Unemployment Benefits for 2011?

 

A temporary, 13-month extension of unemployment benefits is in effect for 2011.

Estate Tax for 2011?

 

A 2-year estate tax rate set at 35% with an exemption for estates valued at up to $5 million

Capital Gain Rates for 2011?

 

A 2-year extension of current capital gains tax rates. (max 15%)

Making Work Pay Credit in 2011?

“Making Work Pay” provision is dropped in favor of the 2% FICA reduction (Social Security part) to the employee from the 2010 rate of 6.2% to 4.2% for 2011. 

 

Unemployment Tax (Florida) Increase for 2011

State of Florida will be increase the minimum state unemployment tax rate.  The article The current minimum rate of 0.36% will nearly triple to 1.08%.  View full article:  http://www.bloomberg.com/news/2010-11-17/fla-unemployment-compensation-tax-going-up-again.html 

Health Insurance goes on W2 in 2011!

There is a lot of mis-information out there about Health Insurance being taxable……..

Starting in 2011, (next year folks), your W-2 tax form sent by your employer will be increased to show the value of whatever health insurance you are given by the company. It does not matter if that’s a private concern or governmental body of some sort.  

That is correct… however, it is NOT taxable… will not increase your tax one bit.  It is just a display thing to “show the total compensation an employee receives” but it is not taxable…

BUT, since the reporting requirement will be in place, it could very well be taxable, or a portion of it taxable in the future… but not in 2011.

Alimony can be used as Compensation for IRA purposes.. yup!

Taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.

For a summary of what compensation does and does not include, see Publication 590 - Table 1-1 on page 4.

Compensation for IRA purposes is what exactly?

To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year. You, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self–employment. Taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.

What Is Compensation?   IRS publication 590 defines compensation for IRA……

Generally, compensation is what you earn from working. For a summary of what compensation does and does not include, see Publication 590 - Table 1-1 on page 4. Compensation includes all of the items discussed next (even if you have more than one type). Wages, salaries, etc.   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation.   The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2.  Commissions.   An amount you receive that is a percentage of profits or sales price is compensation.  

S Corp Shareholder Sells – Short Year Accounting

Taxpayer decided to sell his stock in the company, as opposed to an asset sale.  This means the buyer has the responsibility to prepare the corporate tax return.  Taxpayer has agreed to do an accounting of the year up to the date of sale and present this information to the buyer.           In the contract, please add the following for tax purposes:       

The existing shareholders and the new shareholder(s) elect to allocate income and expenses as if the corporation’s tax year consisted of two separate tax years, the first of which ends on the date of the existing shareholders’ termination.

     Attached to a timely filed return original return will be the statement “Corporation elects under Section 1377(a)(2) and Regulations Section 1.1377-1(b) to treat the tax year as if it consisted of two separate tax years.  Shareholders’ entire interest was terminated by sale.  The corporation and each affected shareholder consent to the corporation making the election.”      Additionally, the statement “Section 1377(a)(2) Election Made” will be entered at the top of each affected shareholders Schedule K-1. 

Pools & Hot Tubs Deduction

There is a great deal of mis-conception about the deductibility of Hot Tubs & Pools. 

First, you must have a doctor’s prescription. 

Second, how much did it really cost you?  The theory is the Pool or Hot Tub has added value to the home.  Let’s say the item cost $15,000.  It has not added $15,000 to the value of the home.  It’s like buying a new car.  Drive it off the lot and its worth less than when you purchased it. 

Let’s assume it has an added value to the home of $10,000.  That means you lost $5,000. 

You lost $5,000 BUT you must divide that by the number of people in the home.  If 4 people live there, your deduction is only worth $1,250. 

The deduction is included in medical expense which is limited by 7.5% of your Adjusted Gross Income.