If you have any questions regarding any of the tax law changes below, please feel free to give us a call at 877-58-PEACE (73223) of send us an email anytime to Info@rklfinancial.com
Raise in the Standard Deductions- There has been an increase in all standard deductions across the board this year. The new amounts are listed below.
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Married Filing Joint
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$11,600
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Qualifying Widow With Dependent Child
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$11,600
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Head Of Household
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$8,500
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Married Filing Separately
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$5,800
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Single
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$5,800
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We have also seen an increase to the Blind/Overage 65 deduction. The new deductions are $1,450 (if your filing status is Single or Head of Household), and $1,150 for Married Filing Joint and Married Filing Separate Individuals.
Increase in Personal Exemptions- Personal Exemptions have increased from $3,650 to $3,700.
Tax Return Deadline Extended- 2011 Individual returns have a deadline of April 17, 2012.
New Form For Capital Gains- Starting in 2011 capital gains and losses must be reported on new Form 8949,Sales and Other Dispositions of Capital Assets. The totals are then carried to Schedule D. This form will be used to help the IRS track which financial brokers are providing taxpayers with a cost basis on the sale of Capital Property (Stocks, bonds, etc)
Stock Basis Recorded By Brokers- Brokers who are otherwise required to file a Form 1099-B to report gross proceeds from the sale of stocks, bonds or other securities must also include the following on the Form 1099-B for securities acquired after 2010: [IRC §6045(g)]
• The customer’s adjusted basis in the security.
• Whether gain or loss with respect to the security is long- or short-term.
Time To Pay on Your 2010 Roth Conversion- Individuals who converted or rolled over an amount to a Roth
IRA in 2010 and did not report the taxable amount on their 2010 return must report that income on their 2011 and 2012 returns. You report the taxable amounts on 15b (for conversions from IRAs) or 16b (for rollovers from qualified retirement plans, other than from a designated Roth account).
No Extra Money For Working- The Making Work Pay (Schedule M) Credit has been eliminated.
The IRS Wants To Know About Your Charge Card Sales- Beginning in 2011, form 1099-K will be issued to business and individuals who have more than 200 transactions and $20,000 USD paid to them. This can be a new effective way that the IRS can track EBay Sales.
FICA Holiday- While wage earners have already received this through their paycheck, self employed individuals will see a reduction in self employment tax of 2%. Thus, the SE Tax is 13.3%.
Health Insurance Premiums Will No Longer Deduct From SE Tax- While health insurance premiums are can still be an adjustment to income, for self employed people, you will no longer be able to deduct the premiums from Self Employment Taxes.
Penalties On Health Plans- As it stands currently, you cannot take from your HSA, MSA, or Flexible spending accounts to pay for over the counter drugs. With that said, any non-qualified distributions from any of the above plans will result in a new 20% penalty.
Health Insurance Premiums on the W-2- Although this is not being enforced by the IRS for 2011, Employers must report the value of health insurance coverage (not including amounts employees elect to contribute to health FSAs) they provide to their employees on the employee’s Form W-2.
New Cafeteria Plans- A new Simple Cafeteria Plan is available to eligible small employers (100 or fewer average number of employees during either of the two preceding years). A Simple Cafeteria Plan and the benefits it provides are treated as meeting the nondiscrimination rules for cafeteria plans if the plan satisfies certain minimum eligibility, participation and contribution requirements.
Cancelation of Debt- Business can no longer defer the taxability of cancelation of debt over 5 years.
New Hire Retention Credit- For each of the taxpayer’s retained workers, the general business credit is increased by the lesser of: [HIRE Act §102(a)]
1) $1,000 or
2) 6.2% of the wages paid to each retained worker during the 52-consecutive-week-period beginning on the worker’s hire date. The credit is only available for wages paid to workers who began employment any time from 2/4/10–12/31/10 and who worked for at least 52 consecutive weeks. So, for calendar year taxpayers, it can be claimed in 2011 only.
Changes in Built In Gains On Corporations- A C corporation that elects S corporation status is taxed at the highest corporate rate (currently 35%) on built-in gains recognized during the recognition period, which is generally the 10-year period starting on the first day of the first year of S status. For 2011, the built-in gain tax is not imposed if at least five years in the recognition period ended before 2011.
Start Up Costs For Business Reduced- For 2011, business must revert back to the $5,000 allowable initial start up cost deduction (rest to be amortized over 180 months). The initial start up deduction used to be $10,000 ofr 2010.
Gift Tax Exclusion Amount- For gifts made in 2011 and 2012, the gift tax is reunified with the estate tax, with an exclusion amount of $5 million. [IRC §2631(c)]
Spouses Benefit In Death- The executor of a deceased spouse’s estate can transfer any unused estate tax exclusion amount to the surviving spouse.
Paying Tax On Mortgage Benefits- New Form 1098-MA is used by government agencies to report to the IRS and to homeowners the total amount of mortgage payments made with funds from the Housing Finance Agency Innovative Fund for the Hardest Hit Housing Markets or the Emergency Homeowner Loan Program. (See Notice 2011-14 for details.)
