Health Insurance Deduction Reduces Self Employment Tax In 2010, eligible self-employed individuals can use the self-employed health insurance deduction to reduce their social security self-employment tax liability in addition to their income tax liability. As in the past, eligible taxpayers claim this deduction on Form 1040 Line 29. But in 2010, eligible taxpayers can also enter this amount on Schedule SE Line 3, thus reducing net earnings from self-employment subject to the 15.3 percent social security self-employment tax.

Standard Mileage Rates

• Business travel rate for owned or leased autos (including vans, pickups or panel trucks): 51 cents/mile
• Medical care or in connection with a move that qualifies for the moving expense deduction: 19 cents/mile
• Charitable mileage: 14 cents/mile

Dividends

When a corporation distributes its earnings to its shareholders, the distribution is usually a dividend. If the dividend is “qualified” it is taxable at rates that apply to net capital gain; otherwise it is taxable as ordinary income. But not all corporate distributions are dividends. And some transactions that don't appear to be dividends may be taxed as constructive dividends.

• the research credit
• Indian employment credit
• the new markets tax credit
• employer wage credit for activated reservists
• 15-year writeoff for qualifying leasehold improvements, restaurant buildings and improvements, and retail improvements
• enhanced charitable deductions for contributions of food inventory and book inventories and computer equipment
• enhanced charitable deductions for corporate contributions of computer equipment
• the work opportunity tax credit
• and empowerment zone tax incentives

IRS Tax Tip 2011-36

Get Credit for Your Retirement Savings Contributions

You may be eligible for a tax credit if you make eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement. Here are six things the IRS wants you to know about the Savers Credit:

• the $250 above-the-line deduction for certain expenses of elementary and secondary school teachers;
• the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes;
• increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;
• the above-the-line deduction for qualified tuition and related expenses;
• the provision that permits taxpayers age 70 1/2 or older to make tax-free distributions to charity from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per tax year (additionally, individuals will be allowed to treat IRA transfers to charities during January of 2011 and as if made during 2010);
• look-thru of certain RIC stock in determining gross estate of nonresidents; and
• disregard of refunds in the administration of federal or federally assisted benefit programs.

IR-2010-126, Dec. 23, 2010

WASHINGTON — Following last week's tax law changes, the Internal Revenue Service announced today the upcoming tax season will start on time for most people, but taxpayers affected by three recently reinstated deductions need to wait until mid- to late February to file their individual tax returns. In addition, taxpayers who itemize deductions on Form 1040 Schedule A will need to wait until mid- to late February to file as well.

The start of the 2011 filing season will begin in January for the majority of taxpayers. However, last week's changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17.

One of the negative aspects of buying a new car is the annoyance involved with getting rid of your old car. Many individuals find the trade-in allowance offered by dealers (if any) to be well below the car's true value. But the alternative of selling the car on your own involves the expense of advertising as well as the commitment of time needed to meet with potential buyers, accompany them on test drives, negotiate a fair price, etc.

For these reasons, some taxpayers consider a different option for their old cars: donating them to charity. An increasing number of charities have turned to car-donation programs. You may have seen ads from some of these organization in your local newspaper urging individuals to donate their old cars. The donation approach saves you the trouble of trying to sell the car. Many charities offer the added convenience of picking up the car at your home.

In taking this approach, however, bear in mind that the amount of the deduction you will be allowed to claim is subject to special limitations. In many cases, the deduction you can claim is less than your view of the car's value. If you compare the tax savings from a donation with a dealer's trade-in offer, the offer may not seem as small.

• State Changes to Individual Income Taxes
• Individual Income Tax Increases
• Individual Income Tax Decreases
• Other Individual Income Tax Developments
• State Changes to Sales Taxes
• Sales Tax Increases
• Sales Tax Decreases
• Other Sales Tax Changes
• State Changes to Corporate Income Taxes
• Rates
• Other
• State Changes to Excise Taxes
• Cigarette Taxes
• Taxes on Soda
• Gasoline Taxes
• Multistate Lotteries
• Other State Tax Changes
• Film Tax Credits
• Energy Taxes
• Estate Taxes

These include head of household filing status, exemption for the child, earned income credit (EIC), child tax credit (CTC), credit for child and dependent care expenses, credits or deductions for qualified education expense, and deductions for medical and dental expenses.

