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Daylight Savings Time changes for 2007
IRS processing delays have ended
IRS extends filing deadline to April 17, 2007
IRS announcement concerning farmers and fishermen
Items addressed in this release of ProSeries Basic Edition/1040
Items addressed in previous releases of ProSeries Basic Edition/1040
What's new in ProSeries Basic Edition/1040
New ProSeries Basic Edition/1040 forms and worksheets
All forms in this release of ProSeries Basic Edition/1040 (Release 2006.07) are final and can be filed with the IRS.
The United States and parts of Canada are extending Daylight Savings Time (DST). From 2007 onward, DST will begin the second Sunday in March (three weeks earlier) and end on the first Sunday in November (one week later). For 2007, DST begins on March 11 and ends on November 4. The DST extension is mandated by the Energy Policy Act of 2005. For more information, go to the Department of Energy Web site.
Important: Some ProSeries Basic Edition functions and services use your computer system's clock. If your computer system's clock is not correct, time dependent events and information might be reported incorrectly. To ensure that your ProSeries Basic Edition software works as expected, we recommend that you update your computer operating system per the manufacturer's instructions so your computer system's clock will be correct.
You might find the link below helpful:
Microsoft Daylight Saving Time Help and Support CenterImportant: On February 6, 2007, the IRS announced they had "...started processing tax returns that claim key tax provisions renewed by legislation enacted in December and urged taxpayers not to overlook the one-time telephone tax refund." The IRS announcement also "...emphasized that using e-file is the easiest and most accurate way to file a return, including any return claiming extender-related benefits."
For more information, go to http://www.proseries.com/support or http://www.irs.gov.
Tip: To see more information about the educator expenses adjustment, tuition and fee deductions, and state and local sales tax deductions in this ReadMe file, see the Issues to be aware of section below.
On January 24, 2007, the IRS announced that "Taxpayers will have extra time to file and pay because April 15 falls on a Sunday in 2007, and the following day, Monday, April 16, is Emancipation Day, a legal holiday in the District of Columbia." The IRS announcement also states that:
"The April 17, 2007 deadline will apply to any of the following:
Other tax-filing and payment requirements affected by this change are described in IRS Publication 509, Tax Calendars for 2007". IRS Publication 509 is available on the IRS Web site, which is http://www.irs.gov.
Tip: Emancipation Day is not a federal holiday. IRS offices will be open on April 16, 2007.
On February 28, 2007, the IRS announced that "...farmers and fishermen may ask the IRS to waive any estimated tax penalties if they were affected by the snowstorms that began in February 19, 2007." The IRS announcement also states that:
"The timing and suddenness of the storm, as well as the resulting power outages, may have affected the ability of many farmers and fishermen to file their 2006 calendar year return by March 1, 2007. Generally, farmers and fisherman can avoid an estimated tax penalty if they file their returns and pay the full amount of tax shown on their return by March 1, 2007. An individual is a farmer or fisherman for these purposes if two-thirds of the individual’s total gross income for the taxable year or the preceding taxable year is from farming or fishing (including oyster farming).
If a taxpayer has an underpayment of estimated tax, all or part of the penalty for the underpayment may be waived if the IRS determines that the underpayment was due to a casualty, disaster or other unusual circumstance and it would be inequitable to impose the penalty.
To request a waiver of the estimated tax penalty, affected taxpayers should complete Form 2210-F Underpayment of Estimated Tax by Farmers and Fisherman and file it with their Form 1040 series income tax return. As indicated in the instructions to Form 2210-F, a statement should be attached to the Form explaining the reasons why you are unable to meet the March 1 deadline. At the top of the Form 2210-F, write “Request for Waiver Due to Winter Ice Storms."
Taxpayers may download forms and publications from IRS.gov or may order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040."
To request a waiver of the estimated tax penalty on Form 2210-F in ProSeries Basic Edition/1040:
With recent releases of ProSeries Basic Edition/1040, when the program printed a client's tax return, it didn't print Overflow Statements that should be filed with the return if the Supporting Statements option wasn't selected in the Print With Return section of the Print Center (and in the Print With Return section of the Options dialog box). This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.07).
