Expiration of Tuition and Fees Deduction

The tuition and fees deduction expired December 31, 2011; it is not available on 2012 tax returns. At the time this presentation is being written, no legislative action has been taken to extend the deduction. Please stay tuned to MBTO/MBFTO and the Tax Institute at H&R Block for details on any potential extensions of the tuition and fees deduction. Note: The tuition and fees deduction is available for tax years for which the statute is still open for amended returns (generally, tax years 20092011). You should make certain to carefully consider the tuition and fees deduction, especially as part of Second Look reviews of eligible returns. Qualifying expenses of higher education may potentially be used to claim either the AOC or the lifetime learning credit. Make certain to conduct a thorough interview with your client to maximize the tax benefit of their education-related expenses.

Expiration of Qualified Educator Adjustment

The qualified educator adjustment (commonly referred to as the educator expenses deduction) expired December 31, 2011; it is not available on 2012 tax returns. At the time this presentation is being written, no legislative action has been taken to extend the deduction. Please stay tuned to MBTO/MBFTO and the Tax Institute at H&R Block for details on any potential extensions of the qualified educator adjustment. Note: The adjustment is available for tax years for which the statute is still open for amended returns (generally, tax years 20092011). You should make certain to carefully consider the adjustment, especially as part of Second Look reviews of eligible returns. Unreimbursed educator expenses may be claimed as unreimbursed employee-business expenses, subject to the 2%-of-AGI limitation, on Form 1040, Schedule A.

Whats New for the Education Credits?

The basics of the education credits did not change for 2012. For 2012, the education credits are still the AOC and the lifetime learning credit. However, the IRS is paying much closer attention to the claiming of the credit(s). There are significant changes coming for the Form 8863 and the amount of information which will be reported on 2012 returns. The new Form 8863 is only available in draft format; it may be viewed at: http://www.irs.gov/pub/irs-dft/f8863--dft.pdf

Expiration of the AOC

The AOC was designed to be a temporary modification/expansion of the Hope credit; unless it is extended, the AOC expires December 31, 2012. For tax years beginning after December 31, 2012, the Hope credit returns. Remember, the Hope credit is not refundable. We need to make sure we help our clients plan for the change. At the time this presentation is being developed, it is not known if the AOC will be extended beyond December 31, 2012. Please check MBTO/MBFTO, The Tax Institute at H&R Block, and any other supplemental information for the latest developments.

Whats New for the Education Credits

New IRS procedures for claiming the credits The IRS continually reviews tax returns to help identify issues with which taxpayers have difficulty, and/or areas to which it (the IRS) needs to pay more attention to help prevent the improper claiming or payment of a tax benefit. A prime example of such effort is the development and application of due diligence procedures regarding the claiming of the Earned Income Credit (EIC).
The IRS has announced that for tax year 2009 the latest year for which they have information nearly 2,000,000 tax returns were filed claiming an education credit for which there was no corresponding Form 1098-T issued by any educational institution. The IRS also found over 35,000 returns filed for 2009 that claimed an education credit for a student under the age of 10. It is safe to say such information has raised concerns with the IRS. Those concerns are compounded by the fact that about 85% of returns filed claiming an education credit are filed by paid preparers. So, beginning with 2012 returns, the IRS is paying much closer attention to the claiming of the education credits.

New IRS procedures for claiming the credits (cont.) The IRS is redesigning Form 8863, education credits (American Opportunity and lifetime learning credits) for 2012. While the form itself is not finalized and may not be published yet, the IRS has announced their goal of collecting the following information on the new form: Institution name Physical address of the institution Age of the student (remember the 35,000 under 10?) Did the student receive Form 1098-T from the institution
As mentioned, the new Form 8863 is still in draft format, but the latest information from the IRS is that a new Part III will be added to the form (it will be page 2 of the form), and that Part III will be completed before the rest of the form (which means Part III will be completed before Parts I or II). The new Part III will contain the information in the above list.

New IRS procedures for claiming the credits (cont.) As an H&R Block Tax Professional, you already know the importance of delivering a thorough and complete client interview. The new IRS procedures will be easy for you to meet because the new procedures are based upon delivering a thorough and complete client interview. You will notice a new screen in TPS to capture the required information for the new Part III of Form 8863.

Mandatory Basis Reporting

Brokers are not required to report basis for any securities acquired before 2011. Clients should continue to maintain their own records

Form 8949, Sales and Other Dispositions of Capital Assets

New reporting rules with respect to capital gains were introduced in 2011.
One of the biggest changes was the introduction of Form 8949. Form 8949 is used to report the sale, exchange, or involuntary conversion of most capital gain property. Most transactions do not require columns (b) and (g) of the form to be completed; however, depending on the taxpayers circumstance, a code may be required. The following attachment can be used to determine whether a code is entered in column (b) or (g) of the Form 8949: Schedule D, Capital Gains and Losses Entries made on Form 8949 are consolidated and carry to Schedule D. As mentioned above, Form 8949 is used to report most capital gain transactions; but certain transactions, such as capital gain distribution from a partnership or S corporation, are reported directly on Schedule D.

