Image by polapix via Flickr There are quite a few tax provisions that will be expiring at the end of 2011 – nowhere near the number of provisions that were set to expire at the end of 2010 (many of which were subsequently extended), but still there are quite a few sun-setting this year. Listed below are some of the major provisions that will expire at the end of 2011 that will affect individual taxpayers. Charitable Contributions from IRA The provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire as of 12/31/2011. This provision allows the IRA owner to make this charitable contribution without having to recognize the income – which could have a profound effect on the taxpayer’s return. Remember, this one expired once before, at […]
income tax credit
2012 Income Tax by the Numbers
Recently, the IRS released the updated figures as they apply to 2012 income tax rates and schedules, via Revenue Procedure 2011-52. Below is a summary of the key information from this procedure document. Adoption Assistance The credit for adoption expenses was changed by the Patient Protection and Affordable Care Act of 2010 (and others) such that this credit was increased to $13,170, and the credit became refundable. This provision will expire at the end of calendar year 2011, which will cause the credit to fall back to an amount of $10,000. This amount is then adjusted for inflation, such that the limit for 2012 is $12,650, and remains non-refundable. The limit for adopting a special needs child is the same at $12,650 for 2012. We’ll see if any changes come through to make any changes to the refundability. The modified AGI limits for the phase-out of adoption credit assistance is […]
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Earned Income Credit and Due Diligence
Image via Wikipedia For those familiar with the Earned Income Tax Credit (EITC), you (hopefully) are familiar with the preparer’s due diligence checklist. This is a checklist that the preparer uses to help determine if the taxpayer’s circumstances are in keeping with the conditions that are required to be met in order to be eligible for the credit. In the past, this checklist has been filled out by the preparer and kept in the preparer’s files. Recently this fact has changed a bit – the IRS changed the requirements, such that now the due diligence checklist must be filed along with the return. This filing requirement is the only thing that has changed, the due diligence is the same as before. The checklist Here’s what the checklist asks: Is the taxpayer’s status Married Filing Separately? (if this question is answered “Yes”, the taxpayer is not allowed to file for EITC) […]
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Tax Bill Higher Than You Expected?
Now that you’ve (hopefully) filed your return for 2010, you may have noticed that the bill was higher than you expected. This may be due to some subtle changes to the tax law that affected your return for this year. Listed below are some of the changes that you may have been impacted by: Social Security taxation: Especially if you had unusual income taxed in 2010, such as a Roth Conversion, you could be subject to as much as 85% taxation of your Social Security benefit. Alternative Minimum Tax: If you’ve been impacted by this, not only are your ordinary income tax items taxed at a higher rate, but your capital gains and dividends could be taxed at a rate higher than 15% as well. This happens for folks with incomes between $150,000 and $439,800 (or $112,500 and $302,300 for singles) as the AMT exemption phaseout occurs. Image via Wikipedia […]
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The Making Work Pay Credit
Many (or most) working taxpayers will be eligible to receive a special credit on their 2010 tax return, called the Making Work Pay Credit. The IRS has recently produced their Tax Tip 2011-15 which explains five important provisions about the Making Work Pay Credit: The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit. Taxpayers who file Form 1040-EZ should use the worksheet for […]
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Credit for Energy Saving Home Improvements for 2011
This tax credit has undergone a change from previous years. In 2010, for example, you could achieve a credit for as much as 30% of the cost of your energy-saving home improvements, with a ceiling of $1,500. Beginning January 1, 2011, the credit rate is now just 10%, and the ceiling has been lowered to $500. Something important to keep in mind about this credit: any credit claimed in prior years (2009 and/or 2010) will be used to reduce your ceiling. In other words, if you claimed the full credit (or any amount up to $500) on a previous year’s tax return, you have no energy-saving home improvement credit available to you. In addition to the changes above, there are specific item caps in place as well. For example, if you are putting in a new furnace or water heater, the credit for those units is capped at $150. If […]
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Earned Income Tax Credit 2011 Style
There have been a few changes to the Earned Income Tax Credit (EITC) for 2011 and years beyond. Some of these changes are pretty significant, others are more of the common variety. No More Advance Payments In the past, if a taxpayer was likely to be eligible to receive the EITC on filing his or her return, the law allowed the taxpayer to apply for and receive advance payment of a portion of the credit. This is because the credit is refundable – even if you don’t owe any tax on your tax return, you’ll get something back with the EITC. With the passage of the Education Jobs and Medicaid Assistance Act of 2010 signed into law August 10, 2010, the Advance payment of EITC was repealed, effective after December 31, 2010. Third-Child EITC The American Recovery and Reinvestment Act (ARRA) increased the EITC by 5% for families with three […]
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7 Tips About the First-Time Homebuyer Credit
The First-Time Homebuyer Income Tax Credit has been really popular with lots of folks – and there is still time to take advantage of it. As you may be aware, the name of the credit is misleading – it’s been expanded to include folks who owned a house for a significant period of time and have purchased a new home during the prescribed period as well. Like all tax provisions, this is one that you have to pay particular attention to the details, otherwise you could miss out on the credit. Following are seven facts that the IRS wants you to know about claiming the credit (IRS Tax Tip 2010-27). Seven Important Facts About Claiming the First-Time Homebuyer Credit You must buy – or enter into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you have entered […]
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