflect the tax-rate drop. Remember, though, that the self-employed deduction for taxes paid doesn't reflect that reduction -- thus, your deduction will be more than half of the tax you pay.
If you took advantage of the provision that let you put off including a 2010 Roth conversion in your taxable income last year, it's time to pay the piper. You'll have to add half of the converted amount this year, with the rest going on your 2012 return.
Congress got its act together to provide an increased 2011 exemption to the alternative minimum tax. That's good news for filers this year, although the picture for 2012 is less clear, as lawmakers still haven't gotten around to making a similar provision for this year.
Tax law changes are a part of filing your taxes every year. As long as you're on the lookout for them, you should be able to avoid mistakes and get the refund amount you deserve.
Selling your kid's old bicycle is not likely to cause any tax consequences, but when you sell crafts, vintage or specialty items on websites like Etsy, you must report and pay taxes on your net income. You will also likely need to pay self-employment tax on your profits, and in some locations, you may also be responsible for charging and collecting sales tax.
If you use vehicles in your small business, how and when you deduct for the business use of those vehicles can have significant tax implications. It pays to learn the nuances of mileage deductions, buying versus leasing and depreciation of vehicles. Special rules for business vehicles can deliver healthy tax savings.
Congress has passed the largest piece of tax reform legislation in more than three decades. The bill will affect the taxes of most taxpayers, but one key point to keep in mind is that for most people, the bill won't affect your taxes for 2017 (the one you file in 2018).
Every April, many taxpayers wait until the last minute to file their federal income tax returns. Despite this tendency, there are many reasons to file your taxes early. If you will receive a refund, you may want to submit your return as quickly as possible. Additionally, there are benefits to filing early for those taxpayers who have a balance due.