The Internal Revenue Service on Friday advised taxpayers on how to file for deductions passed by Congress too late to be included in 2006 forms.
Nearly 1 million taxpayers may not have their returns processed until early February, the agency warned.
The instructions involve three deductions renewed by Congress just before it adjourned two weeks ago and signed into law by President Bush this week: for state and local sales taxes in states that don’t have income taxes, for higher tuition costs and for educator expenses.
The tax agency urged taxpayers seeking the three deductions to file electronically. Software will be updated to include the three tax provisions and taxpayers “will get their refunds faster through e-file,” said IRS Commissioner Mark W. Everson. “Even more importantly, e-file will greatly reduce the chances of making an error compared to claiming the deductions on the paper 1040.”
The IRS said that some 6 million taxpayers in states without state income taxes who receive Form 1040 will by mid-January get a special mailing of Publication 600, which will include tables and instructions for claiming the sales tax deduction.
Publication 600 was also posted Friday to the IRS web site, http://www.irs.gov/.
Form 1040 will not be updated and the higher education and educator expense deductions cannot be claimed on Form 1040A.
The IRS said the deduction for tuition and fees can be claimed on Form 1040, line 35, “Domestic production activities deduction,” by entering “T on the dotted line to the left of that line. Similarly, the educator expense adjustment can be claimed on line 23, “Archer MSA Deduction,” by entering “E” on the dotted line to the left of that line entry.
The sales tax deduction was claimed on about 11.2 million tax returns filed for tax year 2005. It applies to nine states: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
The higher education provision, which allows deductions for up to $4,000 of tuition and fee costs, was claimed on about 4.7 million returns.
The educator expense provision, allowing teachers to deduct up to $250 for personal expenditures on school supplies, was claimed on 3.5 million returns.
The tax agency said it will not be able to process tax returns claiming these deductions until early February. It said that based on filings earlier this year, about 930,000 tax returns claimed any of the three provisions by Feb. 1. This year, the IRS expects to receive about 136 million tax returns.
The three tax breaks expired on Jan. 1 this year, and thus were no longer part of tax law when the main IRS forms went to print in early November.