Tip: When the number of lines of data in an expanding table on a form exceeds the number of lines of data that can be printed on that section of the form, the program creates an Overflow Statement for those additional lines of data. For example, the program might create an Overflow Statement for the expanding table on Schedule C, Part IV, Other Expenses.
Items addressed in Release 2006.05
Items addressed in Release 2006.04
Items addressed in Release 2006.03
Items addressed in Release 2006.02
Items addressed in Release 2006.01
The file with the client filing instructions for Form 1040 returns that was included with the previous release of ProSeries Basic Edition/1040 (Release 2006.04) inadvertently included some letter-type formatting and text at the beginning and the end of the instructions. This situation has been corrected in the file with the client filing instructions letter for Form 1040 returns that is included with this release of ProSeries Basic Edition/1040 (Release 2006.05).
Tip: To see the client filing instructions for a client, open the client's federal return, go to the Tools menu, then select View Client Filing Instructions.
Note: If you like the style of the client filing instructions that you're currently using, you don't need to follow the instructions below to update the client filing instructions file.
To update the client filing instructions on your system, take the following steps:
The program will replace the previous version of the client filing instructions for Form 1040 returns with the current version of the client filing instructions for Form 1040 returns.
With previous releases of ProSeries Basic Edition/1040, if an additional 15% tax was calculated on line 11b of Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, the program didn't flow that amount from Form 8853 to line G in the Additional Other Taxes Smart Worksheet between lines 62 and 63 of Form 1040. This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.05).
With previous releases of ProSeries Basic Edition/1040, if an additional 10% tax was calculated on line 15b of Form 8889, Health Savings Accounts (HSAs), the program didn't flow that amount from Form 8889 to line I in the Additional Other Taxes Smart Worksheet between lines 62 and 63 of Form 1040. This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.05).
With previous releases of ProSeries Basic Edition/1040, if a Schedule K-1 Worksheet for Estates and Trusts (Form 1041) included a net operating loss (NOL) carryover on line 11D, the program didn't flow that amount to line 7 of the Other Income Statement for Form 1040, line 21. As a result, the amount on Form 1040, line 21, Other Income, didn't include the NOL carryover amount. This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.05).
With previous releases of ProSeries Basic Edition/1040, the following two situations existed:
(1) If a 2005 Massachusetts return had a nonrefundable credit on Form 1, line 29 AND an overpayment amount, the program did not transfer the Massachusetts overpayment amount to the 2006 Federal Carryover Worksheet, 2005 State and Local Income Tax Information table, column (f) Total Overpayment. As a result, the Massachusetts overpayment amount was not included in the calculation of Form 1040, line 10, Taxable Refunds, Credits, or Offsets of State and Local Income Taxes.
(2) If a 2005 Massachusetts return had a use tax on out of state purchases on Form 1, line 33 AND a refund, the Massachusetts refund amount that the program transferred to the 2006 Federal Carryover Worksheet, 2005 State and Local Income Tax Information table, column (f) Total Overpayment was too large by $25 because it incorrectly included the $25 Use Tax. As a result, the Massachusetts overpayment amount that was included in the calculation of Form 1040, line 10, Taxable Refunds, Credits, or Offsets of State and Local Income Taxes, was overstated by $25.
Important: These situations have been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.04).
If you already used a previous release of ProSeries Basic Edition/1040 to transfer data from a client's 2005 ProSeries Basic Edition/1040 client file that included a Massachusetts return with either of the situations described above, use one of the following approaches to correct the amount on client's 2006 Federal Carryover Worksheet:
Approach 1 - Retransfer the client's 2005 data because you haven't started data entry:
The program will retransfer data from the client's 2005 ProSeries Basic Edition/1040 client file. The Massachusetts overpayment or refund amount in column (f), Total Overpayment, of the 2005 State and Local Income Tax Information table on the 2006 Federal Carryover Worksheet will be correct, and you can begin entering additional data.
