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Congress is rushing to pass a $150 billion economic stimulus package by Friday that would extend a Social Security payroll-tax and unemployment benefits through the end of the year and avert a scheduled deep cut in the reimbursement fees for doctors who treat elderly Medicare patients.
The bipartisan package was hammered out by a Senate and House negotiating team late Wednesday night and early Thursday in a rare display of political unanimity. That followed a crucial decision by House Speaker John Boehner, R-Ohio, to finance the $100 billion cost of the tax cut extension by adding it to the deficit rather than trying to offset it with cuts in government programs or by raising other revenues.
What the Agreement Will Do:
Extend for another 10 months a two-percentage-point reduction in the Social Security payroll tax for 160 million workers. The rate was first reduced by Congress and the president in 2010 from 6.2 percent to 4.2 percent to help boost the economy. The partial tax holiday will save the average family about $10,000 a year. Revenue lost to the Social Security trust fund would be fully replaced with money from the general fund of the Treasury.
Continue to provide $300 a week in unemployment benefits through the end of the year, but gradually reduce jobless benefits to a maximum of 73 weeks from the current 99 weeks, depending on individual states’ current unemployment rates. Just 18 states are currently getting the full maximum of 99 weeks.
Approvea “Doc Fix” to avert a scheduled 27 percent reduction in Medicare reimbursement rates for physicians through the remainder of the year. Congress has done this before to avoid a situation in which physicians refuse to treat elderly Medicare patients because of woefully inadequate reimbursements.
How Congress Will Pay for It:
The $100 billion costof extending the payroll tax cut will be added to the federal deficit. Congress can do this by declaring an “emergency” to get around a federal “pay as you go” law that would otherwise automatically impose offsetting cuts in discretionary spending.
The remaining $50 billionof the cost for extended jobless benefits and the “Doc Fix” would be offset by auctioning off $22 billion worth of the government-controlled broadband spectrum to telecommunications companies, requiring new federal workers to contribute more to their pension plans, and cutting $5 billion from a fund created under President Obama’s health care reform program to help primary care physicians prevent illness.
Capital Gain and Loss Reporting
Taxpayers will have to report new information on Form 1040, Schedule D, Capital Gains and Losses, and file a new form, Form 8949, Sales and Other Dispositions of Capital Assets, to report gains and losses of certain capital assets. The information on Form 8949 will correspond to the new information being reported on 2011 Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions.
Under Sec. 6045, as amended in 2008, brokers are required to report to the IRS and their customers the customers’ adjusted basis in securities sold and to classify the customers’ gain as long term or short term. This basis reporting applies to covered securities acquired in 2011 and later (certain corporate stock in 2011 and other securities starting in later years; see Sec. 6045(g)(3)(C)).
Individuals will be required to report both short-term and long-term gains and losses of capital assets in the following three situations:
- When basis was reported in box 3 of Form 1099-B;
- When basis was not reported on Form 1099-B; or
- When no Form 1099-B was received.
The information from Form 8949 must then be transferred to Part I of Schedule D, which has been redesigned for 2011.
Veterans Work Opportunity Credits
The Three Percent Withholding Repeal and Job Creation Act, P.L. 112-56, extended the work opportunity tax credit (now called the returning heroes and wounded warriors work opportunity tax credits) for businesses that hire certain military veterans. Employers will be eligible for a credit of up to $9,600 for each qualified veteran that they hire after the law’s enactment date (Nov. 21, 2011) and before Jan. 1, 2013.
Under the returning heroes tax credit, an employer may be eligible for a credit of up to $2,400 for hiring a veteran who has been unemployed for at least four weeks and up to $5,600 for hiring a veteran who has been unemployed for more than six months. Under the wounded warriors tax credit, an employer may be eligible for a credit of up to $9,600 for hiring a veteran with a service-connected disability who has been unemployed for more than six months and up to $4,800 for hiring a veteran with a service-connected disability (who does not meet the returning hero credit requirements) or who qualifies as a food stamp recipient.
