Posts Tagged ‘corporate tax’
Monday, December 19th, 2011 by Moore McLaughlin
The Massachusetts Department of Revenue has announced that for tax years after 2011 the Part B personal income tax rate will be reduced to 5.25% (previously 5.3%). The tax rate for Part B income is subject to reduction by 0.05% if the inflation-adjusted growth in baseline taxes in the fiscal year ending June 30 of the previous year exceeds 2.5% and the inflation-adjusted growth in baseline taxes for each consecutive three-month period reported by the Commissioner of Revenue between August and December of the previous year is greater than zero. There is a minimum rate of 5%.
Tags: asset protection, Asset Protection Planning, business tax, Capital gains tax, corporate tax, income tax, IRS and state tax collections, Massachusetts, Massachusetts Department of Revenue, mclaughlin & quinn, Moore McLaughlin, Part B personal income tax rate, state taxes, tax, Tax planning
Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Wednesday, June 8th, 2011 by Moore McLaughlin
| Ten Important Facts About Capital Gains and Losses |
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| IRS Tax Tip 2011-35
Did you know that almost everything you own and use for personal or investment purposes is a capital asset? Capital assets include a home, household furnishings and stocks and bonds held in a personal account. When a capital asset is sold, the difference between the amount you paid for the asset and the amount you sold it for is a capital gain or capital loss.
Here are ten facts from the IRS about gains and losses and how they can affect your Federal income tax return.
1. Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.
2. When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.
3. You must report all capital gains.
4. You may deduct capital losses only on investment property, not on property held for personal use.
5. Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.
6. If you have long-term gains in excess of your long-term losses, you have a net capital gain to the extent your net long-term capital gain is more than your net short-term capital loss, if any.
7. The tax rates that apply to net capital gain are generally lower than the tax rates that apply to other income. For 2010, the maximum capital gains rate for most people is 15%. For lower-income individuals, the rate may be 0% on some or all of the net capital gain. Special types of net capital gain can be taxed at 25% or 28%.
8. If your capital losses exceed your capital gains, the excess can be deducted on your tax return and used to reduce other income, such as wages, up to an annual limit of $3,000, or $1,500 if you are married filing separately.
9. If your total net capital loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you incurred it in that next year.
10. Capital gains and losses are reported on Schedule D, Capital Gains and Losses, and then transferred to line 13 of Form 1040.
For more information about reporting capital gains and losses, see the Schedule D instructions, Publication 550, Investment Income and Expenses or Publication 17, Your Federal Income Tax. All forms and publications are available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676). |
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Tags: Capital gains tax, corporate tax, income tax, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, Rhode Island, state taxes, tax, Tax planning, tax policy, tax return preparer, tax returns
Posted in Current Events, Tax Current Events and News, Tax planning
Wednesday, April 6th, 2011 by Moore McLaughlin
On April 5, the Senate by a vote of 87-12 approved H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.” The measure, which retroactively repeals expanded Form 1099 information reporting rules added by recent legislation, was passed by the House on March 3 by a vote of 314-112. Thus, H.R. 4 (the Act) is cleared for the President’s expected signature.
Here are highlights of the tax changes in the Act.
Original information reporting rules. Before amendment by the Small Business Jobs Act of 2010 (P.L. 111-240) and the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS. Reporting on Form 1099 was required only when the payor was considered to be engaged in a trade or business and has made the payment in connection with that trade or business. The type of payment that most commonly triggered the reporting requirement was payment for services.
There were a number of exemptions from Code Sec. 6041 ‘s reporting requirements under prior law, notably including payments to corporations (which were exempt under Reg. § 1.6041-3(p)(1)).
Pre-Act law—changes made by 2010 legislation. Beginning in 2012, Sec. 9006 of PPACA added payments of amounts in consideration for any type of property and gross proceeds—i.e., it added payments for goods or other property—to the list of payments subject to information reporting.
Sec. 9006 of PPACA further provided that, beginning in 2012, payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.
Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.
New law. For payments made after December 31, 2011, the Act repeals the provisions in Sec. 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. (Code Sec. 6041(a), Code Sec. 6041(i), and Code Sec. 6041(j), as amended by Act Sec. 2) And for payments made after December 31, 2010, the Act also repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. (Code Sec. 6041(h), as repealed by Act Sec. 3)
In other words, under the Act, the information reporting rules effectively revert to the way they read before enactment of PPACA and the Small Business Jobs Act of 2010.