Form 8938, Statement of Specified Foreign Financial Assets

Form 8938 is an information return used by taxpayers to report the value of specified foreign financial assets to the IRS. If a taxpayer is required to file the form, it must be attached to their annual tax return and filed by the due date (including extensions) of the return. During tax season 2012, the filing of Form 8938 was suspended because the final version of the form was not available. However, if a taxpayer satisfies the following requirements, they must file a Form 8938 for 2011 with their 2012 annual return:

1. The taxpayer had a tax year that began after March 18th, 2010, 2. The taxpayer was required to file Form 8938, and 3. The taxpayer filed an annual return before the Form 8938 was released.

Form 8938 (continued)

Foreign financial assets include but are not limited to the following Savings, deposit, checking, and brokerage accounts held with a bank or broker-dealer, Stock or securities issued by a foreign corporation, A note, bond, or debenture issued by a foreign person, An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty, An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer, A partnership interest in a foreign partnership, An interest in a foreign retirement plan or deferred compensation plan, An interest in a foreign estate, or Any interest in a foreign-issued insurance contract or annuity with a cash-surrender value.

Streamlined compliance procedure to help U.S. taxpayers abroad get up to date with their U.S. tax filing obligations (cont
On September 1, 2012, the IRS began offering a new procedure to help U.S. taxpayers living abroad who have not timely filed their income tax returns and Forms TD F 90-22.1 get up to date. Qualifying taxpayers who participate in the new streamlined procedure will have their submissions fast-tracked and the IRS will not assert penalties or pursue other actions against the taxpayers. To be eligible for the streamlined procedure, taxpayers must satisfy the following requirements: Lived outside the U.S. since January 1, 2009, Not filed U.S. tax returns since January 1, 2009, Owe $1,500 or less in taxes each year covered by the program, and Present a low-level of compliance risk (have simple returns with little or no U.S. tax due) (See the next page for more details). For U.S. taxpayers living in Canada with Registered Retirement Savings Plans (RRSPs) and/or Registered Retirement Income Funds (RRIFs), retroactive relief for failure to timely

elect income deferral on RRSPs and RRIFs (Article XVIII, Paragraph 7 of the U.S.-Canada Income Tax Treaty permits deferral) will be available through this process as well. The election to defer income is made on Form 8891, U.S. information Return for Compliance Risk Determination The level of risk a taxpayer presents increases if one or more of the following factors are present (thus potentially disqualifying a person from using the new streamlined procedure): If any of the returns submitted through this program claim a refund, If there is a material economic activity in the United States, If the taxpayer has not declared all of his/her income in his/her country of residence, If the taxpayer is under audit or investigation by the IRS, If FBAR penalties have been previously assessed against the taxpayer or if the taxpayer has

previously received an FBAR warning letter, If the taxpayer has a financial interest or authority over a financial account(s) located outside his/her country of residence (for example, the taxpayer lives in Belgium but has a bank account located in the Netherlands), If the taxpayer has a financial interest in an entity or entities located outside his/her country of residence (for example, the taxpayer lives in the United Kingdom but has a financial interest in an entity located in Ireland), If there is U.S. source income, If there are indications of sophisticated tax planning or avoidance, or If the taxpayer presents any other factors used to evaluate risk that are listed on the questionnaire.

Alternative Minimum Tax (AMT

How much tax do you really pay?
As discussed in Tax Update 2010, the Alternative Minimum Tax (AMT) has been with us since 1969 and was originally intended to make certain that the wealthiest American taxpayers did not completely escape federal income tax by offsetting all of their income with deductions. Since its inception, the AMT has undergone several changes. The version of the AMT we have today was enacted in 1993. While AMT rates and rules have changed over the years, the purported intent of the AMT remains the same: to ensure that higher-income taxpayers pay at least a minimum amount of federal tax.

How Does the AMT Work?

The AMT is a parallel tax system. Dont be confused by the word alternative; the client does not get to choose if they want to pay AMT. If the AMT calculation results in a higher tax than the regular tax calculation, the client has to pay the AMT amount. Here are the basics of the AMT: Clients can lose certain tax benefits because of AMT some subtractions for regular tax are not
allowed for AMT. Lost subtractions include: Personal exemptions. The standard deduction.

