Taxpayers who Itemize can file their returns today

Taxpayers who had to wait to claim certain deductions can now complete their 2010 tax returns. Starting today, the IRS will begin processing both paper and e-file returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction claimed on Form 1040, Line 23, and Form 1040A, Line 16.

The IRS needed the extra time to update its systems to accommodate the changes in the tax law from the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 which was made official on December 17, 2010.

Back to School = Big Rewards

Higher education expenses can be a huge benefit come tax time. There are several options available.

American Opportunity Credit tax years 2009 through 2010

• The maximum credit is $2,500 (same as 2009) per student (100% of the first $2,000 of expenses, 25% of the next $2,000 of expenses)
• The credit can be claimed for first four years of post-secondary education.
• Credit can reduce your tax liability dollar for dollar (Form 1040 line 49) and provide up to $1,000 additional refund (Form 1040 line 66).

Taxpayers have to wait to receive their income tax refund

Taxpayers who claim certain deductions for will have to wait until middle to late February to file their 2010 returns. The Internal Revenue Service will need extra time to put processing systems in place as a result of the changes in the tax law from the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 which was made official on December 17, 2010.

The biggest on the list is the Schedule A which is used for taxpayers who wish to itemize their deductions which covers an estimated one-third of all filers. Typically, these taxpayers do not file their returns early in the season.

Taxpayers who wish use the following tax benefits are affected:

• home-mortgage interest, property taxes, excess medical expenses, gifts to charity and including state and local taxes – Schedule A
• college tuition and fees – Form 8917
• Educator Expense Deduction claimed on Form 1040, Line 23, and Form 1040A, Line 16

In addition to the above deductions, the tax bill also extended into 2010 an Alternative minimum tax (AMT) patch and the IRA direct charitable donation rollover (extended through December 31, 2011).

The delay will affect both paper filers and electronic filers so the IRS urges taxpayers to use e-file to minimize confusion over the recent tax changes and ensure accurate tax returns. All tax returns claiming these credits or deductions should not be filed until the IRS is ready to start processing these returns in mid - to late February.