Foreign Asset Reporting
Under the Foreign Account Tax Compliance Act, individuals are required to report interests in specified foreign financial assets when filing their federal income tax returns (Sec. 6038D). This requirement was suspended until the Form 8938, Statement of Specified Foreign Financial Assets, was released (Notice 2011-55). The IRS posted the final version of the form and its instructions in December; taxpayers subject to the reporting requirement must file the form in 2012 for 2011 tax years. In addition, taxpayers who would have been required (except for the suspension of the requirement) to file Form 8938 in 2011 for a tax year that began after March 18, 2010, must file it for the prior year with their return for the current tax year.
Bonus Depreciation
The 100% first-year bonus depreciation provision expired on Dec. 31, but 50% bonus depreciation is available for property placed in service in 2012. (100% bonus depreciation does still apply in the case of certain longer-lived and transportation property placed in service before 2013.)
Estate Tax
Estates of decedents who died in 2010 have until Jan. 17, 2012, to elect not to have the estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover basis rules in Sec. 1022. This election is made by filing Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent.
The estate and gift tax lifetime exclusion increases to $5.12 million for 2012.
EITC Due Diligence
The penalty for failing to meet the Sec. 6695(g) earned income tax credit (EITC) due diligence requirements increased from $100 to $500, effective for returns required to be filed after Dec. 31, 2011.
Voluntary Classification Settlement Program
A new voluntary classification settlement program (VCSP) introduced in September (Announcement 2011-64) allows eligible taxpayers to voluntarily reclassify their workers as employees for federal employment tax purposes for future tax periods while receiving relief for part of the tax liability relating to the past treatment of the workers as nonemployees. Taxpayers are eligible if they have consistently treated the workers as nonemployees, filed all required Forms 1099 for the previous three years, are not currently under IRS audit, are not currently under audit by the U.S. Department of Labor or a state agency, and complied with the audit results if the taxpayers were previously audited by the IRS or the Department of Labor.
The VCSP limits the tax liability to 10% of the employment tax liability that would have been due on the compensation paid to the workers in the most recent tax year, as calculated under the reduced rates of Sec. 3509. Interest and penalties are not charged on the liability.
The classification of these workers for prior years is not subject to an employment tax audit, but the statute of limitation on assessment of employment taxes is extended from three to six years for the first, second and third calendar years beginning after the date the taxpayers begin treating the workers as employees under the VCSP closing agreement.
For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:
- The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
- The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
- Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.
Credits, deductions, and related phase outs.
- For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
- The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
- The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
- For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased from the tax year 2011 amounts; please see the table below.
Medical Savings Accounts (MSAs) |
Self-only coverage |
Family coverage |
Minimum annual deductible |
$2,100 |
$4,200 |
Maximum annual deductible |
$3,150 |
$6,300 |
Maximum annual out-of-pocket expenses |
$4,200 |
$7,650 |
The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.
The IRS posted the instructions for Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for decedents dying in 2010. For most 2010 decedents, the due date is Sept. 19. The form itself was posted on Sept. 3, but without instructions.
For decedents who died between Jan. 1, 2010, and Dec. 16, 2010, Form 706 (and payment of estate and/or generation-skipping transfer tax) is due on Sept. 19, 2011. For decedents who died between Dec. 17, 2010, and Dec. 31, 2010, the form and tax payment are due within nine months after the decedent’s death. Executors can request an extension of time to file and pay the tax due by filing Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes.
The request for an extension of time to pay is made on a separate section of Form 4768 from the section of the form for requesting the extension of time to file. In addition, even though the six-month extension to file is automatic, the extension of time to pay the estate tax due is not automatic. Each estate’s executor must state a reason why the extension is needed and show reasonable cause in order to obtain an extension of time to pay the estate tax.
Executors of estates of decedents who died in 2010 have a choice to elect to apply the Code as if the estate tax had not been reinstated by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (PL 111-312). If an executor makes this election, the estate will not be subject to estate tax and should not file Form 706. Instead, the election is made on Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, which is due Nov. 15, 2011. However, the final version of Form 8939 has not been released, nor have its instructions, which will explain what documentation must be attached.