Certain itemized deductions. Common itemized deductions that are not allowed for AMT are state taxes (state and local income taxes, real property tax, and personal property taxes) and miscellaneous itemized deductions subject to the 2%-of-AGI limitation (such as employee business expenses). Other items referred to as AMT adjustments and preferences are added to or subtracted from income to arrive at alternative minimum taxable income (AMTI). These are deferral or exclusion items. An AMT exemption is then subtracted from AMTI. AMT exemptions phase out for AMTI over: $112,500 (S and HOH). $150,000 (MFJ and QW). $75,000 (MFS). To determine the AMT, the result (referred to as taxable excess) is multiplied by: 26% of the taxable excess up to $175,000. 28% of the taxable excess which exceeds $175,000. The result (referred to as tentative AMT) is compared to the regular tax liability. The client must pay the higher of the two.

Issues With the AMT

It is safe to say the AMT has never been popular. Not only does it make a fairly complicated system of taxation more complicated, the AMT in its current form has three main issues which potentially impact many more clients then originally envisioned when the AMT was first created:

No indexing for inflation. Unlike regular tax, AMT amounts are not automatically adjusted for inflation. This means the AMT exemptions, the exemption phaseout range, and the AMT tax brackets do not change from year to year. This has the effect of making more clients subject to AMT liability each year; even clients who are not higher income. Nonrefundable personal credits. With certain exceptions, nonrefundable personal credits are not allowed for AMT. For this purpose, not allowed means these credits cannot reduce the clients tax liability below the tentative minimum tax. Even if the client does not actually pay AMT (because tentative minimum tax is lower than regular tax), these credits may be reduced or eliminated altogether. Kiddie tax. The AMT exemption is substantially reduced for clients subject to the kiddie tax. Because of recent changes to the kiddie tax (basically, students under age 24 are subject to the kiddie tax unless they are self-supporting based on their own earned income), college students with low-paying part-time jobs or who have other sources of income may have to pay AMT.

AMT Patches
In a variety of attempts to alleviate the unintended consequences of the AMT, Congress has enacted several modifications and/or patches to the AMT over the years. The point of the recent patches has been to prevent taxpayers from losing the tax benefits of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). To that end, Congress has temporarily amended the AMT in two ways in recent years: Increasing the AMT exemption amounts

Allowing all nonrefundable personal credits to be used against AMT

Recall our earlier discussion covering the calculation of the AMT. Because the AMT exemption is subtracted from AMTI, a higher AMT exemption means a lower likelihood of a taxable excess (and thus a lower likelihood of tentative AMT). Additionally, allowing the use of all amounts of nonrefundable personal credits to be used against AMT greatly relieves the impact of the AMT on taxpayers. While it may seem the best long-term solution is to either permanently patch the AMT or eliminate it entirely, such a fix is not nearly so simple. Major areas of consideration include the federal budget, various rules regarding the federal budget, the federal deficit, and tax policy about the AMT and its intended (vs. actual) targets. Suffice to say, a long- term solution regarding the AMT is a very complicated undertaking.

Where are We Now?

The last patch applied to the AMT expired on December 31, 2011. As this training is being developed, Congress has not reached a consensus regarding the AMT subsequent to that date. So we need to consider what may happen next

What Happens Without Another Patch

Broadly speaking, two things may happen without a patch: 1. AMT exemptions revert to their pre-2001 amounts. Recall our earlier discussion regarding AMT exemptions: a lower AMT exemption means clients are more likely to pay AMT. 2. The advantage of nonrefundable personal credits will be reduced or eliminated for many taxpayers because of the tentative AMT limitation. Credits which may not offset tentative AMT in 2012 without a patch include: The lifetime learning credit The Child and Dependent Care Credit The Credit for the Elderly or Disabled Three other popular credits (the Child Tax Credit, Savers Credit, and the adoption credit) were protected by legislation through 2011. However, without additional legislative action, these credits are also limited by AMT beginning in 2012.

Hmmm. Maybe I Wasnt Clear. Where are We Now

While Congressional leaders have indicated a patch will be a priority, opinions are all over the map regarding when or even if a patch will be enacted for the 2012 tax year. Please stay tuned to myBlock for the Tax Office (MBTO), Tax In the News, and any other supplemental information developments.

Preparing an Accurate State Income Tax Return

The starting point for practically every state income tax return is the federal return.

Many state income tax preparation errors are made while attempting to navigate from the income reported on the federal return to the correct state taxable income. States generally make adjustments to either the federal adjusted gross income (AGI) or the federal taxable income (TI). Once the appropriate starting point (federal AGI or TI) is determined, adjustments are generally necessary in order to reconcile the differences between the federal income and the state taxable income. Some of these adjustments will be additions, which are usually add-backs of any federal deductions that may have been taken that are not allowed on the state return or income items that are tax-exempt for federal purposes, but are taxed at the state level. Other adjustments will be subtractions, usually for income items that are taxable under federal tax law, but are tax-exempt under state tax law. The amount of adjustments your tax return will require depends upon the extent to which your state conforms to the federal Tax Code. Arriving at the proper state taxable income can be a confusing maze, but thanks to the H&R Block Learning Team and reputable partners like H&R Block s The Tax Institute, we have compiled an arsenal of resources that will thoroughly equip you to prepare accurate state returns.

