The 2011 filing season is under way, and there are a number of changes to note. Last-minute tax changes, on top of a number of other changes throughout the year, add many surprises for individuals. If you’re looking to get an early start on filing your 2010 return, here are some key points to know.

Taxpayers who are entitled to a refund usually want to file as early as possible. This year, that may not be an option for some filers. If you want to claim any of the tax breaks that were extended by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, which was signed into law on Dec. 17, 2010, you’ll have to wait until mid to late February. The delay affects returns filed electronically and by paper. This is because the IRS needs more time to update its computers so they can process the returns. Items that are subject to delay:

• Above-the-line deduction for tuition and fees
• $250 educator deduction for out-of-pocket expenses
• Itemized deduction for state and local sales tax in lieu of state and local income taxes

If you want to file a paper return, don’t wait for forms to show up in your mailbox. The IRS did not send out forms this year. You can download forms from the IRS website at www.irs.gov.

If you want to file electronically, you can do so using any of these options:

• FreeFile (www.freefile.irs.gov): You can use FreeFile, a filing option offered by a number of IRS-approved commercial companies, if your adjusted gross income is $58,000 or less. There is no cost for the return preparation or federal e-filing. FreeFile for 2010 begins January 14, 2011. There are charges for the filing of state and bank fees for the direct deposit.
• Home computer and commercial software or online return preparation: The cost of the return preparation usually includes the filing of a federal return for free. Again there will be charges for state filing and bank fees for direct deposit.
• Paid tax return preparer: Ask your CPA, EA or other paid preparer what the charges will be.

Some taxpayers expecting tax refunds take out short-term loans, called refund anticipation loans, or RALs. Money is advanced to taxpayers to the extent of the refund they expect to receive, and the loan is paid off when the refund is actually received. These loans often are used to pay tax preparer fees or other immediate and pressing expenses. In the upcoming filing season for 2010 tax returns, the cost of these loans has risen because the IRS will no longer provide “debt indicators” to preparers.

Debt indicators explain whether a refund will be offset by any outstanding tax owed or other liabilities that the IRS is allowed to offset with a tax refund, such as student loans. Until now, debt indicators appeared on the e-file receipt confirmation sent to preparers.

Starting with the upcoming tax season, this information will not be included here. This could increase the cost of RALs because it will be more difficult for lenders to determine the amount that can be advanced. H&R Block, however, does not rely on debt indicators to make RALs; it has patented a way to make an assignment of the right to the refund. Also, taxpayers can find out their personal information from the IRS through an interactive online tool called “Where’s My Refund?”

After more than 30 years, the opportunity for low-income workers to receive the earned income credit on an advanced basis has ended. Effective after 2010, eligible workers will have to wait until they file their returns to claim the earned income credit.

It has been estimated that only 1 percent of workers eligible to receive the credit on an advanced basis took advantage of the opportunity. The elimination of this provision helped to fund the Education Jobs and Medicaid Assistance Act of 2010, which was signed into law on August 10, 2010.

Make sure to talk with your tax advisor to clarify all of the tax changes that can affect you and your tax bill. Remember to always “Maximize your refund by optimizing your deductions”.

Jamar White, M.B.A