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IRS ready to handle retroactive tax breaks

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The IRS said it’s prepared to handle three tax breaks that had expired for 2017 but were recently extended retroactively by Congress.

This month, as part of the bipartisan budget deal, Congress revived 36 tax extenders that had expired at the end of 2016 and weren’t previously included in last December’s tax overhaul. After passage of the Bipartisan Budget Act, the IRS said Thursday it has now reprogrammed its systems to process the three benefits most likely to be claimed on returns filed early in the tax season.

That means taxpayers can now file tax returns claiming:

  • Exclusion from gross income of discharge of qualified principal residence indebtedness (often, foreclosure-related debt forgiveness), claimed on Form 982;
  • Mortgage insurance premiums treated as qualified residence interest, generally claimed by low- and middle-income filers on Schedule A; and
  • Deduction for qualified tuition and related expenses claimed on Form 8917.

The IRS said it’s working closely with tax professionals and the tax prep industry to make sure their software can now accommodate the newly extended tax provisions. The IRS is still in the process of updating its systems to handle returns claiming the other tax breaks extended by the budget act that was enacted Feb. 9.

But in general, those other benefits affect a smaller number of taxpayers, such as tax breaks for motor sports raceway owners and rum producers. Taxpayers who are eligible for those tax breaks may need to file an amended tax return after the IRS’s computer systems have been updated to reflect the latest changes.

The Minnesota Society of CPAs recently conducted its annual CPA member survey about the most strange and unusual tax deductions proposed by clients. The responses included everything from pets and wedding rings to gifts not given.
February 17

Taxpayers who have already filed their 2017 federal tax return and now want to claim one of the retroactively renewed tax breaks can file an amended return on Form 1040X. The IRS noted, however, that amended returns can’t be filed electronically and could take up to 16 weeks to process.

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