Tax Law Updates for FS 2011

1. Tax Law Updates for FS 2011 TAX LAW UPDATES FOR TAX YEAR 2010 Rev 11-05-2010

2. Tax Law Updates for FS 2011 Personal/Dependency Exemption No increase - $3,650 Rev 11-2010

3. Tax Law Updates for FS 2011 Standard Deduction: • Single - $5,700 • Married filing separately - $5,700 • Head of household - $8,400 only increased $50 • Married filing jointly/Qualifying widow(er) - $11,400

4. Tax Law Updates for FS 2011 Mileage Rates: • Business Miles - 50 cents • Medical or Moving Miles – 16.5 cents • Charitable Miles - 14 cents

5. Tax Law Updates for FS 2011 Making Work Pay Credit

6. Making Work Pay Credit • Maximum credit is $400 ($800 if married filing jointly) • Credit is refundable • Credit limited to 6.2% of earned income • Can be employee or self-employed • Phased out over modified AGI range of $75,000-$95,000 ($150,000-$190,000 if married filing jointly) • Available for tax year 2010

7. Making Work Pay Credit (continued) • Taxpayer must have a social security number; if married filing jointly, at least one spouse must have SSN • Not available to nonresident aliens, individuals who can be claimed as dependents on someone else’s tax return, or estates and trusts

8. 1040 pg. 2 Line 63

9. Making Work Pay Credit

10. Making Work Pay Credit(continued) Any Making Work Pay Credit must be reduced for taxpayers that received an Economic Recovery Payment in 2010

11. Tax Law Updates for FS 2011 Temporary increase in Earned Income Tax Credit (EITC)

12. Earned Income Credit • Credit percentage increases from 40% to 45% for families with 3 or more children (maximum credit is now $5,657) • Phase-out amount for married taxpayers filing jointly increases from $3,120 to $5,000

13. Earned Income Tax Credit (EITC) for Tax Year 2009

14. EITC Awareness Day 2010 • Friday, January 28, 2011, EITC Awareness Day events • News conferences or news releases to raise awareness of EITC and free tax preparation services • Most volunteer return preparation sites will be open by EITC Day • More than 60 percent of all EITC tax returns are filed during the month of February

15. Tax Law Updates for FS 2011 American Opportunity Credit

16. Tax Law Updates for FS 2011 Student in first four years of post-secondary study Must be enrolled in 2010 in a program that leads to a degree or similar

17. Tax Law Updates for FS 2011 Up to $2500 per student 100% of first $2000 and 25% of second $2000 40% is refundable credit (up to $1000)

18. 1040 Page 2 Line 66

19. Tax Law Updates for FS 2011 Temporary increase in refundable portion of Child Tax Credit

20. Additional Child Tax Credit • The earned income threshold generally needed to qualify for the additional child tax credit decreases from $8,500 to $3,000 • More people will qualify for the credit • Lower threshold applies in 2009 and 2010

21. Tax Law Updates for FS 2011 First-Time Homebuyer Credit

22. First-Time Homebuyer Credit • Extended closing deadline from June 30, 2010 to September 30, 2010 • Purchased a qualifying home by April 30, 2010 and settle by September 30, 2010

23. First-Time Homebuyer Credit(continued) May be eligible for a credit up to $8,000 Documentation requirements apply

24. First-Time Homebuyer Credit (Continued) • For purchases made in 2008, repayment of the credit over a 15-year period begins with the 2010 tax return. • Minimum payment of $500

25. Form 5405 page 2

26. Tax Law Updates for FS 2011 Medicare Part D Coverage Gap “donut hole” Rebate – $250 More information can be found on www.medicare.gov

27. Tax Law Updates for FS 2011 Residential Energy Credits

28. Residential Energy Credits Extension and modification of credit Nonbusiness energy property: Form 5695, Part I • Amount of credit increases from 10% to 30% • Credit limited to $1,500 for the total of all 2009 and 2010 purchases • Credit expanded to include certain asphalt roofs and stoves that burn biomass fuel • Definition of qualifying property revised, primarily to update energy efficiency requirements

29. Form 5695 page 2

30. Tax Law Updates for FS 2011 Basis of Inherited Property: No automatic increase in basis to fair market value (FMV) Inherited property treated as a gift

31. Tax Law Updates for FS 2011 Basis of Inherited Property: Basis of inherited property is lesser of decedent's basis or FMV Executor may allocate limited basis increase to some property

32. Tax Law Updates for FS 2011 Expiring Tax Benefits: • Economic Recovery Payments for SSA, VA and RRB • Special Credit for Certain Government Retirees

33. Tax Law Updates for FS 2011 Expiring Tax Benefits (continued): • Increased Standard Deduction for Real Estate taxes or net disaster loss • Unemployment Compensation Payments

34. Tax Law Updates for FS 2011 Expiring Tax Benefits (continued): • Sales Tax for Purchase of New Vehicle • Deduction for educator expenses in figuring AGI

35. Tax Law Updates for FS 2011 Expiring Tax Benefits (continued): Itemized deduction for state and local general sales taxes Tuition and Fees deduction in figuring AGI

36. Tax Law Updates for FS 2011 Refund Option – Savings Bonds: Purchase Savings Bonds without a bank account Refund balance in paper check Form 8888, Allocation of Refund (including Bond Purchases)

37. Tax Law Updates for FS 2011 In-Scope Changes: Schedule C, Profit or Loss from Business (Sole Proprietorship) Same as Schedule C-EZ Expenses up to $10,000

38. Tax Law Updates for FS 2011 In-Scope Changes: Schedule K-1 (Form 1041, Form 1065 or Form 1120S) Royalty income added

39. Tax Law Updates for FS 2011 In-Scope Changes: Form 5329, Additional Taxes on Qualified Plans(Including IRAs) and Other Tax-Favored Accounts – Part 1 Exceptions to additional tax on early distribution

40. Tax Law Updates for FS 2011 In-Scope Changes: Cancellation of Debt (COD) – Debit Cards Health Savings Accounts (HSAs)

41. Tax Law Updates for FS 2011 Form 13614-C Intake/Interview & Quality Review Sheets A must for preparers!

42. Tax Law Updates for FS 2011 QUESTIONS???? QUESTIONS??? QUESTIONS?????