Form 706 must be filed by the executor of the estate of any U.S. citizen or resident who died in 2010 if the gross estate, plus adjusted taxable gifts and specific exemption, exceeds $5 million, unless the executor makes the election under IRC § 1022. Once made, the section 1022 carryover basis election is irrevocable, except as provided in Notice 2011-66.
All Forms 706 are filed with the IRS Service Center in Cincinnati.
The Internal Revenue Service is reminding taxpayers that now is good time to work with their tax preparer to conduct a review of their tax situation. Taxpayers should review the latest tax changes, check withholding status and start organizing your records.
Areas to review include:
■ Cash charitable contributions: If you plan to donate and deduct your charitable contribution for 2011 as an itemized deduction, you should be aware of a few necessary procedures. Charitable contributions can be tax deductible, but you must have the proper records to support your deduction. Rules on record keeping for charitable contributions were revised because of the Pension Protection Act of 2006. To deduct a charitable cash donation, regardless of the amount, you must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Acceptable bank records would include canceled checks or bank or credit union statements containing the name of the charity and the date and the amount of the contribution. A good resource is IRS Publication 526, Charitable Contributions.
■ Check your withholding status at IRS.gov: Taxpayers should take a few minutes to check their withholding to make sure what is being taken out of their paychecks matches their projected taxes. If not enough is withheld, individuals will owe tax at the end of the year and may, in some cases, have to pay a penalty. If too much tax is withheld, they will lose the use of this money until they get their refund.
■ Review available tax credits, especially those that expire in 2011, to determine eligibility. For a list of expiring credits, click HERE.
■ Record-keeping: The IRS encouraged taxpayers to take the time now to gather and organize their tax records to reduce stress at tax time.
House Republican leaders have rejected key elements of President Obama’s jobs plan, but told their rank-and-file members they would support other components, such as an extension of the current payroll tax holiday and the continuing depreciation write-offs for businesses.
In a letter to their members, Speaker John A. Boehner and Representative Eric Cantor, the majority leader, said, “We believe there are areas of common agreement, and areas worthy of further conversation where agreement , assuming there are good faith discussions, may be possible.”
In regard to the major aspects of the jobs plan, Republican compromise is unlikely to be forthcoming.
Hiding offshore income topped the list of schemes to avoid. U.S. taxpayers must report their worldwide income and disclose certain offshore accounts. However, the IRS reports that taxpayers continue to avoid reporting and disclosure requirements by hiding income in offshore banks, brokerage accounts or, in some cases, fake companies. To encourage taxpayers to come forward, the IRS recently announced a new amnesty program to identify taxpayers with offshore accounts. The new offshore voluntary disclosure initiative (sometimes referred to as OVDI) will be available through Aug. 31, 2011.
The IRS has listed some famous tax quotes on paying taxes. Some are funny, some not.
I am proud to be paying taxes in the United States. The only thing is – I could be just as proud for half the money.” — Arthur Godfrey, entertainer.
People who complain about taxes can be divided into two classes: men and women.”
— Unknown
"No government can exist without taxation. This money must necessarily be levied on the people; and the grand art consists of levying so as not to oppress.'' — Frederick the Great, 18th Century Prussian king
"Like mothers, taxes are often misunderstood, but seldom forgotten.'' — Lord Bramwell, 19th Century English jurist
"The best measure of a man's honesty isn't his income tax return. It's the zero adjust on his bathroom scale.'' — Arthur C. Clarke, author
"Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.” — F. J. Raymond, humorist
A tax loophole is "something that benefits the other guy. If it benefits you, it is tax reform.''
— Russell B. Long, U.S. Senator
"Few of us ever test our powers of deduction, except when filling out an income tax form.''
— Laurence J. Peter, author
“The hardest thing in the world to understand is the income tax.” — Albert Einstein, physicist
“Taxation with representation ain’t so hot either.” — Gerald Barzan, humorist
“Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” — Plato
“Income tax has made more liars out of the American people than golf.” — Will Rogers, humorist
For the fiscal year ended September 30, 2010, the percentage of taxpayers who were audited increased in every category of adjusted gross income above $500,000 compared with a year earlier.
