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Please Note
We had so much information to share with you this month that we are dividing it into two separate emails. The first, this one, will address individual income tax. The second will address other tax types.
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What's New for the 2012 Individual Income Tax
Advancement of Virginia's Fixed Date Conformity with the Internal Revenue Code
Virginia's date of conformity with the Internal Revenue Code (IRC) was advanced from December 31, 2010, to December 31, 2011, with limited exceptions. Virginia will continue to disallow federal income tax deductions for bonus depreciation allowed for certain assets under IRC §§ 168(k), 168(l), 168(m), 1400L and 1400N; the five-year carryback of federal net operating loss deductions generated in taxable year 2008 or 2009; and federal income tax deductions for applicable high yield discount obligations under IRC § 163(e)(5)(F).
In addition, fixed date conformity adjustments continue to be required for Cancellation of Debt Income under IRC § 108(i), and the domestic production deduction under IRC § 199.
At the time this message was written, the only required adjustments for "fixed date conformity" were those mentioned above. However, if federal legislation is enacted that results in changes to the Internal Revenue Code for the 2012 taxable year, taxpayers will be required to make adjustments to their Virginia returns that are not described in the instruction booklet. Information about any such adjustments will be posted on the Department's website at www.tax.virginia.gov.
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Telework Expenses Tax Credit
The Telework Expenses Tax Credit is a new individual and corporate income tax credit for employers who incur eligible telework expenses pursuant to a telework agreement or conduct telework assessments. Taxpayers are required to apply to the Department of Taxation between September 1 and October 31 of the year proceeding the taxable year for which the tax credit is earned to reserve a portion of the credit. To qualify for a credit, the employer must enter into a signed telework agreement with the teleworking employee on or after July 1, 2012, but before January 1, 2017. This telework agreement must be in accordance with policies set by the Department of Rail and Public Transportation (DRPT) which are available on the Telework!VA website at www.teleworkva.org.
For details on this new credit and modifications to existing credits, see What's New for Tax Credits.
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Telework Expenses Addition
Individuals who claim the Virginia Telework Expenses Tax Credit are not allowed to exclude those expenses from Virginia income. To the extent excluded from federal adjusted gross income, any expenses incurred by a taxpayer in connection with the Telework Expenses Tax Credit must be added to the Virginia return.
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Debit Card Option for Refunds
Effective beginning with the 2012 taxable year, individual refunds will be issued through prepaid debit cards or by direct deposit to taxpayers' checking or savings accounts. The paper check refund option is being replaced with the debit card option. Taxpayers receiving a refund may choose either to receive a debit card or direct deposit by filling in the requested information on their returns.
This change is one of the budget reduction measures included in the 2012-2014 Appropriations Act (273 of HB 1301 - Acts of Assembly 2012 Special Session I, Chapter 3) passed by the General Assembly. Visit www.tax.virginia.gov for detailed information and answers to frequently asked questions.
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Filing Threshold
The filing threshold amounts for taxable years 2012 and beyond have been increased. The new threshold for single individuals has increased from $11,650 to $11,950. The filing threshold for married couples filing jointly has increased from $23,300 to $23,900. The threshold for married couples who file separate returns has increased from $11,650 to $11,950.
For complete 2012 legislative information see the 2012 Legislative Summary on the Department's website.
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The New Virginia Tax Refund Debit Card Replaces Paper Refund Checks
As a result of new legislation, Virginia is making a significant change in the way that your clients may receive their individual income tax refund, the Virginia Tax Refund Debit Card.
There are two options for receiving a refund, direct deposit and the new refund debit card. Both paper and software versions of the individual income tax returns require that one of these two options be selected. Requesting a paper refund check is no longer an option.
While using direct deposit is still the fastest method for receiving a refund, the refund debit card offers a more secure and convenient alternative to paper checks and takes about the same amount of time as the refund check did previously.
When gathering information to prepare your clients' returns, be sure to get the correct banking information and birth date(s). When selecting direct deposit, always verify the correct banking information with your clients and do not default to last year's information.
Please visit the Department's website for additional information such as, where and how to use the refund debit card, how to use the card for free, transactions with associated fees and the fee schedule, how the card works for joint filers and more.