Revenue offset. The Act provides an offset for the lost revenue from repealing the new information reporting provisions, estimated at $21.9 billion. It increases the amount of “excess advance payments” of the premium assistance credit (enacted as part of the 2010 health care reform legislation to help lower-income individuals acquire affordable health insurance coverage) that a taxpayer must repay under Code Sec. 36B(f)(2) for tax years ending after December 31, 2013. The credit is available for a taxpayer who does not receive health insurance through his employer (or his spouse’s employer) and whose income falls between 100% and 400% of the federal poverty line (FPL), based on the most recently filed tax return.
Under pre-Act law, if the taxpayer’s income increases such that the credit exceeds that to which his current income level actually entitles him to, but his income is still under 500% of FPL, he had to repay some credit amounts. The limit on amounts he had to repay were capped and ranged from $600 to $3,500.
New law. Under the Act, for tax years ending after December 31, 2013, the repayment caps are increased for taxpayers with household income of at least 200% but less than 400% of FPL, and full repayment is required for taxpayers whose incomes exceed 400% of FPL. (Code Sec. 36B(f)(2)(B)(i), as amended by Act Sec. 4)
Tags: asset protection, Asset Protection Planning, business tax, Capital gains tax, Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011, corporate tax, Form 1099, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, Massachusetts, Moore McLaughlin, Providence, Rhode Island, Small Business Act, Small Business Jobs Act, Small Business Jobs Act of 2010, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Tuesday, March 1st, 2011 by Moore McLaughlin
The IRS announced on February 23, 2011 new policies and programs to help taxpayers pay back taxes and avoid tax liens. The IRS’s goal is to help individuals and small businesses meet their tax obligations, without adding an unnecessary burden to taxpayers.
Background on liens. When a taxpayer fails to pay a tax liability after notice and demand, a lien arises that attaches to all the taxpayer’s property and rights to property. The IRS is authorized to seize and sell the taxpayer’s property and rights to property subject to a federal tax lien. Thus, IRS may seize any property or property right (unless it’s exempt) of a delinquent taxpayer (whether held by him or someone else), sell it, and apply the proceeds to pay the unpaid taxes. Seized property may be real, personal, tangible, or intangible, including receivables, bank accounts, evidences of debt, securities, and salaries, wages, commissions or compensation.
Background on installment agreements. The IRS may enter into written agreements with any taxpayer. IRS must enter into an installment agreement requested by an individual whose aggregate tax liability (without interest, penalties, additions to tax, and additional amounts) is not more than $10,000, and who has not failed to file or to pay income tax, or entered into another installment agreement, during any of the preceding five tax years, if IRS determines that the taxpayer is financially unable to pay the liability in full when due (and the taxpayer submits information that IRS may require to make this determination). The agreement must require full payment within three years, and the taxpayer must agree to comply with all Code provisions while it’s in effect.
Background on OICs. The IRS will consider an offer in compromise (OIC)—i.e., an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed—where: (1) the taxpayer is unable to pay the tax; (2) there is doubt as to the taxpayer’s liability for the tax; or (3) a compromise would promote effective tax administration because collection of the full amount of tax would cause economic hardship for the taxpayer, or compelling public policy or equity considerations provide a sufficient basis for compromising the liability. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.
New procedures. After a review of collection operations which IRS Commissioner Shulman launched last year, as well as input from the Internal Revenue Service Advisory Council and the National Taxpayer Advocate, IRS has determined that the following changes will lessen the negative impact on taxpayers:
- Higher dollar threshold for issuing liens. IRS will significantly increase the dollar thresholds at which liens are generally filed to take account of inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances. IRS expects to review the results and impact of the lien threshold change in about a year.
- Easier lien withdrawals after payment. IRS will modify procedures so as to make it easier for taxpayers to obtain lien withdrawals. Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. IRS will streamline its internal procedures to better allow collection personnel to withdraw the liens.
- Withdrawing liens after DDIA. IRS will now allow lien withdrawals for taxpayers with unpaid assessments of $25,000 or less where: (1) a taxpayer enters into a Direct Debit Installment Agreement (DDIA); (2) a taxpayer on a regular Installment Agreement converts to a DDIA; and (3) a taxpayer on an existing DDIA requests the withdrawal. Liens will be withdrawn after a probationary period demonstrating that direct debit payments will be honored. IRS notes that this lowers user fees and saves the government money from mailing monthly payment notices. Taxpayers can use the Online Payment Agreement application on IRS.gov to set up a DDIA.
