Late Tax Breaks Missing from 1040 Forms

A delay by Congress to restore a number of tax breaks that expired in 2005 will force millions of Americans to use inaccurate 1040 forms and instructions.

Because lawmakers did not vote on the so-called extender bill until weeks after the Internal Revenue Service had sent its forms and instruction booklets to the printers in November, taxpayers who miss the two-sentence warning in the 1040 booklet could become confused.

"If you just picked up the 1040 booklet, the cues, the hints, the instructions are not in there," Karen Brosi, an enrolled agent and certified financial planner, told the San Jose Mercury News.

As a result, the IRS took the unusual step in January of temporarily setting aside an estimated 930,000 tax returns claiming the revived tax breaks. Taxpayers who especially will be affected include those who want to deduct sales taxes, pay tuition bills or teachers who buy classroom supplies.

Here's a breakdown of the affected provisions and quick-fix solutions:

Sales tax
This provision gives taxpayers the choice of deducting either their state income taxes or their sales taxes. It's a possibly big deduction for residents of states like Florida and Texas that don't levy income taxes, but some Californians also will benefit if they made big purchases that pushed what they spent on sales taxes higher than their state income taxes.

Quick Fix: On Schedule A, write the initials "ST" (as in "sales tax") on the dotted line to the left of Line 5, which is labeled "state and local income taxes."

Teacher's expenses
Teachers can write off up to $250 that they spend on books and classroom supplies.

Quick Fix: Write "E" (as in "educator") on Line 23 of Form 1040, where taxpayers otherwise would claim an "Archer MSA deduction." If you are claiming write-offs for classroom supplies and a medical savings account, write down "B" (as in "both") and attach a breakdown.

Tuition bills
Parents and students can deduct up to $4,000 for tuition and fees for qualifying colleges and universities.

Quick Fix: Write "T" (as in "tuition") on Line 35 of Form 1040. If you're deducting both tuition fees and domestic production activities, write in "B" (as in "both") and attach a breakdown showing the amounts for both deductions. Unlike with the sales tax, there's no dotted line to write on.

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