State Tax Resources

Many state and federal tax differences have already been programmed into H&R Blocks tax preparation software, but due to the complexity and variety of state tax issues, other resources may be needed in order to gain competence on the variety of state tax matters that you may come across during the upcoming season. H&R Block provides access to many resources that can help you master state tax issues:

One copy each of a state and a federal tax book provided to every company office (available for purchase by Franchises). The Tax Research Center. Internet access to state-specific Department of Revenue Web sites.

The following slides will discuss resources available through the Tax Research Center.

The Tax Research Center (TRC

The Tax Research Center publishes several state reference charts that tax preparers will find helpful in completing an accurate state return. Some of the charts include:

2011 State IRC Conformity Chart 2011 State Snapshot and Return Filing Information State Mortgage Interest Deduction Chart Beginning in early December 2012, the charts referenced above will be available in the TRC in a new location. Once logged in, Tax Professionals will be able to access these as well as other handy reference charts by clicking the References tab in the TRC, located in the upper, far right side of the navigation bar. The Tax Research Center (TRC) provides in-depth research services including a no-cost, easy-to-search library with thousands of articles that make sense of many tax laws and policies.

A Tax Professional can access every state-related article in the TRC database by simply typing the name of a state in the search box. For example, if you type Missouri in the search box, TRC will extract 13 articles with the keyword Missouri contained within it. The first article in the list includes links to the discontinued prior year All States Guides and a link to the article, Does the Tax Research Center have tax information specific to each state

The article referenced above contains links to The Tax Institute state reference charts, as well as a host of other reference materials related to each state. It is the Tax Professionals One-Stop Shop for state tax issues.

The center also provides a service called Ask a Tax Expert, which grants access to custom research and analysis from their team of experienced tax specialists. Finally, My Tax Research provides a way of storing your research requests submitted through Ask a Tax Expert. Here is where your current and prior research requests are saved and your useful bookmarked articles are saved for future easy reference

Tax Research Center Exercise

Please log into myBlock for the Tax Office (MBTO) or myBlock for the Franchise Tax Office (MBFTO). Select Tax Research Tax Institute in the green QuickLinks list on the left-hand side of your screen. If you havent already done so, you will need to create an account with the Tax Research Center (TRC). Once inside the Tax Research Center, type in the name of your residing state in the Start a New Search search engine. Every article with your state as a keyword will appear below the search engine on the right-hand side. The first article listed will be the One-Stop Shop article for your chosen state. Select this article. You will see links to the prior-year All States Guides and the link to the article, Does the Tax Research Center have tax information specific to each state? Click on this article to see all the state-related links available to you through the TRC.

You can browse other articles related to your selected state by clicking Return to Search Results on the menu located to the right of your article. When you have time, return to this site to become better acquainted with the TRCs Ask a Tax Expert feature that allows you to make written research requests that will be

California Property Tax Deduction

In November 2011, the California Franchise Tax Board (FTB) began an education campaign to instruct taxpayers and tax preparers how to calculate the proper property tax deduction. The FTB took what it believed to be the federal position on property taxesthat real property taxes are deductible only if the taxes are based on the assessed value of the property. During the campaign, the FTB requested clarification from the IRS as to the federal law, and on February 6, 2012, the IRS responded that deductible property taxes are not limited to ad valorem assessments. In their response, the IRS explained that contrary to information in its current forms and publications, assessments based on characteristics other than the assessed value of the property may be deductible in certain circumstances if they are levied:

For the general public welfare by a proper taxing authority. At a like rate for all property owners in the jurisdiction. Not for the benefit or a service rendered to an individual taxpayer (i.e. a sidewalk improvement to a specific property).

Consequently, many assessments that the FTB considered to be nondeductible in its 2011 education campaign should actually be deductible. On April 13, 2012, the FTB changed its position to mirror the federal position that was clarified in the IRS response letter. In addition to ad valorem-based taxes, assessments for library services, landscape and lighting, storm water services, flood control services, County Park Dist., and City 911 Fund are also deductible. Therefore, for calendar years 2012 and beyond, preparers of California income tax can assist their clients by identifying additional taxes that are deductible against their federal and state income taxes. For more information, see The Tax Institutes article, California Property Tax Deduction.

Personal and Dependent Exemptions

The personal and dependent exemption amount for 2012 is $3,800

The TPS F1 help function has been improved to two IRS sites. IRS Instructions IRS Publications Because the most recent version of a tax form may only be available as a draft, you can click on the following Web address to locate the draft version: IRS Draft Forms Note: A draft form is not the final version of the form, and until the final version is released, the IRS may change the form or its instructions. TPS contains only the final released versions of IRS tax forms. IRS publications can also be very helpful. An additional list of IRS publications and other resources can be found on the IRS Tax Map Web site at the following link: IRS Tax Map You should better acquaint yourself with the IRS Web site. On the Web site, you will find all the forms, schedules, publications, and instructions you will need for TS13. Remember, practice makes perfect. The more time you spend getting to know the IRS Web site (and the Tax Research Center at The Tax Institute), the better you will be at conducting research and solving tax problems.