Approach 2 - Edit the client's 2006 Federal Carryover Worksheet because you've begun data entry:
With previous releases of ProSeries Basic Edition/1040, the following two situations existed:
(1) If a 2005 Pennsylvania return had a refund AND certain other conditions (such as a tax forgiveness amount on Schedule SP, Special Tax Forgiveness Credit), the program might have transferred an incorrect amount that was paid with the Pennsylvania return and/or an incorrect Pennsylvania refund amount to the 2006 Federal Carryover Worksheet, 2005 State and Local Income Tax Information table, column (e) Paid With Return, and/or column (f), Total Overpayment. If this occurred, the Pennsylvania overpayment amount that was included in the calculation of Form 1040, line 10, Taxable Refunds, Credits, or Offsets of State and Local Income Taxes, might not have been correct. In addition, the amount of Pennsylvania tax paid in the calculation of Schedule A, line 5, State and Local Income Taxes, might not have been correct.
(2) If the taxpayer was a Pennsylvania resident who reported income earned in New York AND the Pennsylvania return included a credit for New York taxes paid AND the taxpayer paid an amount with the 2005 Pennsylvania return, the program might have transferred an incorrect amount that was paid with the Pennsylvania return to the 2006 Federal Carryover Worksheet, 2005 State and Local Income Tax Information table, column (e) Paid With Return. The amount transferred incorrectly included the amount of credit for New York taxes paid. If this occurred, the amount of Pennsylvania tax paid in the calculation of Schedule A, line 5, State and Local Income Taxes, would not have been correct.
Important: These situations have been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.04).
If you already used a previous release of ProSeries Basic Edition/1040 to transfer data from a client's 2005 ProSeries Basic Edition/1040 client file that included a Pennsylvania return with either of the situations described above, use one of the following approaches to correct the amount(s) on client's 2006 Federal Carryover Worksheet:
Approach 1 - Retransfer the client's 2005 data because you haven't started data entry:
The program will retransfer data from the client's 2005 ProSeries Basic Edition/1040 client file. The Pennsylvania amounts in column (e), Paid With Return, and/or column (f), Total Overpayment, of the 2005 State and Local Income Tax Information table on the 2006 Federal Carryover Worksheet will be correct, and you can begin entering additional data.
Approach 2 - Edit the client's 2006 Federal Carryover Worksheet because you've begun data entry:
With previous releases of ProSeries Basic Edition/1040, some returns that included Form 5695, Residential Energy Credits, were incorrectly rejected when filed electronically. This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.03).
With previous releases of ProSeries Basic Edition/1040, if the Automatically Generate a Taxpayer PIN Equal to Last 5 Digits of Client's SSN for Individual Returns option was selected in the Practitioner PIN Options area of the Electronic Filing section of the Options dialog box, the option didn't work for Transferred returns or returns that were created before the option was selected. This situation has been corrected with this release of ProSeries Basic Edition/1040 (Release 2006.02). The correction works for all new and existing returns. You don't need to retransfer data for previously-Transferred returns.
With previous releases of ProSeries Basic Edition/1040, if a client claimed the standard mileage rate for a vehicle on a copy of the 2005 Car and Truck Expenses Worksheet or 2005 Form 2106 Vehicle Expenses Worksheet, the program correctly included the business miles on line 5a (Business miles from 01/01/05 thru 08/31/05), but it incorrectly didn't include the business miles on line 5b (Business miles from 09/01/05 thru 12/31/05) when computing the depreciation component of the standard mileage deduction. As a result, the amount of prior depreciation entered on lines 34 and 36 of the corresponding copy of the 2006 Car and Truck Expenses Worksheet or lines 28 and 30 of the corresponding copy of the 2006 Form 2106 Vehicle Expenses Worksheet is understated if there was an amount on line 5b of the 2005 Car and Truck Expenses Worksheet or 2005 Form 2106 Vehicle Expenses Worksheet.
