VIrginia Beach, VA (PRWEB) January 07, 2011
Americans are ringing in 2011 with an immediate pay increase rather than tax hikes. Social Security taxes (FICA) will be cut by 2 percentage points for 2011 so employees will pay 4.2 percent of wages earned to Social Security instead of 6.2 percent. For every $10,000 of wages, the yearly increase in the paycheck will be $200. With that good news, Liberty Tax sizes up some of the recent new tax changes and expiring tax items to keep in mind for 2010 filing and 2011 tax planning:
The 2010 Tax Relief Act provided another “patch” for the Alternative Minimum Tax (AMT). The AMT exemption amount has increased to $47,450 for individuals and $72,450 for joint filers.
“Taxpayers can also deduct nonrefundable personal credits in 2010 such as the child tax credit to reduce their AMT liability,” added John Hewitt, CEO of Liberty Tax Service. “Without the patch the, AMT exemption amount would have decreased to $33,750 for individuals and $45,000 for joint filers.”
It’s back in for some “extender” tax measures…again. The state and local sales tax deduction, the higher education tuition and fees deduction, the $250 classroom expense deduction for educators, and charitable contribution of IRA proceeds were all extended again for 2010 and 2011.
The new law continued the temporary increase in the Earned Income Tax Credit (EITC) through 2012. Prior to 2009, the credit percentage for the EITC for a taxpayer with two or more qualifying children was 40 percent of the first $12,570 of earned income. The percentage increased to 45 percent of the first $12,570 of earned income for taxpayers with three or more qualifying children. The EITC phase-out range has also been adjusted upward by $1,880 for joint filers to eliminate any marriage penalty.
Without action, the Child Tax Credit (CTC) would have decreased from $1,000 per qualifying child to $500 per qualifying child in 2011. The Tax Relief Act also continued to allow the CTC to be used against AMT. and continued the refundable portion of CTC (additional CTC) threshold to be 15% of the earned income above $3,000. Without action the threshold would have returned to $10,000.
The inheritance tax returns for tax year 2011. The first $5 million of an estate can pass tax-free to heirs, anything over will be taxed at 35%.
Conversions to Roth retirement plan. Beginning in 2010, the modified AGI and filing status requirements for converting a traditional IRA to a Roth IRA were eliminated. For any 2010 rollover from an IRA other than a Roth IRA to a Roth IRA, any amounts that would have been included as income will be included in income in equal amounts in 2011 and 2012. A taxpayer can choose to include the entire amount in income when filing a 2010 tax return.
The Patient Protection and Affordable Care Act brought on some immediate health care changes for individuals for filing a 2010 tax return. Lifetime limits on benefits and restrictive annual limits are now prohibited. The adoption tax credit and assistance exclusion has increased by $1,000 to $13,170. The bill makes the credit refundable and extends it through 2011. There’s a 10% tax on tanning services that started July 1, 2010.
The First Time Home Buyer Credit is among some expiring tax measures. But also as a reminder, if a taxpayer claimed the first-time homebuyer credit for a home purchased in 2008, they generally must begin repaying it in 2010. Some other tax measures that have just expired are the $2,400 exclusion from income of unemployment payments, the government retiree credit, and the extra $3,000 IRA deduction for employees of bankrupt companies.
About Liberty Tax Service
Liberty Tax Service is the fastest growing income tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 41years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service
Liberty Tax Service (http://www.libertytax.com) provides computerized income tax preparation, electronic filing, refund loans, and online filing through eSmart Tax at http://www.esmarttax.com. Each office offers customers audit assistance, a money back guarantee, and free tax return checking.
Liberty Tax Service CEO John Hewitt and other LTS tax professionals are available for interviews. Contact mediainquiry(at)libtax(dot)com, Martha O’Gorman at 800-790-3863 ext. 8022 (martha(at)libtax(dot)com), or Nina Cunningham at 800-790-3863 ext. 8148 ( nina(at)libtax(dot)com )