Form 1040 has undergone several changes. Listed below are the changes as of the production of this WBT: Tax rate tables income intervals have increased for all filing statuses.

Standard deduction has increased to $5,950 for S/MFS, $11,900 for MFJ/QW, and $8,700 for HH. Personal exemption is $3,800. New MAGI limits for student loan interest deduction begins to phase out for income in excess of $125,000 for MFJ. Limits for all other filers remain the same.

Excess social security withholding starts at $4,624.20 (was $4,485.60). Tuition and fees deduction expired. Line 23 now being held in reserve since educator expense has expired. Line 34 now being held in reserve since tuition and fees deduction has expired. Pending line 51 new Schedule CTC. Line 53 box C added Form 8839 to list of forms reported on this line and requiring checkbox C. The adoption credit is no longer refundable and is now reported on line 53 (was line 71). Line 67 changed to Reserved since the First Time Homebuyers Credit has expired. Line 71 box B changed to Reserved since the adoption credit is no longer refundable

Form 1040A
Tax rate tables Income intervals have increased for all filing status. Standard deduction has increased to $5,950 for S/MFS, $11,900 for MFJ/QW, and $8,700 for HH. Personal exemption is $3,800. Tuition and fees deduction expired. Line 19 has now been set to reserved. Educator expense expired. Line 16 has now been set to reserved. Form 1040A has undergone several changes. Listed below are the changes as of the production of this WBT:

Form 1040ES
Social security withholding rate reverts back to 6.2% for 2013. This will affect the worksheets for calculating SS tax due and the deduction for part of SS tax paid. Mailing address changed for Idaho, New Mexico, Utah, and Wyoming Internal Revenue Service, PO Box, 510000 San Francisco, CA 94151-5100. Mailing address changed for Alabama, Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Missouri, New Jersey, Virginia Internal Revenue Service, PO Box, 1100 Louisville, KY 40293-1100. Mailing address changed for West Virginia Internal Revenue Service, PO Box, 37007 Hartford, CT 06176-0007. Pending Mailing address changed for: Bona fide residents of Guamand the US Virgin Islands have been left off

Form 1040EZ
Tax rate tables Income intervals have increased for all filing statuses.

Standard deduction has increased to $5,950 for S and $11,900 for MFJ. Personal exemption is $3,800.

Form 1040NR
Heading Modifications to foreign address. Field for foreign province/county now includes state. Line 24 Is now set to reserved. Educator expense is set to expire. Line 67 Box b is now set to reserved instead of designated for Form 8839. The adoption credit is no longer refundable. Line 63 New Schedule CTC is replacing Form 8812 and should be attach when claiming additional child tax credit. Line 50 box C Form 8839 will now be reported on this line listed by box c with the other allowed nonrefunable credits

Form 1098
Box 4 Remove mortgage insurance premiums. Deduction on Schedule A is to expire 12-31-2011. Instructions have been added for payments by third party. Mortgage assistance payments by HUDs Emergency Homeowners Loan Program, state housing finance agencies who receive funds from HFA Hardest Hit Fund or similar state programs who receive funding from the EHLP should not be reported here. They should be reported on the 1098-MA.

Form 1099-B
Form 1099-B is prepared by brokerage firms to report the disposition of securities, such as stocks and bonds, sold by the brokerage on behalf of its clients. In an attempt to improve reporting accuracy and to reduce the record keeping burden on individual taxpayers, the following changes have been made to Form 1099-B: Box 1c New box for stock or other symbol. Box 1d New box for quantity sold. Box 2b New box: Check if loss not allowed based on amount in box 2a. Previously box 15. Box 14 New information: State. Previously bartering. Box 16 New identifying state tax withheld. Box 15 Changed to state identification number. (Previously would check if loss not allowed based on amount in box 2). Box 7 Changed to type of gain or sale short term or long term. Previously blank. Box 8 Changed to bartering. (Previously was type of gain or loss). Box 1c Short term/long term checkboxes was box 7 in 6/24/11 draft version. Box 1d and 1e Were 1c and 1d in 6/24/11 draft version. Box 6 Has additional checkbox for basis reported to IRS, compared to 6/24/11 draft. Boxes 7 thru 15 Previously were 8 thru 16 in 6/24/11 draft version

Form 1099-C
Form 1099-C is used to report cancellation of debt. The form has undergone a few changes noted below: Box 6 Removed bankruptcy checkbox replaced with Event Codes A thru I.