Important: This situation has been corrected with this release of ProSeries Basic Edition/1040 (which is Release 2006.02). The correct prior depreciation amounts (using the business miles from lines 5a and 5b on the 2005 Car and Truck Expenses Worksheet or 2005 Form 2106 Vehicle Expenses Worksheet) are transferred when you transfer data from a client's 2005 ProSeries Basic Edition/1040 client file to a 2006 ProSeries Basic Edition/1040 client file.
If you already used a previous release of ProSeries Basic Edition/1040 to transfer data from a client's 2005 ProSeries Basic Edition/1040 client file that included one or more copies of the 2005 Car and Truck Expenses Worksheet or 2005 Form 2106 Vehicle Expenses Worksheet on which the client claimed the standard mileage rate for a vehicle, use one of the following approaches to correct the prior depreciation amount(s) on the client's 2006 Car and Truck Expenses Worksheet(s) and/or 2006 Form 2106 Vehicle Expenses Worksheet(s):
Approach 1 - Retransfer the client's 2005 data because you haven't started data entry:
The program will retransfer data from the client's 2005 ProSeries Basic Edition/1040 client file. The prior depreciation amount(s) on the 2006 Car and Truck Expenses Worksheet(s) and/or 2006 Form 2106 Vehicle Expenses Worksheet(s) will be correct, and you can begin entering additional data.
Approach 2 - Edit the client's 2006 Car and Truck Expenses Worksheet(s) and/or 2006 Form 2106 Vehicle Expenses Worksheet(s) because you've begun data entry:
Note: The 17 cents per mile rate applies to both regular depreciation and AMT depreciation.
If you transferred a client's data from a 2005 ProSeries Basic Edition/1040 client file with a previous release of the 2006 ProSeries Basic Edition/1040 program AND that client claimed any of the following credits on the 2005 Illinois Form IL-1040:
then the taxable state tax refund amount for Illinois or the income taxes paid amount for Illinois that was transferred to the Federal Carryover Worksheet was incorrect. Here's more information:
2005 Illinois overpayment. The amount that the previous versions of ProSeries Basic Edition/1040 transferred to column (f), Total Overpayment, in the 2005 State and Local Tax Information section of the 2006 Federal Carryover Worksheet is understated. As a result, the amount on Form 1040, line 10, Taxable Refunds, Credits, or Offsets of State and Local Income Taxes, is also understated.
2005 Illinois balance due. The amount that the previous versions of ProSeries Basic Edition/1040 transferred to column (e), Paid With Return, in the 2005 State and Local Tax Information section of the 2006 Federal Carryover Worksheet is overstated. As a result, the amount on Schedule A, line J, Total Income Taxes Paid, is also overstated.
Important: This situation has been corrected with this release of ProSeries Basic Edition/1040 (which is Release 2006.02). The correct taxable state tax refund amount for Illinois or income taxes paid amount for Illinois is transferred to the Federal Carryover Worksheet when you transfer a client's data from a 2005 ProSeries Basic Edition/1040 client file with this release of the 2006 ProSeries Basic Edition/1040 program (Release 2006.02), regardless of whether the client claimed any of the credits on lines 19 through 23 on the 2005 Illinois Form IL-1040.
If you already used a previous release of ProSeries Basic Edition/1040 to transfer data from a client's 2005 ProSeries Basic Edition/1040 client file that included an Illinois return with one or more of the credits listed above, use one of the following approaches to correct the amount on client's 2006 Federal Carryover Worksheet:
Approach 1 - Retransfer the client's 2005 data because you haven't started data entry:
The program will retransfer data from the client's 2005 ProSeries Basic Edition/1040 client file. The Illinois amounts on the 2006 Federal Carryover Worksheet will be correct, and you can begin entering additional data.
Approach 2 - Edit the client's 2006 Federal Carryover Worksheet because you've begun data entry:
The standard client letter for Form 1040 returns that was included with the previous release of ProSeries Basic Edition/1040 (Release 2006.00) prints an unnecessary "Internal Revenue Service" after the City, State, ZIP code line of the Mail To address for Form 1040-ES vouchers if the taxpayer doesn't reside in Kentucky or Pennsylvania. This situation has been corrected in the standard client letter for Form 1040 returns that is included with this release of ProSeries Basic Edition/1040 (Release 2006.01).
