The Alabama Department of Revenue announced that when taxpayers electronically file 2013 Alabama Forms 40, 40-A or 40 NR, they should include their driver’s license or non-driver’s license number, as well as their date of birth, on their Alabama returns.
This is the department’s latest effort to combat the growing threat of identity theft and fraudulent tax return filings.
State Revenue Commissioner Julie P. Magee said, “It is just one more level of security. Just about every business transaction that is conducted requires some form of personal identification—credit card purchases, banking transactions, etc. Before a tax refund is issued from a taxpayer’s account, it is reasonable for a taxpayer not only to expect, but also to demand that the department takes every precaution that it can to ensure that the refund is a legitimate refund, and not a fraudulent refund issued to an identity thief. This information can be used as a simple, quick validation and will not affect the normal processing of one’s tax return.”
For the complete release, see ADOR’s website: ADOR Working to Offer More Protection from ID Theft and Fraudlent Return Filings
Maximizing your allowable deductions is key to minimizing your tax burden. Check out the JMF Guide to Maximizing Deductions.
Tax breaks can come in the form of tax credits, tax deductions, and just tax-saving laws. At the end of this year (December 31), the congressional Joint Committee on Taxation say 55 of them are about to expire. For the record, there is still a chance for many to be extended. Check out Bankrate.com’s Summary of Expiring Tax Breaks here.
Our Tax Chief Janet Moore is quoted as follows:
Business taxpayers contemplating any major equipment or software additions should consider making the acquisition before year’s end if they have the income to offset it this year, says Janet Moore, CPA, co-manager of the tax department at the Tuscaloosa office of the Alabama accounting firm JamisonMoneyFarmer PC. “We know the deduction amounts for 2013, but there are no guarantees that these larger deductions will be available next year in 2014,” she says.
And on the prospect of major tax reform:
“It may be several years before any major reform can be achieved,” says Moore. “That likely means that extension of many of the temporary tax provisions that were extended for 2012 and 2013 will be delayed until very late in 2014, after tax reform efforts fail.”
If you have any clients that are affected by the Defense of Marriage Act (DOMA) please be aware that the IRS now recognizes all same-sex marriages nationwide.
If a same-sex couple is legally married in a state that recognizes same-sex marriage, the couple will be treated as married for all federal tax purposes. This is true even if the couple resides in a state that does not recognize same-sex marriage.
IMPACT. Legally-married same sex couples
must file as married filing jointly or married
filing separately for the entire 2013
tax year. For earlier tax years still open by
the statute of limitations (generally 2010,
2011 and 2012 returns), these couples
have the option to file an amended return
to reflect their married status. In an unusual
twist based on the effective date of the
guidance, legally-married same-sex couples
who have not yet filed their 2012 returns
have a limited time to file as unmarried
taxpayers. If they file on or after September
16, 2013, they must file as married. In
addition, employers, employees and plan
administrators will need to sort out withholding,
pre- and after-tax benefits, retroactive
benefits, and refund opportunities.
If you know of a JMF client that might be affected by this please contact them as the September 16 deadline is almost here.
For much more information please read this:
At this time we are not sure how Alabama will apply this law for state of Alabama income tax returns. State law has no effect on Federal income tax returns.
The Alabama Accountability Act of 2013 signed into law earlier this year, provides Alabama state income tax credits for both:
This post will focus on the second Alabama tax credit listed above, the one for donations to qualifying scholarship-granting organizations.
This new Alabama tax credit is available for donations to qualifying scholarship-granting organization (SGOs). .
Individual taxpayers are limited to an Alabama tax credit of the lesser of $7,500, or their actual donation (a maximum of $7,500). Corporate taxpayers are allowed a credit equal to 100 percent of their donation. For all donors, the amount of the credit that can offset Alabama taxable income is limited to the lesser of 50% of their Alabama income tax liability or the amount of the allowable credit.
For individuals, their Alabama tax liability must be $15,000 or more in order to get the full benefit of the tax credit in the year the donation is made. However, any limited portion of an allowable credit may be carried over for up to three tax years.
Credits may only be claimed once.
The federal tax effect is zero for individuals, unless the taxpayer is subject to the alternative minimum tax (AMT). The amount that is donated should provide a federal income tax deduction, subject to normal federal limitations. Keep in mind that any donated amounts that are eligible for an Alabama tax credit will reduce state income taxes. So for federal tax purposes, the state income tax deduction will likely decrease by the same amount that the charitable deduction increases. In other words, there may be no net change in Federal taxes for taxpayers that choose to make a donation to an SGO. For some taxpayers, who are pay alternative minimum taxes (AMT) on their Federal tax returns, the donation may reduce their AMT liability. For individuals who pay AMT, this reduction in Federal tax could be approximately $2,000, depending on the amount donated, the amount eligible for the state tax credit and the amount of AMT liability.
Organizations that wish to become an SGO must apply to the Alabama Department of Revenue (ADOR). Beginning August 1, 2013, the ADOR will notify qualified SGOs that they are included on a list of organizations approved to accept qualifying scholarship donations. There is a maximum of $25,000,000 in annual tax credits for this program.
Alabama Accountability Act of 2013
For a current list of SGOs maintained by the ADOR click here:
Scholarship Granting Organizations
For a current list of qualifying schools click here:
There may be a sense of urgency for taxpayers who wish to make these donations, as once the maximum of $25,000,000 in tax credits has been allocated, donations will not be eligible for the tax credits.
To make a donation that is eligible for the Alabama tax credit, taxpayers will need to reserve their tax credit by signing up with the Alabama Department of Revenue using the My Alabama Tax system (MAT). Click here for instructions:
Alabama Accountability Act Guidance
This summary is intended to provide an overview of the potential tax effects of making a donation under the Alabama Accountability Act of 2013. It should be noted that by making these donations, taxpayers in Alabama will be re-directing some of what they would have paid in state income taxes to fund scholarships for private schools. In Alabama, after deducting for the cost of collections and refunds, nearly all state income taxes go to the Alabama Education Trust Fund, to fund public schools.
Before making these donations, we recommend that all clients and friends consult with their tax advisor and contact the school and organization to which they wish to make a donation.