HAPPY TAX DAY

Today is the first day of the tax season. (Can you hear the thrilling cheers in the background?) As crazy as it sounds I love tax season. The office is quiet and slightly lonely during the off season so when the season rolls around I am ready and prepared for some CRAZINESS! Most people are probably thinking that only a mentally unstable person could work with the IRS and do taxes……well, they are probably right. I might be crazy but at least I’m fun!

This year is going to be one of the most chaotic years. There have been so many last minute law changes that things are being postponed and people are a lot confused. So, in CELEBRATION of this TAX DAY I am posting a few tidbits about some tax law changes. (Just a few, in an effort not to bore you.)
~ Alternative Minimum Tax Patch
• The Act extends higher AMT exemption amounts for 2010 ($47,450 for Single and Head of Household filers, $72,450 for Married Filing Joint filers) and 2011 ($48,450 for Single and Head of Household filers, $74,450 for Married Filing Joint filers). Higher AMT exemptions result in fewer taxpayers paying AMT.
~ Traditional “Small” Extenders
• Tuition and fees deduction
• State and local sales tax deduction
• Educator’s expense deduction
• Qualified charitable distributions from IRAs
• DC Homebuyer Credit
~ Payroll Tax Holiday
• The employee only portion of social security tax, 6.2% of the first $106,800 in 2010, is reduced to 4.2% of the first $106,800 in 2011. (Meaning a little extra money on each paycheck.)
• The Self Employment rate for self-employed taxpayers will also be reduced from 12.4% to 10.4%.
~ Mortgage Insurance Premiums
• Mortgage insurance premiums paid by a taxpayer on a qualified mortgage may be deducted as mortgage interest. (Was scheduled to expire after 2010.)
~ Nonbusiness energy property credit
• The Act extends for one year the credit for energy-saving home improvements, such as windows, insulation, and furnaces.
~ Capital Gain and Qualified Dividend Rates
• Favorable capital gain and qualified dividend rates in effect for 2010 are extended through 2012. The maximum net long-term capital gain rate remains at 15% (0% for taxpayers in the 10% and 15% tax brackets).
~ Marriage Penalty Relief
• Extended for two years, this provision helps married taxpayers filing joint returns avoid paying higher taxes than they would pay if they were single filers.
~ American Opportunity Credit
• American Opportunity Credit is set to expire 2010.
~Child Tax Credit
• The maximum Child Tax Credit per qualified child will remain at the 2010 level of $1000.
~ Earned Income Tax Credit
• Extends the higher phaseout range ($5000 adjusted for inflation) for married taxpayers filing a joint return.
• Extends higher Earned Income Tax Credit for families with three children.
~ Bonus Depreciation
• The Act allows 100% expensing of qualifying property placed into service September 9, 2010 through December 31, 2011.
• For 2012 only, 50% bonus depreciation is allowed.
~ Estate Tax
• The estate tax, which was repealed in 2010, has been reinstated. The maximum estate tax rate is 35% with an exemption of $5 million that is indexed to inflation.
~ Health Savings Plans
• Starting in 2011, over-the-counter drugs and medicines no longer count. (HAS, FSA, MSA, and HRA)

WHAT EXPIRES
Beginning in 2010, the following provisions are NOT available
• Increased Standard Deduction for Real Property Tax
• New Vehicle Sales Tax Deduction
• First $2,400 Unemployment Compensation Exclusion
• Required Minimum Distribution Waiver
Beginning in 2011, the following provisions are not available
• Making Work Pay Credit
• Alternative Motor Vehicle Credit

FILING DELAYS FOR TAXPAYERS
For those of you filing any of these forms you will have to wait to file your return. The IRS says “hopefully” by mid to late February you can begin filing.
• Schedule A (all homeowners)
• Form 8917, Tuition and Fees Deduction
• Educator Expense Deduction (all teachers)
• Form 4684, Casualties and Thefts
• Form 3800, General Business Credit
• Form 5405, First-Time Homebuyers Credit and Repayment of the Credit
• Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit
• Form 8834, Qualified Plug-In Electric and Electric Vehicle Credit
• Form 8910, Alternative Motor Vehicle Credit
• Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit

FYI, this year you have until APRIL 18th to file your tax return!  (Oh yes, three extra beautiful days to file that dreaded return.....for all of you procrastinators.)  

There are some very interesting financial and tax changes happening in the next few years due to the new Health Care Reform. If anyone is interested in knowing about them (which will most definitely affect ALL of us in some way) let me know and I can make a post.

For now, here are just a few (you might be sleeping by now) of the important tax changes this year. Which is why, in my opinion, this year is going to be one of the CRAZIEST years yet! YIPPEE! Good thing the season only lasts four months! (But then I spend the rest of the year picking up the pieces.)