New Changes For Tax Year 2011
via IRS.gov
- Standard mileage rates:
- The 2011 rate for business use of your car is 51 cents a mile for miles driven before July 1, 2011, and 55 ½ cents a mile for miles driven after June 30, 2011.
- The 2011 rate for use of your car to get medical care is 19 cents a mile for miles driven before July 1, 2011, and 23 ½ cents a mile for miles driven after June 30, 2011.
- The 2011 rate for use of your car to move is 19 cents a mile for miles driven before July 1, 2011, and 23 ½ cents a mile for miles driven after June 30, 2011. See Publication 521, Moving Expenses.
- The standard deduction has increased.
- The amount you can deduct for each exemption has increased.
- Alternative minimum tax (AMT) exemption amount has increased.
- Health savings accounts (HSAs) and Archer MSAs:
- For distributions after 2010, the additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses has increased to 20%.
- Also beginning in 2011, amounts paid for medicine or a drug are qualified medical expenses only if the medicine or drug is a prescribed drug or is insulin.
- Roth IRAs: If you converted or rolled over an amount to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.
- Designated Roth accounts. If you rolled over an amount from a 401(k) or 403(b) plan to a designated Roth account in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return.
- Alternative motor vehicle credit. You cannot claim the alternative motor vehicle credit for a vehicle you bought in 2011, unless the vehicle is a new fuel cell motor vehicle.
- First-time homebuyer credit: To claim the first-time homebuyer credit for 2011, you (or your spouse if married) must have been a member of the uniformed services or Foreign Service or an employee of the intelligence community on qualified official extended duty outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.
- Repayment of first-time homebuyer credit. If you have to repay the credit, you may be able to do so without attaching Form 5405.
- Nonbusiness energy property credit. This credit is figured differently for 2011 than it was for 2010.
- Health coverage tax credit. This credit has been extended, and the amount has changed.
- Schedule L. Schedule L is no longer in use. You do not need it to figure your 2011 standard deduction.
- The making work pay credit has expired. You cannot claim it on your 2011 return. Schedule M is no longer in use.
- Mailing your return. If you are filing a paper return, you may be mailing it to a different address this year because the IRS has changed the filing location for several areas. Where to file
Make it Easy on Yourself: Choose the Simplest Tax Form
Via IRS.gov
Use the 1040EZ if:
- Your taxable income is below $100,000
- Your filing status is single or married filing jointly
- You are not claiming any dependents
- Your interest income is $1,500 or less
Use the 1040A if:
- Your taxable income is below $100,000
- You have capital gain distributions
- You claim certain tax credits
- You claim adjustments to income for IRA contributions and student loan interest
If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. Among the reasons you must use the 1040 are:
- Your taxable income is $100,000 or more
- You claim itemized deductions
- You are reporting self-employment income
- You are reporting income from sale of property
Government Shutdown
via NATP
There is potential for a government shutdown after midnight on Friday due to a lack of budget approval. If this occurs, the IRS has stated that the April 18 tax deadline remains in effect. All taxpayers should continue to file their returns and pay their taxes as normal. The IRS plans to continue accepting all tax returns, both electronic and paper. Refunds will continue to be processed normally for electronically filed tax returns and most taxpayers will not see delays for e-filed returns. However, taxpayers should expect delays for paper tax refunds.
Tax Exempt Orgs, Your Filing Day May Be Approaching ~ May 15th
If your organization normally has gross receipts of $25,000 or more ($50,000 for tax years ending on or after December 31, 2010), you must file a 990 (or 990-EZ if allowed) Return by the 15th day of the 5th month after the end of your organization’s fiscal year. Many organizations begin their year on January 1st and therefore must file by May 15th. However, a three month extension may be granted by filing Form 8868 before the due day without having to explain why it cannot be filed on time. An additional three month extension may be granted if your organization can prove reasonable cause why you cannot file on time.
* Small organizations whose annual gross reciepts are normally less than the threshold are not required to file annually, but may be required to file a notice by e-postcard.
