It’s T Time! Are You Ready?

It’s that dreaded time of the year when we all start gathering together the information and forms such as W-2s and 1099s along with other important financial information in order to have our tax returns prepared.  This tax season may prove to be like no other.  In 2010, congress passed several pieces of legislation that affect our taxes in one way or another.  The latest was passed on December 17, 2010.

Many of the tax measures passed are simply extenders of the Bush era tax cuts that either expired at the end of 2009 or 2010.  Those that were extended are in effect thru 2012.  Some of these tax extensions include:

• Lower individual tax rates.
• Child tax credits.
• Reduced capital gains and dividend tax rates.
• Alternative Minimum Tax “patch” to prevent AMT from invading middle class tax payers.
• Estate taxes at a maximum rate of 35% with a $5 million exclusion for decedents passing in 2010 – 2012.
• Teacher’s classroom expense deduction.
• Higher education tuition deductions.
• General business credit carryback period.
• Section 179 expensing for businesses.
• Bonus depreciation extension and increase.

There was also some of the Bush era tax cuts, such as the deduction for payment of local property taxes for those taxpayers that do not itemized on Schedule A, that were not extended or renewed.

The 2010 Tax Relief Act also included provisions that result in a payroll tax cut for 2011.  Many of you that have received your first paycheck of the year may have noticed that you took home a little more money.  The Social Security tax required to be deducted from your pay has been reduced to 4.2% for 2011.  This is a 2% savings to employees.  Employers however, are still required to pay the match at the 6.2%.  The idea was to “replace” the Making Work Pay credit which expires after 2010.

Higher income taxpayers will face additional Medicare taxes beginning in 2012 as a result of the Health Care and Education Reconciliation Act that was passed early in 2010.  A 0.9% additional Medicare tax for incomes above certain levels along with a 3.8% Medicare contribution tax on qualified unearned income.  Unearned income includes investment income.

Individual taxpayers affected by the last minute tax measures will not be able to file their 2010 tax returns until mid to late February 2011.  This delay affects both electronic filing and paper filing.  If you typically itemize on Schedule A, the filing delay affects you. 

Filing deadlines for 2010 tax returns are as follows:

            Federal Form 1040                                                due April 18, 2011

            State Individual Form                               due May 16, 2011

            Business Partnership Form 1065           due April 15, 2011

            Business Form 1120 & 1120S                due March 15, 2011*

            *This is for a fiscal year end of December 31, 2010.

If you are looking for a tax preparer, the IRS website has some tips to help you choose a tax preparer.  The article is titled “Points to Keep in Mind When Choosing A Tax Preparer” and is IRS Tax Tip 2011-6 .  The link/url to the article follows:  http://www.irs.gov/newsroom/article/0,,id=120129,00.html. 

Suzonne Vicknair Cowart CPA

225-261-7484

Disclaimer:  Subject to the rules of professional conduct set forth in Circular 230, as stated by the US Department of Treasury, any US federal tax advice contained in this article was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the IRS, and it cannot be used by any taxpayer for such purpose.  This article is intended to educate and provide information.  In no way does the article give complete tax advice nor does it guarantee a specific outcome.  Professional tax advice should be sought related to individual and specific tax circumstances.