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IRS Tax Highlights for 2011 Tax Returns

coming years due to the current Federal Administration ********

ALL TAX RETURNS MUST BE FILED ELECTRONICALLY

Individual Changes (Hyperlinks refer to IRS Pub 17)

Standard Mileage Rate

Business-related mileage.   The 2011 rate for business use of your car is 51 cents a mile for miles driven before July 1, 2011, and 55 ½ cents a mile for miles driven after June 30, 2011. See chapter 26.See chapter 21 .
Medical- and move-related mileage.   The 2011 rate for use of your car to get medical care is 19 cents a mile for miles driven before July 1, 2011, and 23 ½ cents a mile for miles driven after June 30, 2011.  The 2011 rate for use of your car to move is 19 cents a mile for miles driven before July 1, 2011, and 23 ½ cents a mile for miles driven after June 30, 2011. See Publication 521, Moving Expenses. 
Charitable-related mileage.   The special standard mileage rate in effect for 2011 for the cost of operating your car for providing charitable services is 14 cents per mile.

IRS NOTICE 1383 dated January 4, 2010

You Must Use Form W-2, W-2G or 1099-R Information When Submitting Electronic Returns

Medicare Part B Premiums: New Rules for Beneficiaries with Higher Incomes

Have you noticed that your Medicare Part B portion has increased? Thanks to the regressive economic policies of the current administration, you are being penalized.  If you think this is unfair, contact your legislators

Standard Deduction Chart for Most People*
If your filing status is... Your standard
deduction is:
Single or Married filing separately $5,800
Married filing jointly or Qualifying
widow(er) with dependent child 		11,600
Head of household 8,500
*Do not use this chart if you were born before January 2, 1947, are blind, or if someone else can claim you (or your spouse if filing jointly) as a dependent. Use Table 20-2 or 20-3 instead.

Table 20-2. Standard Deduction Chart for People Born Before January 2, 1947, or Who are Blind*

Check the correct number of boxes below. Then go to the chart.
You: Born before
January 2, 1947? 		Blind ?
Your spouse, if claiming
spouse's exemption: 		Born before
January 2, 1947 ? 		Blind ?
Total number of boxes checked
Box
IF your
filing status is...		 AND
the number in
box above is...		 THEN
your
standard
deduction
is...
Single 1 $7,250
2 8,700
Married filing jointly 1 $12,750
or Qualifying 2 13,900
widow(er) with 3 15,050
dependent child 4 16,200
Married filing 1 $6,950
separately 2 8,100
3 9,250
4 10,400
Head of household 1 $9,950
2 11,400
*If someone else can claim you (or your spouse if filing jointly) as a dependent, use Table 20-3, instead.

However, there are several additions that can be filed on Form 1040 schedule L that could increase your standard deduction:

Unemployment compensation. You do not have to pay tax on unemployment compensation up to $2,400 per person for the year. Amounts over $2,400 are still taxable. See chapter 12.
American opportunity education credit. The maximum Hope education credit is increased to $2,500. The increased credit has been renamed the American opportunity credit and part of it is refundable. See chapter 35.
First-Time Homebuyer Credit

For most people, this credit is not available for homes purchased in 2011. Members of the uniformed services or Foreign Service and employees of the intelligence community may still be able to claim the credit.

In general, you can claim the credit only if you meet all three of the following requirements.

  1. You (or your spouse if married) are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community and were on qualified official extended duty for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.

  2. You bought a main home in the United States:

    1. After December 31, 2010, and before May 1, 2011, or

    2. After April 30, 2011, and before July 1, 2011, and you entered into a binding contract before May 1, 2011, to buy the home before July 1, 2011.

  3. You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.

Special rule for long-time residents of same main home. Even if your are not a first-time homebuyer, you may be able to claim the credit if you meet all three of the following requirements.

  1. You (or your spouse if married) are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community and were on qualified official extended duty for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.

  2. You bought your main home in the United States:

    1. After December 31, 2010, and before May 1, 2011, or

    2. After April 30, 2011, and before July 1, 2011, and you entered into a binding contract before May 1, 2011, to buy the home before July 1, 2011.