How to talk with the IRS
Remember that IRS agents are just people performing a job and paying their bills. Most are very nice and want to help you resolve your issue. So, don’t be afraid to talk to an IRS agent – it’s your money.
Understanding Self-employment Taxes
All self-employed individuals who have earned income of $400 or more are required to pay self-employment tax. This tax covers your Social Security and Medicare payments that your employer would normally cover if you were an employee.
You figure and file your SE tax on Schedule SE along with your 1040 form. The rate at the moment is 15.3%. This is split into two parts, 12.4% for social security and 2.9% for Medicare (hospital insurance). It is important to note that he SE tax rules apply no matter how old you are and even if you are already receiving social Security or Medicare payments.
It is possible to get a Self-employment tax deduction. You can deduct half of your SE tax when you calculate your adjusted gross income. This deduction only affects your income tax however; it does not affect either your net earnings from self-employment or your Self-Employment tax.
When do you pay your Self-Employment taxes? Well, our system is a pay-as-you go or pay-as-you-earn. This means that you pay your taxes as you acquire income throughout the year. If you expect to owe $1000 or more in taxes, including SE taxes, then you must pay quarterly estimated tax payments in relation to the income you receive during the year. It is important to understand well the concept of this tax and when and how much you need to pay so that you won’t find yourself with a hefty penalty when you file your next tax return
Congratulations, you’re in business!
Are you among the self-employed? Well, if you are in business for yourself, work as an independent contractor or a combination of the two, then yes, you are definitely self-employed. You are still self-employed for the income you receive from your business even if you are employed as an employee at another job from which you receive a W-2 statement at the end of the year.
Operating a business comes with a plethora of responsibilities of which many people overlook. It is important to remember to acquire all the necessary licenses and permits, acquire the appropriate tax identification number for which you qualify, keep good and accurate records throughout the year, file the appropriate tax forms and pay the necessary taxes for your business in a timely manner. These responsibilities do not stop at the federal level. It is vitally important to find out what is required of business owners in your particular state, and in some cases, those of your city as well. Disorganized records, taxes filed late and paid late or not at will cost you dearly in fees and fines.
Taking care of the necessary research and creating an organized, well-maintained business, no matter what kind of business, will reward you far beyond the financial profits you will accrue. Take pride in the fact that you are the captain of your own financial ship, navigating that ship through the Sea of Success!
Are You Playing Audit Truth or Dare?
MFS Can Be A Bummer
The Married Filing Seperate tax status can be helpful to any married couple for two reasons:
1. You each want to be responsible for only your own tax.
2. You find that this status gives you better results than filing a joint return.
This is generally a desirable way to file for people that are still considered married at the end of the tax year, but are filing for divorce. However, most often especially if children are involved, it may be much more advantageous to both parties if they suck it up one last time and file a joint return. I will give the IRS list below since it can’t be made any simpler:
- Your tax rate generally will be higher than it would be on a joint return.
- Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
- You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer’s dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).
- You cannot take the earned income credit.
- You cannot take the exclusion or credit for adoption expenses in most cases.
- You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
- You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
If you lived with your spouse at any time during the tax year:
- You cannot claim the credit for the elderly or the disabled.
- You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
- You cannot roll over amounts from a traditional IRA into a Roth IRA.
The following credits and deductions are reduced at income levels that are half of those for a joint return:
- The child tax credit,
- The retirement savings contributions credit,
- Itemized deductions, and
- The deduction for personal exemptions.
- Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
- If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
Copy of Your Tax Return – How to Get One
Copy of Your Tax Return – How to Get One
http://www.irs.gov/taxtopics/tc156.html
“If you need an exact copy of a previously filed and processed tax return and all attachments (including Form W-2), you should complete Form 4506 (PDF), Request for Copy of Tax Return, and mail it to the address listed in the instructions, along with a $57.00 fee for each tax year requested. The check or money order for the fee should be made payable to the “United States Treasury”. Copies are generally available for returns filed in the current and past six years. Copies of jointly filed tax returns may be requested by either spouse and only one signature is required. Allow 60 calendar days to receive your copies.”
