Archive for December, 2010
A.k.a., the Bush tax cuts extender act (as we like to call it) was signed into law by President Barrack Obama this past week with some sweeping tax cuts, extensions, and new provisions for both individuals and businesses. Some of the highlights of the new act are:
The current income tax rates will be retained for two more years (2011 and 2012) with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains
The payroll tax on social security was dropped 2%, from 6.2% to 4.2% for employees and self-employed workers. For the self-employed, this makes the rate 10.4% versus 12.4%. Including medicare the new “self-employment tax” rate is 13.3%
The “AMT patch” has once again been passed, basically indexing the AMT exemption amount for inflation for 2010 and 2011. This typically results in several thousand dollars in tax savings for those taxpayers affected by AMT
Several key tax credits were extended including the Child Tax credit, rules expanding the availability of the Earned Income Credit for low earnings families, and the American Opportunity Tax Credit (credit for higher education expenses)
Businesses can now write off 100% of their equipment and machinery purchases, effective for property placed in service after September 8, 2010 and through December 31, 2011. For 2012, the 50% bonus depreciation has been reinstated as well
Other items such as the sales tax in lieu of state income tax deduction, the $250 out-of-pocket expenses for teachers deduction, and the research credit have all been extended two more years (through 2012)
The estate tax will be reinstated for 2011 and 2012, with a top tax rate of 35% and an exemption amount of $5 million per individual. This is a major change from previous discussions in Washington and probably is the singlest biggest item in the bill. Additionally for taxpayers who died in 2010, the estate has the option of choosing the original 2010 rules (no estate tax and limited basis step-up) or the 2011 rules ($5 million exemption and full income tax basis step-up).
There are many changes to tax law for the next two years but these are some of the highlights. As always if you have any specific questions about how the new law pertains to your specific tax situation, please do not hesitate to contact your LMGW advisor at once!
LMGW Certified Public Accountants, LLP would like to congratulate Jaclyn Skull, Senior Accountant for completing her CPA exam.
Jaclyn has been with LMGW since 2007 specializing in accounting services and taxation for both individual and business clients.
California and federal incentives for buying certain clean vehicles are still available. California currently offers a rebate of up to $5,000 per light duty vehicle to individuals and businesses who purchase or lease a new eligible zero emissions or hybrid electric vehicle. Certain zero emissions commercial vehicles are eligible for a rebate of up to $20,000. The rebates are available on a first come first serve basis and apply to qualified vehicles purchased or leased after March 15, 2010. For more information on eligible vehicles, rebate amounts and to apply for rebates visit www.energycenter.org. Read more
Estate and generation-skipping transfer (GST) taxes have been repealed for 2010 but are scheduled to return in 2011. Next year’s rules, however, won’t be those that applied during 2009 when these taxes were last in effect. Rather, unless Congress acts, rules from 2001 will apply for next year. This Practice Alert explains what repeal means, what old rules are scheduled to return in 2011, and relevant concerns and planning considerations both for this year and next year.
As of January 1, 2011 business taxpayers will no longer be allowed to use a paper coupon (IRS Form 8109 – Federal Tax Deposit Coupon) to deposit federal taxes directly to an authorized bank. You will now be required to make deposits by telephone or online using the Electronic Federal Tax Payment System (EFTPS). Because the process for enrolling in EFTPS can take several weeks and involves multiple steps, we highly suggest you enroll right away if you have not already done so. Enrollment can be done via the web at www.eftps.gov or by completing Form 9779 EFTPS Business Enrollment Form.
Enrollment can take about 10-15 business days for online enrollment and up to 10 weeks for paper enrollment, so sign up today!
If you have any questions or would like any assistance with the enrollment process, please contact us.