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NATP Warns Of Missing Lines On US Tax Forms

by Mike Godfrey, Tax-News.com, Washington

10 January 2007


The National Association of Tax Professionals (NATP) on Monday warned that tax forms in the packets mailed by the Internal Revenue Service (IRS) in January 2007 are missing lines on which to claim some important deductions — notably, those for state and local sales tax, higher education tuition and fees, and educator expenses.

However, it went on to suggest that the around 19,000 taxpayers who qualify for these deductions (according to the IRS tax year 2005 taxpayer usage study) need not be in a hurry to get their tax returns filed, because the IRS will be unable to begin processing returns with these deductions until February (IRS estimated date).

According to the NATP, the deductions are not new items, but are deductions that expired on December 31, 2005, and were not reinstated until the president signed the Tax Relief and Health Care Act of 2006 in December 2006; but the IRS could not delay printing of the tax forms to wait for passage.

For taxpayers likely to be affected by this omission, the NATP counseled preparedness and awareness of the rules surrounding such deductions, enlisting the assistance of a tax preparer, and, for those utilising e-file and free-file software, regular checking for software updates.

The Association revealed that the IRS will not be reprinting corrected forms, and therefore issued the following guidelines for the three key deductions:

State and local general sales tax deduction:

- Claim the deduction for state and local general sales taxes on Schedule A (Form 1040), Line 5, (state and local income taxes). Enter “ST” on the dotted line to the left of Line 5 to indicate you are claiming the general sales tax deduction instead of the deduction for state and local income tax.

- Use the state and local sales tax tables from 2006 IRS Pub. 600, as well as the worksheet and instructions to figure the deduction.

- This option is available to all taxpayers regardless of residence location, though it's primarily designed to benefit residents of the eight states without state and local income taxes.

Higher education tuition and fees deduction:

- Taxpayers must file Form 1040 to take this deduction for up to $4,000 of tuition and fees paid to a post-secondary institution. It cannot be claimed on Form 1040A.

- The deduction for tuition and fees will be claimed on Form 1040, Line 35, (domestic production activities deduction). Enter “T” on the dotted line to the left of that line entry if claiming the tuition and fees deduction, or “B” if claiming both a deduction for domestic production activities and the deduction for tuition and fees. For those entering “B,” taxpayers must attach a breakdown showing the amounts claimed for each deduction.

Educator expense adjustment to income:

- Educators must file Form 1040 in order to take the deduction for up to $250 of out-of-pocket classroom expenses. It cannot be claimed on Form 1040A.

- The deduction for educator expenses will be claimed on Form 1040, Line 23, (Archer MSA deduction). Enter “E” on the dotted line to the left of that line entry if claiming educator expenses, or “B” if claiming both an Archer MSA deduction and the deduction for educator expenses on Form 1040. If entering “B,” taxpayers must attach a breakdown showing the amounts claimed for each deduction.


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