The biggest yearly increase was for taxpayers making $10 million or more. For those earning $500,000 to $1,000,000, the audit rate rose to 3.4% from 2.8%
Concerned about the tax compliance burden imposed on taxpayers, particularly small businesses, Congress passed legislation repealing certain information reporting requirements enacted last year. The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, repeals recently expanded information reporting rules that would have required the filing of Form 1099 for:
- Payments of $600 or more by businesses; and
- Expense payments of $600 or more with respect to rental property.
To pay for the cost of repeal, estimated at approximately $25 billion over 10 years, the legislation increases the amount of overpayment of health care credit that is subject to recapture.
The House passed the measure on March 3, 2011, by a vote of 314 to 112. The Senate followed with passage on April 5, 2011, by a vote of 87 to12. The legislation now goes to President Obama for his signature.
Of the more than 1.6 million Americans who were slapped with audits last year, 78% dealt with correspondence audits, while only 22% were asked to come in for an in-person tax examination
According to CNNMoney, that is a 13% rise in audits-by-mail from 2009, and a 93% jump compared to 2003. In 2000, the chances of getting a correspondence audit were less than 2 to 1.
Summary:
- Extension of the Bush tax cuts and a top 35% income tax rate for all taxpayers through 2012.
- Extension of the preferential 15% tax rate on long-term capital gain and qualified dividends through 2012.
- Alternative minimum tax relief in the form of a larger AMT exemption for 2010 and 2011.
- Repeal of the phase-outs related to personal exemptions and itemized deductions through 2012.
- Extension of various deductions and exclusions expected to sunset in 2009 or 2010.
- Reinstatement of a popular opportunity for those over 70 ½ to make tax free IRA distributions directly to charity with a special window of opportunity to treat January 2011 distributions as 2010 events.
- Extension of various credits, including the energy credit, child credit and education credit.
- For business taxpayers, enhanced bonus depreciation and expensing opportunities.
- Establishment of a 2% payroll and self-employment (“SE”) tax reduction for 2011.
- Estate and gift tax relief, including a lower 35% tax rate and an enhanced $5 million exemption, as well as portability of a spouse’s unused exemption for use in the survivor’s estate.
The following are details on the most critical items
Retention of Bush Tax Cuts
The 2010 tax rates and brackets were extended for two more years, 2011 and 2012. The top rate will remain at 35%. Before passage of the Tax Act, the top rate was expected to increase to 39.6% and the lowest 10% bracket was to disappear, leaving the lowest tax rate at 15%. Note that despite an effort to restrict the tax rate cut to taxpayers making less than $200,000 ($250,000 for married couples), the Tax Act applies the rates to all taxpayers.
Capital gain and qualified dividend income.
The Tax Act extends the 15% maximum tax rate for long-term capital gains and qualified dividends through 2012. Moreover, taxpayers in the 10% and 15% tax brackets enjoy a 0% tax rate on this income. Before enactment of the Tax Act, the maximum tax rate on long-term capital gains was to revert to 20% (18% for assets held more than five years), and qualified dividends would be subject to tax at the ordinary income rate (up to 39.6%). The Tax Act also extends the 100% gain exclusion for qualified small business stock held for more than five years and acquired between September 27, 2010 and January 1, 2012. Qualified small business stock acquired between February 17 and September 26, 2010 is allowed a 75% gain exclusion.
Estate Tax.
The federal estate, gift, and generation-skipping (“GST”) taxes were reinstated retroactively as of the beginning of 2010. Both the estate and gift tax are based on a flat rate of 35%. For 2010 only, the GST tax rate was zero. Fiduciaries of decedents dying in 2010 may opt out of the estate tax regime, and be subject to the carryover basis rules for income tax purposes, thus negating the opportunity to step up tax basis of assets to date of death value. For 2011 and 2012, the estate, gift and GST taxes remain at 35%, with an exemption of $5 million. For married couples, the unused exemption in the first spouse's estate may be used in the survivor's estate (introducing the concept of “portability”). The increase in gift tax exemption to $5 million ($10 million for a married couple) provides an outstanding opportunity to pass current wealth and future appreciation to lower generations, either by outright gifting or through leveraging strategies such as sales to intentionally defective trusts and grantor retained annuity trusts (“GRATs”).The IRS states that anyone who contemplates arguing on legal grounds against paying his or her fair share of taxes should first read the 84-page document,
Tax-free IRA distributions to charity
Before 2010, individuals over age 70 ½ were allowed to make distributions from their IRAs directly to charities, up to $100,000 per year. These direct distributions counted toward taxpayers’ required minimum distribution amounts. The Tax Act extends this provision through 2011. A special rule allows direct charitable transfers during January 2011, to be treated as 2010 distributions. The special rule may allow taxpayers to put back into their IRAs distributions they received late in 2010 under the 60-day rollover rule, which subsequently could be directly distributed to charity by January 31, 2011, thus avoiding 2010 taxation on the required minimum distribution amount.