New codes for box 6 defined. Codes A H are defined on page 3 of instructions under When a Debt is Canceled. Code I is defined on page 4 under box 6 compared with prior year. Box 6 code G Decision or policy to discontinue collection; H Expiration of nonpayment testing period. Change from 6-15-11. 1099-c draft. Box 6 Codes for type of event must be used in 2013. These codes were optional for 2012. See page 3 of the instructions entitled When Is a Debt Canceled for description of codes. Instructions for Forms 1099A and 1099C. Expanded address field descriptions Added verbiage for town, province, country. Box 6 For 2012, the event code is optional except for Code A Bankruptcy

Form 1099-DIV
New box 10 Tax-exempt dividends amount goes to 1040/(A) line 8b. New box 11 Specified private activity bond interest dividends. The amount is subject to alternative minimum tax and already included in box 10. New box 12 State abbreviation. New box 13 State identification number. New box 14 State tax withheld

Form 1099-OID
Form 1099-OID is used to original issue discount. The form has undergone a few changes noted below: Box 8 New state name replaces blank box. Box 9 New state ID number replaces blank box. Box 10 New state tax withheld replaces blank box. Address expanded Province, country, and foreign postal code are now part of the address for the payer and recipient. New field Payer's country code. New checkbox Check if branch reporting. New Field Box 5 foreign taxes paid. New Field Box 6 foreign country or U.S. possession. Shows country or possession to which foreign tax was paid. Subsequent boxes have been renumbered due to added fields.

Form 2848
Form 2848 is used to authorize an individual to represent a taxpayer before the IRS. The authorized individual must be a person eligible to practice before the IRS. A student who works in a qualified Low Income Taxpayer Clinic (LITC) or Student Tax Clinic Program (STCP) may represent the taxpayer under a special order issued by the Office of Professional Responsibility. Authorization of a qualifying representative will also allow that individual to receive and inspect confidential tax information. Change in filing address Permanent residents of Virgin Islands should mail 2848 to VI Bureau of Internal Revenue, 6115 Estate Smith Bay Suite 225 (was 9601 Estate Thomas Charlotte Amalie). Line 1 New guidance for deceased individual. Enter the name of the decedent as well as the title and address of the executor or personal rep. Part II New data required. Item h and i (the PTIN) is now required to be entered.

Line 3 If the matter being specified relates to an employee plan, the plan number should be included in the description.

Form 3800
Form 3800 reports general business credit. The form has changed with the following notations Pending line 10b Reworded. Now Certain allowable credits (see instructions). Instructions are not yet available to know if this is a content change. Line 16a Reserved. Line 16b Reserved. Line 17a Changed to enter smaller of line 6 or 16a (was 16c). Line 17 b Reserved. Line 17c Reserved. Line 21 Changed instructions to subtract line 17a (was 17b on 2011). Line 28 Changed instructions to add line 17a (was 17b on 2011). Top of page 3 Added fields for name(s) and identifying number at top of page above Part III. Obsolete Just a wording change. Part III, line 1 k added instructions to the line description. This is not a calculation or law change

Form 5405
Form 5405 is for reporting First-Time Homebuyer Credit and Repayment of the Credit. The form has expired First-Time Homebuyer Credit will no longer be available starting with 2012. Form is available, however, for reporting repayments of credit Parts I and II Removed. Page 1 Parts I and II have been deleted due to expiration of the credit. Page 2 is now Page 1, and Parts III, IV, and V have been renumbered Parts I, II, and III. All line numbers and references have been updated: Lines 11 25 are now 1 15. Form has been renamed Repayment of the First-Time Homebuyer Credit

Form 5695
Nonbusiness Energy Credit expired after 2011. This will eliminate Part I (based on 2011 form) of Form 5695

Form 8283

Section A, Part 1 New column (b). If donated property is a vehicle, check the box and enter VIN (vehicle identification number) if Form 1098-C is not attached to return. All columns in this part are updated by one letter. Section B, Part 1, line 4. New checkbox for vehicle. Each checkbox now has a letter associated with it. Section A, Part 1, column (c). More detail added if donated property is a vehicle and if Form 1098-C is attached to return give year, make, and model of vehicle. If no Form 1098-C is attached to return, also give condition and mileage at time of donation. Section B, Part 1, line 4. If you check i, the checkbox for a vehicle, you must attach Form 1098-C. Section B, Part 1, line 4. Only one box should be checked for each Form 8283. Multiple Form 8283s should be completed as necessary.

