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What's New in 2010?

What's New in 2010?. What are we going to cover: New In-scope Changes Economic Recovery Act New tax provisions in 2010 Extenders Expiring Tax Benefits Other items affecting tax preparation in 2010. IRS In-scope Changes for VITA-TCE.

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What's New in 2010?

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  1. What's New in 2010? What are we going to cover: • New In-scope Changes • Economic Recovery Act • New tax provisions in 2010 • Extenders • Expiring Tax Benefits • Other items affecting tax preparation in 2010

  2. IRS In-scope Changes for VITA-TCE • Schedule C – up to $10,000 expenses – same rules as Schedule CEZ (no losses, no employees, no inventory) • Schedule K-1 - royalties • Two new “on-line” training modules and tests: • HSA – Health Savings Accounts • COD – Cancellation of Debt

  3. In-Scope/Competencies being Tested • Basic – 30 questions – two full returns and one completed return to be QR (18 Competencies Tested) • 10 on Credits (EIC, CTC, ACTC, MWPC); • 5 on QR; • 7 on Dependency/Filing Status; • 8 on various issues including std ded, adjustments, tax due, purchase savings bonds, taxable social security

  4. In-Scope/Competencies being Tested(continued) • Intermediate – 20 questions – two full returns (11 Competencies Tested) • 5 on Itemized Ded; 4 on Sch C/CEZ; 4 on Educ Credit and Adjustments; • 7 on energy credit, taxable pensions, and payments • Advanced – 15 questions – one full return (8 Competencies Tested) • 8 on Sch D and sale of home; • 7 on taxable pensions, foreign tax, and amended returns

  5. Economic Recovery Payment • Some SS recipients will receive $250 ERP in 2010 • If did not receive in 2009 when first eligible, • i.e. social security, ssi, railroad retirement, or veterans disability benefits in November 2008, December 2008, or January 2009 • Any Making Work Pay Credit will be reduced in 2010 by this payment

  6. Estate Tax, Basis & Holding Period • Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) repealed estate tax after December 31, 2009 and before January 1, 2011 • Basis of assets inherited from decedent dying in 2010 is the lesser of the decedent’s adjusted basis or fair market value • Basis is treated as a gift • Automatic “more than one year” or long term holding period does not apply • Date of acquisition will be same as decedents’

  7. Other ARRA Provisions in 2010 • First time homebuyer credit extended closing on purchase of home to September 30, 2010, if purchased before April 30, 2010; eligible for up to $8,000 credit • New motor vehicle purchased in 2009 (after Feb 16, 2009 and before Jan 1, 2010) but did not pay sales taxes until 2010 – are eligible to deduct the amount paid in 2010

  8. New Provisions in 2010 • Adoption Tax Credit of 2010 – made fully refundable in 2010 • Qualified expenses up to $13,170 for both special and non-special needs adoptions • Affordable Care Act of 2010 – expands exception to exclude forgiven state loans from income of certain qualified medical providers • Decrease Personal Casualty and Theft Losses – limited to losses over $100 instead of $500 – this is in addition to the 10% of AGI limit

  9. New or Unchanged Provisions in 2010 Investment income for children remains at $1900; Standard deduction for Head of Household increases to $8400 (from $8350) – all other standard deductions remain the same: Single - $5,700 Joint - $11,400 HOH - $8,400 Exemption amount remains the same in 2010 - $3,650; Standard Mileage Rates – for 2010 Business – 50 cents per mile Medical and moving – 16.5 cents per mile Charity – 14 cents per mile

  10. Earned Income Credit Amount of credit increases in 2010: One qualifying child – maximum $3050 Two qualifying children – maximum $5036 Three qualifying children – maximum $5666 No qualifying children – maximum $457 Earned income amount increases in 2010: $35,535 (joint $40,545) One qualifying child $40,363 (joint $45,373) Two qualifying children $43,352 (joint $48,362) Three qualifying children $13,460 (joint $18,470) No qualifying children

  11. Other changes or items • Increases in MAGI for contributions to IRA • Refund options for purchase of Savings Bonds • For 2010, in addition to direct deposits can use refund to purchase savings bonds • Can purchase up to three I bonds registrations, • Purchase for themselves, beneficiaries, or co-owners, or other persons, other than themselves; • Use Form 8888

  12. Expiring Tax Benefits(subject to possible extenders) Waiver of Minimum Required Distributions from IRAs’ and defined benefit plans; Exclusion of $2400 of unemployment compensation from income; Tax free distributions to charity from IRA; Deduction of educator’s expenses; Tuition and Fees Deduction from AGI; Extra $3000 IRA contribution for bankrupt companies; Increase of Standard Deduction for real estate taxes and disaster losses; Increase in Itemized Deduction or Standard Deduction for sales taxes of purchase of new motor vehicle; Increase in Itemized Deduction for state and local sales taxes; Certain tax benefits for Midwestern disaster areas

  13. QUESTIONS? COMMENTS?

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