Energy Credits
Federal tax credits for energy-efficient home products were extended through Dec. 31, 2011. Bit the credits aren’t as high as those for 2010.
The 2011 Energy Tax Credit drops to 10 percent of a project — excluding installation — and $500 max. (Last year’s credit was 30 percent of a project and up to $1,500.) If you’ve already taken advantage of the Energy Tax Credit, whatever you claimed in the past counts against the $500 in 2011. Here are some of the caps.
Windows and skylights: up to $200.
Air conditioner: up to $300.
Furnace (efficiency must be 95 percent, up from 90 percent from before the extension. Includes natural gas, propane, oil or hot water): up to $150.
Water heater (includes electric, natural gas, propane or oil): up to $300.
Insulation, doors and roof: up to $500.
For more information, go to www.energystar.gov/taxcredits....more
Child Care Credits
This credit is for people who have a qualifying child as more than one person. For details, see the instructions for
defined on this page. It is in addition to the credit for child
Form 1040, lines 51 and 6c, or Form 1040A, lines 33 and
and dependent care expenses (on Form 1040, line 48;
6c.
Form 1040A, line 29; or Form 1040NR, line 46) and the
earned income credit (on Form 1040, line 64a; or Form
Limits on the Credit
1040A, line 41a).
The maximum amount you can claim for the credit is You must reduce your child tax credit if either (1) or (2)
$1,000 for each qualifying child.
A qualifying child for purposes of the child tax credit is a child who: (1) Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or
nephew); (2) Was under age 17 at the end of 2010, (3) Did not provide over half of his or her own support for
2010; (4) Lived with you for more than half of 2010 (see Exceptions to time lived with you below); (5) Is claimed as a dependent on your return, and (6) Was a U.S. citizen, a U.S. national, or a U.S. resident alien.
For more information see IRS Publication 519,
...more
Education Tax Credits
As the cost of obtaining a higher education continues to rise, there are tax credits that can help ease the financial burden. There are two tax credits for higher education.
The American Opportunity credit provides a refundable tax credit of up to $2,500 for undergraduate education. The American Opportunity Credit is scheduled to expire at the end of 2012. The Lifetime Learning Credit provides a tax credit of up to $2,000 for any level of college education (even graduate school), and doesn't require a minimum level of enrollment. However, the Lifetime Learning Credit has a narrower income range compared to the tuition deduction.For 2010, Congress enabled a greater degree of qualification of certain education-related expenses as valid or expanded tax deductions within the 2010 tax year under the American Opportunity Credit legislation.
Here’s what you need to know about the American Opportunity Credit:
The first qualification centers on income. Full credit is possible for those whose gross adjusted income is $80,000 or less for individual filers or $160,000 for married couples filing a join return. Credit is tiered and reduced as income rises above that benchmark. Under the American Recovery and Reinvestment Act, benefits from the Hope Act and the Lifetime Learning Credits are expanded, but there are still income-related restrictions. Qualifying income levels are raised above those determined by them, as well.
Only tuition and certain related expenses qualify under the American Opportunity tax credit.
The Hope Act allowed tax credit for only the first two years of learning at an accredited school. The American Opportunity credit allows for the first four years of learning at secondary schools. Expenses related to programs extending beyond four years, whether regarding a post-graduate degree or an expanded bachelor’s degree program, do not qualify for this tax credit.
