Highlights of 2011 Tax
| Bush tax provisions still effective: (1) 10% tax bracket for individuals and the other tax brackets to 25%, 28%, 33%, and 35%; (2) The 15% tax rate for capital gains (0% for taxpayers in the 10% and 15% tax brackets)
Itemized deduction and personal exemption limitation: Those limitation are repealed.
Alternative Minimum Tax exemption: $48,450 for unmarried individuals and $74,450 for married individuals filing jointly.
Social Security tax and self-employment tax: The 2011 tax rate for the employee share of Social Security is 4.2%, reduced by 2%. Reflecting this, the self-employment tax rate is 13.3%, 2% less; deduction for self-employment tax is usually 50%, but for 2011 the deduction is larger.
Foreign earned income exclusion: $92,900 for 2011.
Revised Schedule D and New Form 8949: Form 8949 must be used for reporting 2011 sales of capital assets, such as stock, and attach to Schedule D. Also Sch. D is substantially revised. These changes will require even most organized taxpayers to bring in information they haven’t previously provided.
Brokerage Form 1099 due is Feb 15: Your brokerage company will issue Form 1099 by February 15. In case you received a revised/corrected 1099 statement, please immediately provide the new information to us. For capital gain calculation, please obtain Gain/Loss statement, if not included in your 1099.
New Form 1099-K: Payment settlement entities are required to report in Form 1099-K (1) all payments made in payment card transactions; (2) third-party network transactions of more than 200 transactions and $20,000 gross income paid to them. The seller will receive 2011 Form 1099-K by January 31.
Startup expenses: The deduction for trade or business startup expenses is $10,000 for 2011. The start of the limitation on the deduction is increased from $50,000 to $60,000. So for 2011 the amount of the deduction is the lesser of (1) the amount of the startup expenses or (2) $10,000, reduced (but not below zero) by the amount by which the startup expenditures exceed $60,000.
Bonus depreciation: 100% of the cost of business property acquired after Sept. 8, 2010, and before Jan. 1, 2012, and placed in service before Jan. 1, 2012 (or before Jan. 1, 2013, in the case of certain property).
Sec 179 deductions: If bonus depreciation is not available, first-year expensing is allowed for qualifying property up to $500,000.
|Standard mileage rates:
Jan through June 2011 = 51 cents per mile for business, 19 cents/mile for medical and moving, and 14 cents/mile for charitable volunteers.
July through Dec 2011 = 55.5 cents per mile for business, 23.5 cents/mile for medical and moving, and 14 cents/mile for charitable volunteers.
Vehicle depreciation limits: Max depreciation for a car placed in service in 2011 is $11,060, if bonus depreciation applies; otherwise $3,060. For a light truck and van, $11,260 and $3,260, respectively.
100% write-off for heavy SUVs: 100% bonus depreciation in 2011 is allowed, if the SUV is new (not pre-owned) and used 100% for business. The Sec 179 deduction limit of $25,000 can be avoided.
Last year to deduct Mortgage Insurance Premiums: Effective for amounts paid or accrued in 2007 through 2011, taxpayers may deduct qualified mortgage insurance premiums on acquisition indebtedness of a qualified residence.
Earned income tax credit due diligence: New IRS regulation requires paid tax-return preparers to file a due diligence checklist (Form 8867) with any federal tax return claiming EITC.
Small business health tax credit: Employers that pay at least 50% of the health insurance premiums for their employees in 2011 may be able to claim 35% credit, but eligibility rules apply.
Foreign Account Reporting Requirements:
Form TD F 90-22.1 Each US person who has a financial interest in or signature authority over any foreign bank and financial accounts that exceed $10,000 in aggregate value in any time during the calendar year must report to Dept of Treasury by June 30 of the succeeding year. This form is not filed with your tax return; you may e-file this form.
Form 8938 must be filed with your tax return if you hold any interest in a specified foreign financial asset and the aggregate value of all those assets exceeds $50,000. Failure to timely disclose this information will be penalized at least $10,000.
All Charitable Contributions require evidence: IRS is very strict with substantiation requirement for charitable contribution deduction. Make sure you keep receipts, acknowledgment letter, etc. For this purpose, if you donate cash, write a check.
Recordkeeping: Keeping well-organized tax record is strongly recommended. Especially, many taxpayers tend to forget keeping mileage logs for automobiles.