  3. You (and your spouse if married) previously owned and used the same main home as your main home for any 5 consecutive year period during the 8-year period ending on the date of purchase of the main home described in (2).

Main home. Your main home is the one you live in most of the time. It can be a house, houseboat, mobile home, cooperative apartment, or condominium.

Home constructed by you. If you constructed your main home, you are treated as having bought it on the date you first occupied it.

Who cannot claim the credit You cannot claim the credit if any of the following apply.

  1. The purchase price of the home is more than $800,000.

  2. Your modified adjusted gross income is $145,000 or more ($245,000 or more if married filing jointly).

  3. You can be claimed as a dependent on another person's tax return.

  4. You (and your spouse if married) were under age 18 when you bought the home.

  5. You are a nonresident alien.

  6. Your home is located outside the United States.

  7. Neither you nor your spouse (if married) was on qualified official extended duty outside the United States as a member of the uniformed services or Foreign Service or an employee of the intelligence community for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.

  8. You acquired the home by gift or inheritance.

  9. You acquired your home from a related person. A related person includes:

    1. Your spouse, ancestors (parents, grandparents, etc.), or lineal descendants (children, grandchildren, etc.),

    2. A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock of the corporation, and

    3. A partnership in which you directly or indirectly own more than 50% of the capital interest or profits interest.

    For more information about related persons, see Nondeductible Loss in chapter 2 of Publication 544, Sales and Other Dispositions of Assets. When determining whether you acquired your main home from a related person, family members in that discussion include only the people mentioned in 9a, earlier.

  10. You acquired your home from a person related to your spouse. This includes your spouse's ancestors or lineal descendants (for example your parents-in-law or your stepchildren), and any relationships described in 9b or 9c that your spouse has.

Amount of the credit. Generally, the credit is the smaller of:

  • $8,000 ($4,000 if married filing separately), or

  • 10% of the purchase price of the home.

However, if the Special rule for long-time residents of same main home described earlier applies, the credit can be no more than $6,500 ($3,250 if married filing separately).

You are allowed the full amount of the credit if your modified adjusted gross income (MAGI) is $125,000 or less ($225,000 or less if married filing jointly). The phase-out of the credit begins when your MAGI exceeds $125,000 ($225,000 if married filing jointly). The credit is eliminated completely when your MAGI reaches $145,000 ($245,000 if married filing jointly).The credit increases to as much as $8,000 ($4,000 if married filing separately) for homes bought after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010). You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit. You generally must repay any credit you claimed on your 2008 return if you sold your home in 2009 or the home stopped being your main home during 2009.For more information on these changes and other changes to the homebuyer credit, see chapter 37.
 

Business Changes

Health Insurance Costs for Self-Employed Persons

If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2011. For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business.

You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2011. You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer.

If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. But if any of the following applies, do not use that worksheet.

  • You had more than one source of income subject to self-employment tax.

  • You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.

  • You are using amounts paid for qualified long-term care insurance to figure the deduction.

If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction.

Note.

When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown in box 1 and any additional credit reported in the box to the left of box 8 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, line 4, from the total insurance premiums you paid.

Do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy.

Also, do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer.

Where to report. You take this deduction on Form 1040, line 29. If you itemize your deductions and do not claim 100% of your self-employed health insurance on line 29, include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 7.5% limit. See chapter 6 of Publication 535, Business Expenses, for more information.

 

IRA and Other Retirement Plans

Health savings accounts (HSAs) and Archer MSAs. For distributions after 2010, the additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses has increased to 20%.Also beginning in 2011, amounts paid for medicine or a drug are qualified medical expenses only if the medicine or drug is a prescribed drug or is insulin.See the instructions for Form 8889 or Form 8853 for details.

Roth IRAs. If you converted or rolled over an amount to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. See Publication 575 for details.

Designated Roth accounts. If you rolled over an amount from a 401(k) or 403(b) plan to a designated Roth account in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. See Publication 575 for details.

 

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Revised: 12/12/10 11:36:13 -0600.