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Electronic Filing Requirement - Individual Income Tax
If you prepare more than 50 Virginia individual income tax returns, then you are required to e-File all of your clients' returns. The only exceptions are if the taxpayer voluntarily opts out of having their return e-Filed.
Visit the Tax Professionals Page on the Department's website for more information and the list of 2012 approved software vendors.
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e-File for the 2012 Taxable Year
NEW for e-File for the 2012 Taxable Year
All forms that can be e-Filed are now eligible. There are no longer requirements that will result in you having to file paper for your clients. You simply scan and attach all documentation, attachments, schedules, out-of-state tax returns, etc. to the file and submit. The scanning and attaching of required documentation is optional and will not prevent your client's return from being accepted if it is not attached. However, returns that require an attachment for which there is none, even though accepted, will result in a letter to your client requesting the missing attachment(s) and will delay their refund by approximately 30 days.
e-File Begins Accepting Returns Wednesday, January 30, 2013
You can expect to receive acknowledgement that your clients' e-Filed returns were accepted or rejected within 24 hours of transmission to the Department.
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Help Get Your Clients Ready to File Their Returns
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Have your clients gather their tax records and information such as current banking information, change of address, income statements and any supporting documentation in advance and have everything that you will need when delivering their files to your office.
- Especially make sure you have their birth date(s), current banking information, if they are using Direct Deposit, and any address changes before they leave your office.
- Please make sure the client is aware of the two refund options and have them make the selection that works best for them.
- Make sure your clients are aware that they can e-file and warehouse their payment for any date in the future right up to, and on, the due date.
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Refund Expectations
The fastest way to get your clients their refund is to e-File their tax return and select Direct Deposit.
- Refunds using any of the e-File options requesting a Direct Deposit take approximately 1 week.
- Refunds using any of the e-File options requesting a Refund Debit Card take approximately 2 weeks.
- Refunds from paper filed returns requesting a Direct Deposit take approximately 6 weeks.
- Refunds from paper filed returns requesting a Refund Debit Card take approximately 7 weeks.
Important Reminder:
When selecting Direct Deposit, always clear the taxpayer's saved bank routing and account information from the previous year and reenter the information again for the current year.
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Important Information for Military Spouses
The Military Spouses Residency Relief Act provides exemptions from income and personal property taxes when certain criteria are met. Under this law the spouse of military service members do not automatically become liable for income and personal property taxes as Virginia residents when they are present in Virginia solely because their spouse is a member of the military serving in Virginia. Visit the Department's website for details.
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Spouse Tax Adjustment Information for Joint Filers
If filing a joint return on Form 760, your client may qualify for a reduction in net tax of as much as $259.00 by taking advantage of the Spouse Tax Adjustment (STA). Taxpayers must use Filing Status 2, and each spouse must have taxable income and their combined income must be at least $3,000.
As you know, married taxpayers filing separately automatically receive the benefit of a lower tax rate on each of their individual returns but when filing jointly and combining their income they must take the STA to receive the benefit of a lower tax rate.
The STA is calculated based on each spouse's portion of the joint Virginia Adjusted Gross Income (VAGI). To claim the STA for your clients, complete Form 760, Lines 16a and 16b using the spouses separate VAGI amounts. Verify that the total of the separate VAGIs equal the total on Form 760, Line 9. An STA calculator is located on the Department's website.
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Tips and Tools for Tax Professionals
If you aren't already, please consider taking advantage of the following resources/tools available to you:
Tax Professionals Hotline (804) 367-9286 - Open Monday through Friday, 8:30 AM to 4:30 PM to provide quick responses to your inquiries about client accounts or other tax questions for any tax type administered by the Department.
Tax Professionals Page on the Department's website - Provides electronic filing information, early release forms, instructional materials, and special contact information.
Laws, Rules and Decisions Page on the Department's website - Offers a variety of information, from Tax Bulletins to Legislative Summaries, to Rulings of the Commissioner. This is a great tool for researching the latest interpretations of Virginia tax law.
Other website features and services you may find helpful are the Department's "What's New" pages for both individual and business tax types, tax forms, the Department's online filing and secure messaging services, and agency publications, just to name a few.
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