- Easier access to Installment Agreements for small businesses. IRS will make streamlined Installment Agreements available to more small businesses by raising the dollar limit to allow small businesses with $25,000 or less in unpaid tax to participate. Currently, only small businesses with under $10,000 in liabilities can participate. Small businesses that file either as an individual or as a business will have 24 months to pay. Small businesses with an unpaid assessment balance greater than $25,000 can qualify for a streamlined Installment Agreement if they pay down their balance to $25,000 or less. Small businesses will need to enroll in a DDIA to participate.
- Expanding streamlined OIC program. IRS will expand a new streamlined OIC program to cover a larger group of struggling taxpayers. The streamlined OIC will allow taxpayers with annual incomes up to $100,000 to participate. Participants must have tax liability of less than $50,000, doubling the current limit of $25,000 or less.
McLaughlin & Quinn, LLC partner Thomas P. Quinn, Esq. says “These changes are significant and will help many of our clients immediately. We welcome this practical improvement to the collection system. We represent clients on a daily basis who face these thresholds. Those clients will now be able to better manage their affairs and settle their outstanding tax obligations.”
For more information on these changes, and IRS collections matters generally, contact Tom Quinn, Esq. at 401-421-5115 ext. 218 or by e-mail at TQuinn@McLaughlinQuinn.com.
Tags: asset protection, Asset Protection Planning, Capital gains tax, collection, corporate tax, Direct Debit Installment Agreement, income tax, installment agreement, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, joint account, levy, lien, lien withdrawals, mclaughlin & quinn, Moore McLaughlin, offer in compromise, OIC, Providence, Rhode Island, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Bankruptcy, Financial workout, IRS and state tax collections, Tax Current Events and News, Tax planning
Monday, February 21st, 2011 by Moore McLaughlin
The IRS had earlier announced that because of the Emancipation Day holiday in the District of Columbia (DC), the due date of Form 1040 for 2010 is April 18, 2011, instead of April 15, 2011. Now, in Notice 2011-17, the IRS has explained the mechanics of this deferral, and how it may apply in other years.
Background. Under Code Sec. 6072(a), income tax returns must be filed on April 15. When April 15 falls on a Saturday, Sunday, or legal holiday, a return is considered timely filed if filed on the next succeeding day that is not a Saturday, Sunday, or legal holiday, defined as legal holiday in DC.
Under DC law, Emancipation Day, April 16, is a legal holiday. The twists and turns in DC law regarding this holiday produce the following results for filing deadlines for all tax forms and payments that must be filed or completed on or before April 15, including the Form 1040 series tax returns:
- When April 16 falls on Saturday, then Friday, April 15, is the observed date for Emancipation Day and the filing deadline for all tax forms and payments required to be filed or completed on or before April 15, is Monday, April 18.
That’s the situation this year, when April 16 falls on a Saturday, which means Emancipation Day will be observed on Friday, Apr. 15, 2011. Thus, the filing deadline for all tax forms and payments required to be filed or completed on or before April 15 will be Monday, April 18, 2011.
- When April 16 falls on Sunday, then Monday, April 17, is the observed date for Emancipation Day, and the filing deadline for all tax forms and payments required to be filed or completed on or before April 15 is Tuesday, April 18.
- When April 16 falls on Monday, then that day is the observed date for Emancipation Day, and the filing deadline for all forms and payments required to be filed or completed on or before April 15 is Tuesday, April 17.
The last time this happened was in 2007.
IRS said it will widely publicize the Emancipation Day rules in affected years to remind the public that the filing deadline is extended.
In all likelihood, the new Notice was issued in response to a flood of questions about why the filing deadline was deferred to April 18, even though April 15 will fall on a Friday this year.
The deadline deferral to April 18, 2011, applies to a host of deadlines for filing and paying, including:
… Requests for an automatic six-month tax-filing extension on an individual return for calendar-year 2010.
… Tax-year 2010 balance-due payments.
… For calendar-year taxpayers, individual estimated tax payments for the first quarter of 2011.
… For calendar-year taxpayers, tax-year 2010 contributions to a Roth or traditional IRA.
… Corporation income tax returns, including S corporations, for a fiscal year ending on January 31, 2011, and any balance due.
… For calendar-year corporations, the estimated tax payment for the first quarter of 2011.