Additional information for easements on buildings in historic districts need a signed copy of the qualified appraisal, and the description of any restrictions can be made by attaching a copy of the easement deed. Additional information for qualified conservation contribution: Describe the easement in detail, attach a copy of the easement deed, and indicate if the information provided is about the underlying property or the easement. Additional information for Part IV: The donee should also provide a contemporaneous written acknowledgment required by section 170(f)(8). (This acknowledgment must contain the amount of cash and a description of any property contributed, whether the donee organization provided any goods or services in consideration for any property contributed and if so a description and good faith estimate of the value of any such goods or services.) Additional information for Section B Part 1: Deductions over $500,000 need a signed copy of the qualified appraisal. Form 8283 is used for listing noncash charitable contributions. It has undergone the following changes:

Form 8606
Nondeductible contributions you made to traditional IRAs; Distributions from traditional, SEP, or SIMPLE IRAs if you have ever made nondeductible contributions to traditional IRAs; Distributions from Roth IRAs; conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs; and Certain distributions from designated Roth accounts allocable to in-plan Roth rollovers. Form 8606 is used to report: Header Fields added. Fields have been added for foreign country name, foreign province/state/county, and foreign postal code. Part I, line 4 Due date changed. The due date for making a 2012 contribution is 4/15/13 (was 4/17/12). Part I, line 7 Qualified charitable distributions are no longer excluded from distributions on line 7. The provision for making qualified charitable distributions has expired. Part II has been moved to top of page 2. Part II was previously on the bottom of page 1. Pending Part III, line 19 Removed and certain qualified distributions. Part III, line 21 Changed to skip lines 22 25 (was 22 24) if value is zero or less. Part III, line 23 Changed to skip lines 24 and 25 (was just line 24) if value is zero or less. Part III, line 25 Is now taxable amount (calculation remains the same) and will flow to 1040 line 15b, 1040A line 11b, or 1040NR line 16b. (This was previously on line 36.) Part III Deleted lines. Lines 26 38 on Part III for prior year conversions have been removed from the form. Part IV Completely removed from form. Per correspondence 5/21/12, the instructions will cover computing the amount to include in taxable income and this section will not be used. Here are the changes to Form 8606 as of the creation date for this WBT:

Form 8839 is used to figure the adoption credit and any employer-provided adoption benefits you can exclude from income. The taxpayer can claim both the exclusion and the credit for expenses of adopting an eligible child. Credit allowed for child with special needs and maximum credit allowed for other adoptions and excludable amount for adoption assistance programs is $12,650. New phase-out limits Maximum credit allowed and amount excludable from employees gross income begins to phase out with income in excess of $189,710 and is completely phased out at $229,710. Line 12 Deleted instruction to attach all required documentation. Documentation requirements have reverted back to pre-ACA requirements Form 8863 is used to figure and claim taxpayer education credits, which are based on qualified education expenses paid to an eligible postsecondary educational institution Unless extended by congress, the American Opportunity Credit will expire and the Hope credit will return in its place. Here are the changes as of the creation of this WBT: Modified AGI increased for determining reduction of lifetime learning credit Now MAGI in excess of $52,000 ($104,000 for MFJ). Part III This section is now completed for each student for whom education credits are being claimed. Fields for student name line 20 and SSN line 21 have been moved to this section. Additional copies of page 2 (Part III) are to be completed as needed for each qualified student. New line 22a Name of first educational institution. New line 22b Name of second educational institution. New line 22(1) Fields available for address of first and second educational institution address, number and street; city, town, or post office; state and zip code. New question line 22(2) Fields available for first and second educational institution. Did the student receive Form 1098-T from this institution for 2012? Yes/No checkboxes added. New question line 22(3) Fields for first and second educational institution. Did the same student receive Form 1098-T from this institution for 2011, with box 2 filled in and box 7 checked. Yes/ No checkboxes added. New guidance for Part III If you checked No in both 22(2) and 22(3), skip 22(4). New question line 22(4) Fields available for first and second educational institution. If you checked Yes in (2) or (3), enter the institutions federal identification number from Form 1098-T. Fields available for 9 digit EIN. New question line 23 Has the Hope Scholarship Credit or American Opportunity Credit been claimed for this student for any prior four years? Yes/No checkboxes added. If Yes, stop and go to line 31. If No, go to line 24. New question line 24 Was the student enrolled at least half time for at least one academic period that began in 2012 at an eligible educational institution in a program leading towards a postsecondary degree, certification or other recognized postsecondary educational credential? Yes/No checkboxes added for response. If Yes, go to line 25. If No, stop and go to line 31. New question line 25 Did the student complete the first 4 years of post-secondary education before 2012? Yes /No checkboxes added for response. If Yes, stop and go to line 31. If No, go to line 26.

