Tax filing begins Wednesday

Wednesday marks the official start of tax season, as the first day the Internal Revenue Service will begin processing individual income tax returns.

The IRS originally planned to open electronic filing on Jan. 22, but January tax law changes made by Congress under the American Taxpayer Relief Act meant last-minute updates to forms, programming and testing of its processing systems.

While the IRS expects that most tax filers -- more than 120 million households -- should be able to start filing tax returns at this point, many will not be able to start filing until late February or into March because of the need for more extensive form and processing systems changes.

This group includes people claiming residential energy credits, depreciation of property or general business credits. According to the IRS, most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.

Who Can File Starting Wednesday?

The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.

Who Can’t File Until Later?

According to the IRS, there are several forms affected by the late legislation that require more extensive programming and testing of IRS systems.

Those forms include Residential Energy Credits or Form 5695, Depreciation and Amortization or Form 4562 and  General Business Credit or Form 3800. A full listing of the forms that won’t be accepted until later is available on IRS.gov.

The IRS expects to be able to accept those forms in February or March, but specific dates are not available yet.

Updated information will be posted on irs.gov.

Filing for free

All taxpayers have options for filing either a paper return or an electronic return at no cost.

The IRS has partnered with varying tax software companies to offer free tax-preparation software and online fillable forms.

For taxpayers with adjusted gross incomes of $57,000 or less, free versions of brand-name tax-preparation software, such as TurboTax, are available, and several software products are also available in Spanish.

While each company sets its eligibility requirements, generally based on income, age or state residency, anyone with an adjusted gross income of $57,000 or less in 2012 can find at least one tax software product to use.

To access free tax software, taxpayers must go to irs.gov/freefile. An online tool is available to select the appropriate software.

After choosing a software, the taxpayer will be directed away from the IRS website to the software company’s website. There, the software generally will offer a step-by-step guide through the tax preparation process.

The software asks the questions; the taxpayers supply the answers. The software will help find any tax breaks, such as the Earned Income Tax Credit, that may be due. It will find the right tax forms and do the math.

Some companies provide state tax return software – sometimes for free and sometimes for a fee.  Some states also have a relationship with the Free File Alliance and those states are listed on the companies’ websites.

For people who make more than $57,000 or who are comfortable preparing their own tax returns, there are also free fillable forms available at irs.gov/freefile.

There is no software assistance with the free fillable forms, but it does the basic math calculations. It does not support state income tax returns.

For more information, visit irs.gov.