… Calendar-year estate and trust income tax returns (Form 1041) and any balance due.
… Calendar-year 2010 partnership returns (Form 1065).
Tags: 1031 exchange real estate investment, 2011, April 15, April 18, April 18 2011, Capital gains tax, collection, corporate tax, District of Columbia, Emancipation Day, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Notice 2011-17, Providence, Rhode Island, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in 1031 Exchanges, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Monday, February 21st, 2011 by Moore McLaughlin
On February 17, the House Ways and Means Committee by a vote of 21-15 approved. H.R. 705, the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011. Upon passage of H.R. 705, the text of a competing bill (H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011), which was approved by voice vote earlier in the day, was incorporated into H.R. 705. There were no other amendments adopted to H.R.705.
Both bills seek to modify or repeal the new requirements imposed by Sec. 9006 of the Patient Protection and Affordable Care Act (PPACA), which provides that payments for goods and payments made to corporations (that are not tax-exempt) will be subject to information reporting beginning in 2012. H.R. 705 also seeks to repeal Code Sec. 6041(h), which was added by the Small Business Jobs Act of 2010 and which treats recipients of rental income from real estate as engaged in the trade or business of renting property for information reporting purposes beginning in 2011. However, H.R. 705 provides an offset for the estimated $21.9 billion cost of repeal, whereas H.R. 4 does not.
Also on February 17, the Senate by a vote of 92-2 invoked cloture (i.e. voted to cut off debate) on S. 223, the FAA Air Transportation Modernization and Safety Improvement Act, which includes a provision to repeal the Sec. 9006 reporting requirements. Unless time is yielded back, there remains 30 hours of debate on the bill before a vote on final passage of the measure.
Tags: 1099, business tax, Capital gains tax, Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayment Act of 2011, corporate tax, FAA Air Transportation Modernization and Safety Improvement Act, Form 1099, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, IRS Form 1099, mclaughlin & quinn, Moore McLaughlin, Patient Protection and Affordable Care Act, Providence, Rhode Island, Small Business Act, Small Business Jobs Act of 2010, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Current Events, IRS and state tax collections, Tax Current Events and News, Tax planning
Thursday, February 3rd, 2011 by Moore McLaughlin
The IRS is putting the finishing touches on a new offshore voluntary disclosure program, according to several agency officials quoted in news reports. The new program will have some similarity to the previous voluntary disclosure program that ended in October 2010, but is expected to offer different terms regarding possible penalties. Many observers foresee the new initiative offering terms less generous than those in the previous program. At an American Bar Association gathering on Janury 21, Steven Miller, IRS deputy commissioner for services and enforcement, put the tax professional community on notice that another initiative was in the works. Other agency officials have since indicated that the details of the program would soon be forthcoming.
Stay tuned to our Blog, or contact Partner Moore McLaughlin, Esq. for more information at mmclaughlin@mclaughlinquinn.com or by phone at 401-421-5115 ext 212.
Tags: asset protection, Asset Protection Planning, Capital gains tax, corporate tax, FBAR, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, mclaughlin & quinn, Offshore Voluntary Disclosure Program, Providence, Rhode Island, tax, Tax planning, Thomas P. Quinn
Posted in Asset Protection Planning, Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning
Wednesday, February 2nd, 2011 by Moore McLaughlin
In Notice 2011-11, the IRS has provided relief to tax return preparers who have made a good faith effort to obtain a preparer tax identification number (PTIN) by allowing them to prepare tax returns for compensation, even though they have not received a PTIN.
Background. In January 2010, the IRS released a study on the U.S. return preparer industry carrying detailed recommendations on new standards for preparers other than attorneys, certified public accountants (CPAs), and enrolled agents (EAs). Subsequently, the IRS rolled out a new set of rules subjecting tax return preparers who are not attorneys, CPAs or EAs to new registration requirements, including mandatory use of PTINs for tax returns or refund claims filed after December 31, 2010, competency testing, continuing education (CE) rules, and ethical standards (i.e., Circular 230). Under the rules, all individuals who are compensated for preparing, or assisting in the preparation of, all or substantially all of a tax return or claim for refund of tax must have a PTIN.
In early January 2011, the IRS issued Notice 2011-6, which dialed back some of the most controversial aspects of the new tax return preparer initiative. It provides guidance on the implementation of the new regulations requiring tax return preparers to obtain a PTIN for tax returns or refund claims filed after December 31, 2010. It also softened key aspects of earlier guidance. For example, it provides that properly supervised nonsigning preparers are not required to undergo a competency exam and are not subject to the CE requirements.