Note: If all your clients who make quarterly estimated tax payments live in Kentucky or Pennsylvania, this situation doesn't affect you.
To correct this situation on your system, take the following steps:
The program will replace the previous version of the standard client letter for Form 1040 returns with the current version of the standard client letter for Form 1040 returns.
The client invoice doesn't include charges for a Minnesota Property Tax Refund return (Form M1PR). If you prepare a Minnesota Property Tax Refund return (Form M1PR) for a client AND you want to include a charge for that return on the client invoice in the client's federal return:
The IRS has indicated that taxpayers must file Form 1040 (not Form 1040A or Form 1040EZ) to take the educator expenses deduction. The deduction is reported on line 23 of Form 1040, with (1) an "E" if line 23 includes educator expenses only, (2) a "B" if line 23 includes both educator expenses and the Archer MSA (Medical Savings Account) deduction, or (3) no letter if line 23 includes the Archer MSA deduction only. If line 23 includes both educator expenses and the Archer MSA (Medical Savings Account) deduction (a "B"), an attached statement must break down the amounts.
In ProSeries Basic Edition/1040, enter the entire educator expense on the Educator Expenses Worksheet. The program flows the first $250 to the Line 23 Detail Archer MSA and Educator Expenses Smart Worksheet above line 23 on page 1 of Form 1040. The program flows any amount in excess of $250 to the Miscellaneous Itemized Deduction Worksheet. The program calculates line 23 on Form 1040 by adding any amounts in the Line 23 Detail Archer MSA and Educator Expenses Smart Worksheet to any amounts that it flows from Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. When you print the client's Form 1040, the program prints "E" or "B" to the left of the number on line 23. If there's a "B" in line 23, the program also prints a supporting statement.
The IRS has indicated that taxpayers must file Form 1040 (not Form 1040A or Form 1040EZ) to take the tuition and fees deduction. The deduction is reported on line 35 of Form 1040, with (1) an "T" if line 23 includes tuition and fees only, (2) a "B" if line 35 includes both tuition and fees and the domestic production activities deduction, or (3) no letter if line 35 includes the Archer MSA deduction only. If line 35 includes both educator expenses and the domestic production activities deduction (a "B"), an attached statement must break down the amounts.
In ProSeries Basic Edition/1040, enter the tuition and fees expenses on the Education Tuition and Fees Worksheet. The worksheet optimizes this expense between the Hope Credit, the Lifetime Learning Credit, and the Tuition and Fees Deduction. If the deduction is the best alternative, the program flows the amount to the Line 35 Domestic Production Activities Deduction and Tuition and Fees Deduction Smart Worksheet above line 35 of Form 1040. The program calculates line 35 on Form 1040 by adding any amounts in the Line 35 Domestic Production Activities Deduction and Tuition and Fees Deduction Smart Worksheet to any amounts that it flows from Form 8903, Domestic Production Activities Deduction. When you print the client's Form 1040, the program prints "T" or "B" next to line 35. If there's a "B" next to line 35, the program also prints a supporting statement.
The IRS has indicated they will reissue Publication 600 (State and Local General Sales Taxes) for 2006 with the state and local sales tax tables, worksheets, and instructions for figuring the deduction. This release of ProSeries Basic Edition/1040 includes the IRS Sales Tax Table that was available on 12/8/06.
In ProSeries Basic Edition/1040, a Smart Worksheet above line 5 of Schedule A helps you calculate the Sales Tax deduction for line 5. However, there aren't any check boxes on Schedule A to indicate which option is being used for line 5. (Schedule A in last year's ProSeries Basic Edition/1040 product (for 2005 returns) included an "Income taxes" check box and a "General sales taxes" check box for line 5.) Therefore, the program prints "ST" to the left of line 5 if the sales tax option is being used.
If a client is applying for a Refund Anticipation Loan (RAL) or a Refund Transfer (RT), don't change the application from one type of Bank Product to another type after you file the return electronically. If you change the type of Bank Product after you e-file a return, you might not receive a check authorization from Santa Barbara Bank and Trust. If you don't receive a check authorization, you can't print a bank product check for the customer.