Here's what you need to know about the Lifetime Learning Credit:
The Lifetime Learning Credit is a tax credit for any person who takes college classes. It provides a tax credit of 20% of tuition expenses, with a maximum of $2,000 in tax credits on the first $10,000 of college tuition expenses. You can claim the Lifetime Learning Credit on your tax return if you, your spouse, or your dependents are enrolled at an eligible educational institution and you were responsible for paying college expenses. Unlike the American Opportunity credit, you need not be in the first four years of undergraduate classes. Even if you took only one class, you may take advantage of the Lifetime Learning Credit.
Education credits is a complex subject. Contact your financial advisor or your accountant for more information and personal guidance.
Making Work Pay
Working taxpayers may be eligible for the Making Work Pay tax credit, a significant tax provision of the American Recovery and Reinvestment Act of 2009.
Here are five things the IRS wants every taxpayer to know about the Making Work Pay tax credit:
1. This credit -- available for tax years 2009 and 2010 -- equals 6.2 percent of a taxpayer's earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers. Most wage earners have been enjoying a boost in their paychecks from this credit since April.
2. Eligible self-employed taxpayers can also benefit from the credit by evaluating their expected income tax liability. If eligible, self-employed taxpayers can make the appropriate adjustments to the amounts of their upcoming estimated tax payments in September and January.
3. Taxpayers who fall into any of the following groups should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:
• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Pensioners
• Social Security recipients who also work
• Workers without valid Social Security numbers
Having too little tax withheld could result in potentially smaller refunds or – in limited instances –small balance due rather than an expected refund.
4. The Making Work Pay tax credit is either phased out or unavailable for higher-income taxpayers. The phase out begins at $75,000 for single taxpayers and $150,000 for couples filing a joint return.
5. For those who believe their current withholding is not right for their personal situation, a quick withholding check using the IRS withholding calculator on IRS.gov may be helpful. Taxpayers can also do this by using the worksheets in IRS Publication 919,
Retirement Savings Credit
If you make a contribution to a retirement account -- such as an IRA or a 401(k) -- you could be eligible for up to $1,000 in credit if you're single, and up to $2,000 for married couples.To qualify, single filers must make less than $27,750 and married couples, under $55,500.
If you're going to claim this credit, you must be over 18, not a full-time student and cannot be claimed as a dependent by anyone else.
The actual credit is based on your filing status, how much you contribute to your retirement account and how much you make. The more you contribute, the less you earn and the higher your credit will be.
To claim this credit, you must complete Form 8880 – also known as the Credit for Qualified Retirement Savings Contributions. To get the form, and instructions for calculating how large your credit will be, visit www.irs.gov
The Statement on Standards for Accounting and Review Services no. 19 (SSARS 19), Compilation and Review Engagements includes some major changes for Certified Public Accountants (CPAs) who perform compilations and reviews. One change is the wording for compilation and review reports along with new documentation requirements (including engagement letters) and other changes.
EXAMPLE:
Accountant’s Compilation Report
To the Board of Directors
«Client_Company_Name»
«Client_City», «Client_State»
I (We) have compiled the accompanying statement of assets, liabilities, and equity — income tax basis of «Client_Company_Name» (a corporation) as of «Report_Date», and the related statements of revenues, expenses and retained earnings–income tax basis for the year then ended. I (We) have not audited or reviewed the accompanying financial statements and, accordingly, do no express an opinion or provide any assurance about whether the financial statements are in accordance with the income tax basis of accounting.
Management is (The owners are) responsible for the preparation and fair presentation of the financial statements in accordance with the income tax basis of accounting and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.
My (Our) responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management (the owners) in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements.
Management has (The owners have) elected to omit substantially all of the disclosures ordinarily included in financial statements presented in accordance with the tax basis of accounting. If the omitted disclosures were included in the financial statements, they might influence the user’s conclusions about the Company’s assets, liabilities, equity, revenues, and expenses. Accordingly, these financial statements are not designed for those who are not informed about such matters.
I am (we are) not independent with XYZ Company.
Firm’s Signature
«Current_Date»
This change is effecgive for financial statements for periods ending after December 15, 2010.
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