Notice 2011-6, states that, unless otherwise provided in it or other guidance, the IRS expects tax return preparers to comply with the new requirement to obtain a PTIN as soon as possible. Tax return preparers who used the new online application system available through IRS’s website at http://www.irs.gov/taxpros generally will receive their PTIN number when the application process has been completed. Preparers who apply for a PTIN using the paper Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application, generally will receive their PTIN four to six weeks after the application and payment are received.
However, the IRS recognizes that some tax return preparers are experiencing or may experience difficulty in obtaining a PTIN. If preparers using the online system are unsuccessful in obtaining a PTIN, the IRS system will notify them that their application was not processed and provide appropriate instructions. Complying with these instructions before the preparation of a tax return or refund claim for compensation will establish that these individuals were making a good faith effort to comply with the new PTIN requirement.
Preparer relief. In Notice 2011-11, the IRS provides that any tax return preparer receiving: (1) notice from the IRS that it was unable to process their online PTIN application, or (2) an acknowledgment of receipt of the paper PTIN application, will be allowed to prepare and file tax returns or claims for refund for compensation after the tax return preparer complies with all instructions provided in the notification or acknowledgment letter. This relief only applies during the 2011 filing season (i.e., 2010 returns) and does not apply to individuals who engage in conduct that constitutes a willful violation of the applicable duties and restrictions set out in, or disreputable conduct under §10.51 of, Circular 230.
A tax return preparer may use a PTIN issued before September 28, 2010 (or his Social Security number if he does not have a previously issued PTIN) as his PTIN during the 2011 filing season or until they receive a new PTIN, whichever is earlier. Once a new PTIN is obtained, the new PTIN must be used.
Preparers who rely on the relief provision of Notice 2011-6 to prepare returns or refund claims for compensation must pay the $64.25 PTIN application fee for the 2011 filing season, even though the processing of their application may be delayed. Payment must be submitted as instructed by IRS. Preparers who rely on this relief must keep a copy of the notification or acknowledgment letter as documentation of their good faith effort in the event that the preparer is contacted by IRS during the 2011 filing season or in the future.
IRS notes that tax return preparers who applied for a PTIN using paper Form W-12 before Notice 2011-11 is published in the Internal Revenue Bulletin (February 14, 2011) and have not received a PTIN generally will receive a PTIN or an acknowledgment of receipt of the PTIN application within six weeks of IRS’s receipt of the PTIN application or within six weeks of Notice 2011-11 ‘s date of publication, whichever is later. Preparers who apply for a PTIN using paper Form W-12 after Notice 2011-11 ‘s date of publication generally will receive a PTIN or an acknowledgment of receipt of the PTIN application within six weeks from the date the application is submitted. For individuals who do not attempt to submit a PTIN application via the online system, the submission of a processible paper Form W-12 and payment generally constitutes a good faith attempt to comply with the requirement to obtain a PTIN.
Tags: corporate tax, income tax, internal revenue code, Internal Revenue Service, IRS, IRS and state tax collections, Moore McLaughlin, Notice 2011-11, Notice 2011-6, PTIN, PTIN registration process, state taxes, tax, Thomas P. Quinn
Posted in Current Events, IRS and state tax collections, Tax Current Events and News
Sunday, December 19th, 2010 by Moore McLaughlin
Under pre-Act law, the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, other than those made permanent or extended by subsequent legislation, were set to sunset and no longer apply to tax or limitation years beginning after 2010. Beginning in 2011, the EGTRRA sunset would have wiped out a host of favorable tax rules, such as: favorable income tax rate structure for individuals; marriage penalty relief; and liberal education-related deduction rules. Similarly, under Sec. 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003, the favorable tax treatment of long-term capital gain and qualified dividends would have ended after 2010.
The alternative minimum tax (AMT) exemption amounts were “temporarily” increased for four years by EGTRRA, and then “temporarily” increased again by a succession of tax laws. The ability of individuals to use most nonrefundable personal credits to offset AMT also is “temporary,” and has been extended over the years by a series of new laws. Under pre-Act law, after 2010, the AMT exemption amounts were to have plummeted to their pre-EGTRRA level, and individuals would not have been able to use most nonrefundable personal credits to offset AMT.
