24V AC converter to 12V DC at 1.2A
This just screams for a switching converter, you can buy these on ebay. I suggest an LM2596 based module.



You can remove everything in your circuit that is right of C2 and replace it with this module. Then turn the pot on the module so that the output supplies 12 V and you're done. Notice how this module does not need a heatsink !

BUT like brhans comments, you're really pushing it with 15 W in and 14.4 W out. You should really be using a slightly more powerfull transformer, like 20 W or so. When using a switching converter you can also just make the input voltage slightly higher (up to what the LM2596 can handle) to increase the power.