Your 2012 Taxes : Fewer Surprises, Plenty of Pitfalls

Tom Herman for the Wall St Journal writes: Nothing is inevitable but death, taxes—and tax-return complexity. This year, though, some taxpayers may find the task somewhat easier. Most of the Internal Revenue Service's forms for 2012 generally look about the same as a year ago, although many numbers, such as the standard deduction and personal-exemption amounts, have been adjusted for inflation.

"Very little has changed" on the 2012 forms, says Bob Meighan, vice president at Intuit's INTU -1.19% TurboTax, the nation's top-selling tax-return preparation software. "The real changes are for 2013 and later."

Even so, beware of overconfidence. Many taxpayers will face new complexities because they got married or divorced last year, lost a job, added a job, moved to take a new job, started working in a home office or went through some other major life change. Whatever the case, don't automatically assume you can do your return the same way as last year.

Losing your job "can have a significant impact on your tax situation," says Mark Luscombe, principal tax analyst at CCH, a Wolters Kluwers business that provides tax, accounting and audit information, software and services.

While Congress has talked for years about the need for tax-law simplification, tax laws have grown increasingly complicated over the past few decades. CCH's standard federal tax publication now has about 74,000 pages, up from 40,500 in 1995. Whether you pay an expert, rely on software, or do your own return with pencil, paper and painkillers, here are some things to keep in mind during this year's filing season:

1. Filing Delays

The IRS said the "vast majority" of taxpayers could start filing Jan. 30. But millions of others still can't, because the IRS says it needs more time to adjust its return-processing apparatus to reflect a law enacted Jan. 2. That new law included many provisions affecting returns for 2012.

For example, the IRS will begin accepting returns on Thursday from people claiming education credits on Form 8863 (the American Opportunity Tax Credit and the Lifetime Learning Credit). Taxpayers claiming certain other provisions can't file until early March.

See the IRS site www.irs.gov for updates.

TurboTax says it already is up-to-date. "All tax-law changes, including 'fiscal cliff' legislative changes, are reflected in the TurboTax product," says Mr. Meighan.

2. Earned Income Tax Credit 

About one out of five eligible workers and families miss out on the Earned Income Tax Credit, or EITC, which is designed to help the working poor, IRS officials say. This is a "refundable" credit, meaning people can get refunds even if they don't owe any tax. So they must file a tax return even if they otherwise wouldn't need to file.

The IRS has renewed efforts to encourage millions of people who earned $50,270 or less to take advantage of this credit, whose amount varies by income, family size and filing status.

Do you qualify? Go to the IRS site and search for the "EITC Assistant." Detailed eligibility rules are available (www.irs.gov/eitc).

3. Job-Related Deductions

If you've been hunting for a new job, you might be able to deduct expenses related to the search, such as résumé preparation, travel, and employment and outplacement agency fees. You'll need to itemize your deductions and have proof of these expenses.

They may be deductible even if you didn't find a new job. But you can't deduct them if you're looking for a job in a new occupation or searching for work for the first time, the IRS says. You also can't deduct them if there was a "substantial break" between the end of your last job and your search for a new one. (That's why it's helpful to search for work on a continuous basis.)

Also, this deduction is subject to what's known as the 2% floor, which means you have to reduce the total of most miscellaneous itemized deductions by 2% of adjusted gross income.

4. Tax Overpayments

If you worked for two or more employers last year, check to see if you had too much in Social Security tax withheld from your paychecks. The total maximum amount that should have been withheld was $4,624.20. If you paid more, claim a credit on your federal income-tax return. Enter it on Form 1040, line 69, or include it in the total for Form 1040A, line 41.

5. Breaks Back From the Dead

Several tax breaks that died at the end of 2011 were revived and made retroactive to the start of 2012.

If you itemize your deductions, you can choose to deduct your state and local general sales taxes instead of state and local income taxes. This is especially helpful to taxpayers in Florida, Texas and other states that don't have a state income tax. But it can also help many people in other states.

Educators in elementary and secondary schools can deduct as much as $250 of unreimbursed expenses for classroom supplies. You don't have to itemize to claim it. But you do have to have worked at least 900 hours in a school year as a teacher, counselor, principal or aide.

6. Don't Try It

Some people insist there is no law requiring them to pay taxes, or that only foreign-source income is taxable, or make similar "tax protester" arguments. Courts routinely throw them out—and those who make these arguments may get hit with hefty penalties.