Finally, the American Recovery and Reinvestment Act of 2009 temporarily boosted the credit incentives for higher education (i.e., created the American Opportunity Tax Credit, or AOTC), and liberalized the rules for the refundable child tax credit and the earned income tax credit (EITC). Under pre-Act law, these ARRA incentives would have ended on December 31, 2010.
New law. Under 2010 Tax Relief Act Secs. 101 through 103, the Sec. 901 EGTRRA sunset, the Sec. 303 JGTRRA sunset, and the ARRA sunsets relating to the AOTC, child tax credit, and EITC are extended for two years (one year in case of the adoption rules).
Caution: Unless Congress acts, all of the favorable rules will revert after 2012 to their pre-EGTRRA, pre-EGTRRA, and pre-ARRA rules. For example, the tax rates for individuals in 2013 will be 15%, 28%, 31%, 36%, and 39.6%.
Stay tuned for more posts about this new tax law.
Tags: asset protection, Asset Protection Planning, business tax, Capital gains tax, corporate tax, income tax, internal revenue code, Internal Revenue Service, IRS and state tax collections, Moore McLaughlin, Providence, Rhode Island, Small Business Act, state taxes, tax, Tax planning, Thomas P. Quinn
Posted in 1031 Exchanges, Asset Protection Planning, Current Events, Estate Planning, IRS and state tax collections, Tax Current Events and News, Tax planning, Uncategorized
Sunday, December 19th, 2010 by Moore McLaughlin
At about 3:50 p.m. on Friday, December 17, 2010, President Obama signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.” This new law is a sweeping tax package that includes, among many other items, an extension of the Bush-era tax cuts for two years, estate tax relief, a two-year “patch” of the alternative minimum tax (AMT), a two-percentage-point cut in employee-paid payroll taxes and in self-employment tax for 2011, new incentives to invest in machinery and equipment, and a host of retroactively resuscitated and extended tax breaks for individuals and businesses. Here’s a look at the key elements of the package:
- The current income tax rates will be retained for two years (2011 and 2012), with a top rate of 35% on ordinary income and 15% on qualified dividends and long-term capital gains.
- Employees and self-employed workers will receive a reduction of two percentage points in Social Security payroll tax in 2011, bringing the rate down from 6.2% to 4.2% for employees, and from 12.4% to 10.4% for the self-employed.
- A two-year AMT “patch” for 2010 and 2011 will keep the AMT exemption near current levels and allow personal credits to offset AMT. Without the patch, an estimated 21 million additional taxpayers would have owed AMT for 2010.
- Key tax credits for working families that were enacted or expanded in the American Recovery and Reinvestment Act of 2009 will be retained. Specifically, the new law extends the $1,000 child tax credit and maintains its expanded refundability for two years, extends rules expanding the earned income credit for larger families and married couples, and extends the higher education tax credit (the American Opportunity tax credit) and its partial refundability for two years.
- Businesses can 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 property placed in service in 2012, the new law provides for 50% additional first-year depreciation.
- Many of the “traditional” tax extenders are extended for two years, retroactively to 2010 and through the end of 2011. Among many others, the extended provisions include the election to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction for state and local income taxes; the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers; and the research credit.
- After a one-year hiatus, the estate tax will be reinstated for 2011 and 2012, with a top rate of 35%. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years. Estates of people who died in 2010 can choose to follow either 2010′s or 2011′s rules.
- Omitted from the new law: Repeal of a controversial expansion of Form 1099 reporting requirements.
- Also not included: Extension of the Build America Bonds program, which permits state and localities to issue federally-subsidized municipal bonds.
Watch for upcoming posts containing more detail on this new law. In the meantime, feel free to contact us with any questions you may have.
Tags: 1031 exchange real estate investment, alternative minimum tax, American Recovery and Reinvestment Act of 2009, AMT, and Job Creation Act of 2010, asset protection, Asset Protection Planning, business tax, Capital gains tax, collection, corporate tax, elderlaw, Estate Planning, income tax, internal revenue code, IRS and state tax collections, mclaughlin & quinn, Moore McLaughlin, Providence, real estate, Rhode Island, seniors, Social Security payroll tax, Tax planning, tax relief, Thomas P. Quinn, Unemployment Insurance Reauthorization
Posted in 1031 Exchanges, Asset Protection Planning, Bankruptcy, Current Events, Elderlaw/Law For Life, Estate Planning, Financial workout, IRS and state tax collections, Self-directed IRAs, Tax Current Events and News, Tax planning