New question line 26 Was the student convicted before the end of 2012 of a felony for possession or distribution of a controlled substance? Yes/No checkboxes added for response. If Yes, stop and go to line 31. If No, either complete lines 27 30 or line 31. Line 27 30. (Was line 1, column (c) column (f)). Line references updated to reflect repositioning on form. Line 30 Include the total of all amounts from all Parts III on Part 1, line 1. This addresses if multiple Part III's are completed. Line 31 (was line 4) Include the total of all amounts from all Parts III or Part II, line 10. This addresses if multiple Part IIIs are completed. Credit Limit worksheet Lines 2 7 are now reserved for future use. Subsequent lines, as well as Form 8863, references updates to reflect changes to worksheet and form. Credit Limit worksheet New line 13. Enter the smaller of line 9 or line 12 here and on Form 8863 line 19. (Replaces lines 10 and 11 from 2011 worksheet). Credit Limit worksheet New line 8. Enter the amount from Form 8863 line 9. Credit Limit worksheet New line 9 new total. Line 9 Add lines 1 and 8. Pending Credit Limit worksheet calculations assume IRC 26(a)(2), which allows credits to be claimed against AMT will be extended. Line 22 Additional guidance. If the student attended more than two educational institutions, then complete an additional page 2, but only complete through line 22. For taxpayers age 18 23 to qualify for refundable credit, there is an expanded definition of earned income. New guidance defining what is earned income when: 1 personal services are rendered to a corporation, 2 if you are a sole proprietor or partner in which both personal services and capital is a material income producing factor. See diff doc page 4 for specifics.

Form 8867

Line 6 Limit increased. Investment income limit has increased to $3,200. Line 22 New question with yes/no checkboxes. Added question about follow-up questioning of the taxpayer when claiming a child for EIC who is not taxpayers son or daughter. Line 23 New question with yes/no checkboxes. Added question about whether tax preparer explained tiebreaker rules and consequences when tiebreaker rules might apply to taxpayer. Subsequent lines renumbered. Line 24 Has been changed to ask whether tax preparer asked additional questions to comply with knowledge requirement. Was line 22. Line 25 Has been changed to now ask whether the tax preparer documented the additional questions and answers. Was line 23. Line 26 New line for recording documentation used to determine EIC eligibility. Lines a through n have been added for determining residency of qualifying children. Lines o through u have been added for determining disability of qualifying children. All lines have a corresponding checkbox.

Line 27 New line for documenting Schedule C filers claiming EIC. Lines a through l have been added to indicate records used to determine income and expenses. All items have associated checkboxes. Line 3 EIC can be claimed if social security card is issued by DHS (Department of Homeland Security), specifies Valid for work only with DHS authorization, and is still valid. Line 11 Check Yes if the child was born or died in the year, and the taxpayers home was the childs home more than half the time the child was alive. Paid preparers of federal income tax returns or claims for refund involving the EIC must meet the due diligence requirements in determining the taxpayer's eligibility for, and the amount of, the EIC. Failure to do so could result in a $500 penalty for each failure.

Form 9465

Who owes income tax on Form 1040. Who may be responsible for a Trust Fund Recovery Penalty. Who was self-employed and owes self-employment or unemployment taxes and is no longer operating the business. Who is personally responsible for a partnership liability and the partnership is no longer operating, or owner who is personally responsible for taxes in the name of a limited liability company (LLC) and the LLC is no longer operating.

Changes include: Part I, line 2 New line added with fields for business name and EIN. Previous line 2 has been renumbered 1b. Line 7 Instructions added. If taxpayer owes between $25,000 and $50,000, then you must complete line 11 and Part II on page 2. If taxpayer owes more than $50,000, then Form 433-F must be completed and attached. Form is now to be used for all installment requests (form 9465FS is obsolete). Part II New page 2, Part II is added to 9465. Part II of obsolete Form 9465-FS has been added to the 9465 for taxpayers who owe between $25,000 and $50,000. Form 9465 is used to request a monthly installment plan if the taxpayer cannot pay the full amount they owe shown on their tax return (or on a notice the IRS sent). Use Form 9465 if you are an individual:

Form W-4 for 2013

Pending All worksheet values are pending on this draft version. Exemption from withholding for 2012 expires February 18, 2013. Personal allowances, line G: If total income $61,000/90,000 (same as 2011) enter 2; less 1 if between 3 to 7 eligible children; less 2 if 8 or more eligible children. Deductions and Adjustments worksheet line 2: Standard deduction: MFJ $11,900.

HH $8,700. S and MFS $5,950. Deductions and Adjustments worksheet line 8: Divide line 7 by $3,800 (was $3,700). Table 2 for highest paying job has been updated for 2013: See page 2. Worksheet 5 Tax credits removed. Note that some credits maybe extended with 2012 legislation. (Residential Energy Credits 5695 Qualified Vehicle Credits passive credit 8834 Dist of Col first time home buyer credit 8859 First time home buyer credit 5405.) Worksheet line 5 Updated income levels to determine percentage of credits to apply. Four new worksheets have been created to assist with calculating amounts for the W-4 planner. Taxpayers complete Form W-4 so that their employers can withhold the correct federal income tax from their pay. Consider completing a new Form W-4 each year and when their personal or financial situation changes.