Overview

You may be able to take the first-time homebuyer credit if you are an eligible buyer who purchased a home as your primary residence in 2008, 2009 or 2010. Eligibility varies depending upon the year of your purchase. And there are specific benefits (see link at end of article) that certain members of the military and certain other federal employees have, such as an additional year to buy a home in the United States, if they otherwise qualify for the credit.

This credit reduces your tax bill or increases your refund depending on the tax you owe. The IRS will refund the credit, even if you owe no tax or the credit is more than the tax owed.

Legislation enacted in July 2010 extended the closing deadline from June 30 to Sept. 30, 2010, for eligible homebuyers. Legislative changes in November 2009 expanded and extended the credit and also added documentation requirements for claiming the credit. Due to increased compliance checks by the IRS, failure to submit documentation will slow down the issuance of any applicable refund.

Tax Rate Schedules 2010

Tax Rate Schedules 2009

Tax Rate Schedules 2008

Tax Rate Schedules 2007

Tax Rate Schedules 2006

Tax Rate Schedules 2005

Tax Free Money? Take advantage of IRS 8b payouts

Interest on state and local bonds (i.e., obligations of a state, the District of Columbia, a U.S. possession, certain Indian tribal governments or any political subdivision of the foregoing) is exempt from federal income tax. You can take advantage of the special tax treatment of interest income from earned on state and local bonds. Even though the interest from these sources is tax exempt, it must be reported on line 8b of your federal income tax return, thus "IRS 8b payouts."

Q1. Is a taxpayer required to include in gross income payments the taxpayer receives for lost business income, lost wages or lost profits?

A1. Yes. The law requires that a taxpayer include in gross income payments the taxpayer receives for lost business income, lost wages or lost profits. For information on whether estimated tax payments may be required, see Publication 505, Tax Withholding and Estimated Tax.

Tax Deduction Checklist for Musicians

• Vehicle mileage allowance of $.50 per mile (in 2011) (Keep a mileage log.)
• Parking, transportation (airfare, etc), and food expenses for professional travel
• Rehearsal space rental fees
• Telephone expenses (including cell phone)
• Stage clothing and dry cleaning expenses (only outfits appropriate for stage wear exclusively may be deducted, e.g. Lady Gaga outfits deductible; clothes that can be worn as street clothes, not deductible.
• ...

Summary of Small Business Health Care Credit

For tax years beginning after Dec. 31, 2009, an eligible small employer (ESE) may claim a tax credit for nonelective contributions to purchase health insurance for its employees. An ESE is an employer with no more than 25 full-time equivalent employees (FTEs) employed during its tax year, and whose employees have annual full-time equivalent wages that average no more than $50,000. However, the full credit is available only to an employer with 10 or fewer FTEs and whose employees have average annual full-time equivalent wages from the employer of not more than $25,000. And, in general, the ESE must pay not less than 50% of the premium cost of the employee health plan. The IRS has issued the final version of Form 8941 (Credit for Small Employer Health Insurance Premiums), which is used to claim the credit.

You may be able to take a tax credit of up to $13,170 for qualified expenses paid to adopt an eligible child. The Affordable Care Act increased the amount of the credit and made it refundable, which means it can increase the amount of your refund.

Here are seven things the IRS wants you to know about the expanded adoption credit.

Taxpayers who need certain prior year tax return information can obtain it from the IRS. Here are nine things to know if you need federal tax return information from a previously filed tax return.

• Unemployment Compensation
• Required Minimum Distribution (RMD)
• Increased standard deduction
• Deduct before Adjusted Gross Income (AGI)
• First-Time Homebuyer Credit – extended and expanded into 2010
• Lower Long Term (LT) capital gain rates.
• Energy Efficient Home Improvement credit (and lower your energy bills)
• Charitable Contributions if you're over 70½ and want to contribute to charities during these tough times.