It’s tax time again, and if you are like me you hate this time of year. There are so many things to consider and to know to make sure you get right with Uncle Sam. I spent a few minutes talking to Allah Funderburke of ACE Financial to learn more about what we should know this tax season.
According to Funderburke there have been massive legislative changes the past few months, and while many things have changed, there are five key things you should know.
Tip 1: A number of tax breaks now extend into 2011, including:
- $250 deduction for elementary and secondary school teachers’ classroom expenses
- a continuation of the deduction for qualified tuition and related expenses
up to $4,000
- a charitable donation deduction for direct contributions from qualified retirement accounts if 70 1/2 years or older
- $1,000 Child Tax Credit that does not fall back to $500 as scheduled
- a choice between taking sales tax OR state income tax as an itemized deduction
Tip 2: Roth IRA Conversions. Anyone can now convert IRAs into Roth IRAs by paying the tax, regardless of your income levels. However, you must be prepared to pay taxes on the amount converted in 2011.In 2010, this tax obligation could be spread between 2011 and 2012 tax years.
Tip 3: W-2s now have health benefit reporting. Your 2011 W-2 will contain the value of health insurance benefits. While not yet taxable, the government wants to keep track of these values as part of t he Health Care Reform Act.
Tip 4: More 1099s. In an effort to capture unreported income, the Treasury Department is requiring more information reporting. This includes brokerage companies reporting the cost basis of stock transactions, merchant credit card companies reporting merchant business card activity, and small businesses issuing 1099s to many more suppliers.
Tip 5: Phase-out reprieve. For many clients, itemized deductions and personal exemptions were phased out in prior years. After a hiatus in 2010, phase-out of deductions was scheduled to occur once again in 2011, but has now been delayed