Tax Filing News from the IRS
Here are some recent IRS actions and news releases that may affect you or your business.
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The April 15 filing deadline we’re all so familiar with has been changed to April 18 this year. Because Washington, D.C. will celebrate Emancipation Day on Friday, April 15, the Treasury Department decided to extend Tax Day 2011 to Monday, April 18. The new deadline applies to individual and partnership tax returns, extension requests and other tax deadlines such as making 2010 IRA and education savings account contributions and making the first 2011 estimated tax payment.
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Last year, you could purchase savings bonds with your tax refund, but you could only buy them in your name. With this year’s refund, you have the option of buying Series I savings bonds for yourself and up to two other individuals. The bonds are available in $50 increments, and you can purchase a total of $5,000.
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The IRS is notifying those who purchased homes in 2008, 2009 and 2010 about the first-time homebuyer credit. The content of the letters differ, depending on the year the home was purchased. Those who claimed the credit for homes purchased between April and December of 2008 are being reminded that repayment of the credit begins with the 2010 tax return. Repayment is to be made in installments over 15 years. Taxpayers who sell the home or convert it to a rental may have to pay back some or all of the credit before the end of the 15-year period.
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Nonprofit organizations are required to file annual reports with the IRS. Those with gross receipts below a threshold amount are permitted to file a simple E-postcard rather than a longer Form 990. The IRS has announced an increase in the filing threshold amount to $50,000, up from the previous $25,000 threshold. The deadline for calendar-year nonprofits to file reports for 2010 is May 16, 2011. Nonprofit organizations that fail to file risk eventually losing their tax-exempt status.
Some deductions can be taken even if you don’t itemize
You’re probably familiar with the deduction choice you must make when you file your tax return. You either have enough deductions (such as mortgage interest, charitable contributions and medical expenses) to itemize, or you take the standard deduction, a set amount that doesn’t require you to list specific deductible items.
What you may not be as familiar with are those deductions that you are allowed to take above the line; that is, deductions that you can take in addition to your itemized deductions or your standard deduction.
Here’s a quick rundown of above-the-line deductions you shouldn’t miss on your 2010 tax return.
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A deduction of up to $250 for classroom supplies purchased by teachers for use in their classrooms.
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A deduction of up to $2,500 for interest paid on student loans.
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A deduction of up to $2,000 or $4,000 for college tuition and fees, depending on your income level.
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A deduction of up to $5,000 for individual retirement account contributions if you’re under age 50. If you’re 50 or older, the deduction limit is $6,000.
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A deduction for the expenses connected with a job-related move.
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A deduction for 50 percent of the self-employment tax and 100 percent of health insurance premiums paid if you are self-employed.
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A deduction for alimony paid. (Note that child support is not deductible.)
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A deduction for contributions to health savings accounts (HSAs).
Most of these deductions have qualification requirements or income limitations. Don’t overlook above-the-line tax deductions. An added benefit: These deductions decrease your adjusted gross income, an important number on your tax return. The lower your adjusted gross income, the more likely you are to qualify for credits and deductions subject to income thresholds.
Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail [email protected] or [email protected].
Finance
CONTRIBUTION LIMITS FOR 2011
Its now 2011 and we are all planning ahead. The contribution table for 2011 below is for your review. Though we don’t offer tax advice, this table has proven to be quite useful and can perhaps help you with some planning throughout this year.
Limitation |
2011 |
IRAs |
$5,000 |
Catch-up Contributions for IRAs |
$1,000 |
401(k)/403(b)/SAR-SEP IRA Elective Deferral |
$16,500 |
Catch-up Contributions for 401(k)/403(b)/Government 457(b) Plans and SAR-SEP IRAs |
$5,500 |
Defined Benefit Plans |
$195,000 |
Defined Contribution Plans and SEP IRAs |
$49,000 |
Annual Compensation Limits |
$245,000 |
457(b) Plans |
$16,500 |
Highly Compensated* |
$110,000 |
SIMPLE IRAs |
$11,500 |
Catch-up Contributions for SIMPLE IRAs |
$2,500 |
Key Employee Officer Threshold |
$160,000 |
SEP Minimum Compensation |
$550 |
Income Subject to Social Security |
$106,800 |
*Note: Maximum HCE compensation utilizes prior year limits.
Seema Ramroop, financial advisor, Morgan Stanley Smith Barney, can be reached at see[email protected] or call (727) 773-4629.