TAX LAW CHANGES AND IMPORTANT INFORMATION
CLIENT CONSENT TO DISCLOSE TAX RETURN INFORMATION
“MAKING WORK PAY” CREDIT – 2010
PERSONAL EXEMPTION – HIGH INCOME TAXPAYERS NOTE: GOOD NEWS!
ITEMIZED DEDUCTIONS 3% LIMITATION FULLY REPEALED FOR 2010
CANCELLATION OF DEBT – May create taxable income, but it may not! Complex rules.
EDUCATOR DEDUCTION – EXTENDED, AGAIN FOR 2010
HIGHER EDUCATION – Deduction versus Credit?
If you have a child not yet in the eleventh grade that plans to attend college, take a look at this: www.okpromise.org
2010 RESIDENTIAL HOMEBUYER CREDITS -
ADDITIONAL STANDARD DEDUCTION FOR REAL PROPERTY TAXES
An individual taxpayer's standard deduction for taxable years beginning in 2008 or 2009 is increased by the lesser of:
STANDARD MILEAGE RATES $.51/mile for 2010
NEW VEHICLE PURCHASED IN 2010?
CHARITABLE CONTRIBUTIONS This is a still a BIG DEAL for 2010!
Gambling winnings are fully taxable and all must be reported on your tax return. (Even if you did not get a W2G) You must file Form 1040 and include all of your winnings. Gambling income includes, among other things, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. Generally, over a certain amount, the casinos will provide you with a W2-G, but you must have good records supporting any losses claimed against the winnings.
Anyone who pays your winnings or awards you a prize is required to issue you a Form W-2G if your winnings are subject to Federal income tax withholding or if your winnings are over:
You can find more information in Publication 525, Taxable and Nontaxable Income.
However, all gambling winnings must be reported regardless of whether any portion is subject to reporting or withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on tax withholding on gambling income, refer to Publication 505, Tax Withholding and Estimated Tax.
If your luck is not always so good, you may deduct gambling losses. Losses may be deducted only if you itemize deductions and only to the extent that you have gambling winnings. You are required to keep an accurate diary or similar record regularly maintained by you, supplemented by verifiable documentation (checks, ATM withdrawals, etc.) Gambling losses are claimed as a miscellaneous deduction on Form 1040, Schedule A. Remember, the losses you deduct may not be more than the gambling income you report on your return. You are responsible for maintaining adequate records to support wagering winnings and losses.
HOBBY LOSS RULES
BUSINESS TAX MATTERS
PENALTY FOR LATE/FAILURE TO FILE PARTNERSHIPS OR S CORPORATION RETURNS
DEPRECIATION LIMITATIONS ON VEHICLES - “Luxury Vehicle” is defined as “cost greater than $15,300!”
First year depreciation deduction for luxury auto (gross weight 6,000 pounds or less) = $3,060. For light trucks or vans (gross weight more than 6,000 pounds) = $3,260. (Autos with gross vehicle weight greater than 6,000 pounds are excluded.) There are lots of other complex limitations. Ask if you think you may have purchased a qualified vehicle in 2010.
SECTION 179 - ELECTION TO EXPENSE – 2010-2011 limit is $500,000; 2012, $25,000
50% SPECIAL BONUS DEPRECIATION ALLOWED FOR 2008-2010
IRS ASKS WORKERS TO IDENTIFY EMPLOYERS WRONGLY PAYING ON 1099 WATCH OUT!!
Workers who think they should be “employees” and have you pay ½ the Social Security and Medicate tax can file Form 8919 and only pay the employee’s portion. But guess what? This will trigger the IRS coming to you for misclassifying an “employee” as “independent contractor” and all the associated penalties and interest, as well as taxes on amounts paid!
S CORPORATION COMPENSATION
If you are not paying a “reasonable” compensation to working shareholders, expect a letter from the IRS!
The business use of “listed property” requires stringent recordkeeping that very few taxpayers are aware of, much less comply with. Examples of listed property: automobiles, computers and cell phones.