Filing 2012 Taxes: Your Go-To Guide

There is one key piece of information that every taxpayer — especially those who will be filing at the last minute — should keep in mind as April 15, 2012 draws near:

The deadline for filing 2012 returns is midnight on April 15, 2013.

The April 15 deadline applies to any return or payment normally due on April 15. It also applies to the deadline for requesting an individual return tax-filing extension and for making 2012 IRA contributions.

It would be simple if that were the only change in taxes this year. But, this year, as always, there are additional changes you need to be aware of as you prepare your income taxes. 

The deadline for filing 2012 returns is midnight on April 15, 2013.

The "making work pay" credit, which for tax years 2009 and 2010 provided a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns, has expired. Consequently, Schedule M — the filing of which was required in order to take the credit — has been eliminated.

To make up for the loss, Congress has authorized a payroll tax "holiday" for 2012, said Kelly Phillips Erb, a tax attorney and shareholder with Philadelphia-based Erb Law Firm, PC. 

The "holiday" reduced by 2 percentage points — from 6.2 percent to 4.2 percent — the amount of money withheld from each person's income for Social Security. Self-employed individuals must be aware of the change and pay Social Security taxes accordingly, Erb said. "Everyone else will see it in their W-2, and they felt it in their check all year," she said. "If you’re self-employed, your Social Security taxes will be different at the end of the year.”

Starting back with the 2011 tax forms, brokers or custodians of a person’s assets began tracking and reporting to the IRS the cost basis of those investments. In the past, it was up to the taxpayer.

The federal government established new tax reporting requirements with the Emergency Economic Stabilization Act of 2008, said financial adviser J. Mark Nickell of Brentwood, Tennessee-based J. Mark Nickell & Co. Its purpose was to get investors to accurately report on tax forms any gains and losses on securities. The changes will eventually simplify tax preparation for investors, Nickell said.

The effects of this legislation will emerge in phases through 2013. For tax year 2012, custodians must report costs on covered and non-covered securities. For 2012, they will report costs involved with mutual funds, exchange-traded funds and dividend reinvestment plans. For 2013, they will report on fixed-income options and other securities.

“In the past, the custodians of your assets reported how much a sale was for, but they wouldn’t have listed the cost basis,” said financial planner Chris Walker, also of Brentwood-based J. Mark Nickell & Co. “It was up to the taxpayer to dig through their records, sometimes going back years to find out how much they paid for it.”

The standard mileage rate for  business use of a car, van, pick-up or panel truck   has increased to 55.5 cents for 2012. If  the vehicle is operated for medical reasons or as part of a deductible move, the rate is 23 cents a mile for 2012. The rate for using a vehicle to provide services to charitable organizations remains at 14 cents a mile.

Full electric cars or the cars with electric plug-in, i.e. electric vehicles (EVs) purchased in or after 2010 may be eligible for a federal income tax credit of up to $7,500. The credit amount will vary based on the capacity of the battery used to fuel the vehicle.

The first-time homebuyer credit remains available only for those individuals who were in the military, were employed by the Foreign Service, or were part of the intelligence community and in one of those capacities were stationed outside the United States for at least 90 days between Dec. 31, 2008, and May 1, 2010 — not including those dates.

If you claimed the first-time homebuyer credit for a home bought in 2008 you must generally make the third of 15 annual repayment installments on your 2012 return.  Separately, a repayment requirement also applies where you purchased a home and claimed the credit on a prior year return and then sold it or stopped using it as a main home in 2012.

The focus in "1040 Instructions 2012" on line 67 of Form 1040 provides additional details.

The amount for personal exemptions has increased from $3,700 in 2011 to $3,800 in 2012.

The additional tax on distributions from health savings accounts (HSA) not used for qualified medical expenses has increased to 20 percent, and payments for medicine are now considered qualified medical expenses only if the medicine is a prescribed drug or insulin.

In most cases, taxpayers will now use the new Form 8949 to report capital gain and loss transactions. Schedule D, the form traditionally used to show these individual transactions, is now used as a summary sheet, reporting amounts for total sales price, basis and other adjustments for all individual transactions, and for figuring the tax.

If you converted your taxable retirement assets into a Roth IRA in 2010, you had the option of distributing the tax payment over the course of two years — 2011 and 2012. Only half of the resulting income had to be included in income in tax-year 2011 and the other half would be reported in 2012, unless you chose to include all of it in income for 2010.

Eligible self-employed individuals may take a self-employed health insurance deduction in 2012. This deduction may be used not only for health insurance premiums that cover the filer, but also for spouses and other dependents as well as non-dependent children under the age of 27.