If you are offering bank products through Santa Barbara Bank and Trust (SBBT), it is very important that you transmit the check status information back to SBBT after you print a bank product check.
The IRS clarified the following issues concerning electronic filing, Form 2106, and Form 2106-EZ.
ProSeries Basic Edition/1040: If a federal return is being filed electronically, the ProSeries Basic Edition/1040 software allows one copy of Form 2106 or one copy of Form 2106-EZ for the taxpayer. If the filing status for the return is Married Filing Joint, the software also allows one copy of Form 2106 or one copy of Form 2106-EZ for the spouse. However, the ProSeries Basic Edition/1040 software does not support two copies of page 2 of Form 2106 with just one copy of page 1 of Form 2106. With ProSeries Basic Edition/1040 software:
California Civil Code section 1798.85 addresses the disclosure of Social Security Numbers in certain mailed materials. If you think California Civil Code section 1798.85 (or a similar regulation) might apply to materials that you send to your clients, we suggest you check with your attorney or other advisor.
To suppress the printing of a Social Security Number on a particular form or worksheet, (1) select the Social Security Number field, (2) go to the Edit menu and choose Override, then (3) press the Delete key to remove the Social Security Number from the field.
ProSeries Basic Edition doesn't enter Social Security Numbers on the following reports:
New ProSeries Basic Edition/1040 forms and worksheets
For information on what's new in ProSeries Basic Edition/1040, open a 1040 return, go to the Help menu, choose Help Center, then select What's New This Year?
For information about new and revised ProSeries Basic Edition features, use any of the following methods:
We've added the following forms to ProSeries Basic Edition/1040 for the 2006 tax year:
Congress recently passed H.R. 6111, the Tax Relief and Health Care Act of 2006. President Bush signed the bill on December 20, 2006. The bill extends several items that were set to expire in 2006, including the state and local sales tax deduction, tuition and fees deduction, educator expenses adjustment, and certain work credits. The act also liberalizes rules for health savings accounts. The Tax Relief and Health Care Act of 2006 extends through 2007, and in certain circumstances modifies, provisions that expired at the end of 2005 or that will expire at the end of 2006.
State and local sales tax table. This release of ProSeries Basic Edition/1040 includes the IRS Sales Tax Table that was available on 12/8/06.
For more information, go to http://www.proseries.com/support or http://www.irs.gov.
New legislation takes effect in 2006 as a result of the Pension Protection Act of 2006, the Tax Increase Prevention and Reconciliation Act of 2006, and the Energy Tax Act of 2005.
Highlights of this new legislation include new tax credits for residential energy efficiency improvements, alternative motor vehicle credit, tax-free IRA distributions for charitable purposes, real property contributions for conservation, stricter rules for charitable contributions, increased alternative minimum tax (AMT) exemption amounts, increase in the age of children subject to the "kiddie tax" involving investment income from 14 years old to 18 years old, and changes to the foreign earned income and housing exclusion rules.
Some of the provisions benefiting taxpayers affected by Hurricanes Katrina, Rita, and Wilma are still in effect for 2006.
For more information:
To use the Quicken Import feature to import data into ProSeries Basic Edition, you must use Quicken 2005, 2006, or 2007. To upgrade your version of Quicken, call 1-800-446-8848 or go to http://www.quicken.intuit.com.
Be sure to open Quicken before using Quicken Import to import Quicken information into a client's return.
Important: Electronic filing began on January 12, 2007. The IRS has indicated that returns containing items related to the Tax Relief and Health Care Act of 2006 (which was passed in mid-December) won't be processed until the first week of February - at the earliest.
For electronic filing procedures and information, you can click the EF clients tab (if HomeBase is on the screen) or the EF Clients button on the toolbar (if a return is on the screen) to go to the EF Clients view. The Steps to E-File section on the right side of the EF Clients view summarizes the steps that you take when you file a client's return(s) electronically.
End of ProSeries Basic Edition/1040 ReadMe file