Tax Changes
Each year changes are made to taxes, please select from the following to see what has changed for the most current years:
Tax Changes 2011
Standard Mileage Rate
Mileage Rate Changes
Purpose |
Rates 1/1 through 6/30/11 |
Rates 7/1 through 12/31/11 |
Business |
51 |
55.5 |
Medical/Moving |
19 |
23.5 |
Charitable |
14 |
14 |
Cancellation of Debt Income
Taxpayers can make an election to defer COD income arising from a cancellation, reacquisition or modification of a business debt occurring after December 31, 2008 and before January 11, 2011, and to include the COD income ratably over a five‐year period beginning in 2014.
ROTH IRA Conversions
For tax years beginning after 2009, the $100,000 modified AGI limit for conversions has been eliminated. In addition, taxpayers with a filing status of married filed separately, who have previously been precluded from making such elections will be able to do so. For conversions made in 2010 only, none of the income from the conversion will be recognized in that year. The income will be recognized in two equal parts in 2011 and 2012. If the taxpayer elects to do so, they may recognize 100% of the income in 2010 instead.
Makes sense to consider if:
The taxpayer is able to pay the tax due on the conversion from outside funds (if the taxpayer must withdraw funds from the IRA to pay the tax there will be less in the account to grow tax free). The taxpayer has a number of years to retirement. This allows more time for the money to grow tax free and offsets the fact that the tax is being paid up front.
It is expected that the taxpayerʹs future marginal rates will be higher than they are now, either because their income will be higher at that time or because rates in general will be higher. The taxpayer does not foresee a need to live on IRA withdrawals. Because Roth IRAs have no minimum distribution requirements, they can grow tax free even after the tax payer turns 70 1/2.
Repeal of the Personal Exemption Phase‐out (temporary):
Finance Repeal of Personal Exemption Phaseout (PEP) and Limitation on Itemized Deductions (Pease) By Increasing Top Marginal Rates to 34.7 and 36.8 Percent, Baseline Assumes An AMT Fix, Distribution of Federal Tax Change by Cash Income Percentile, 2010. PEP eroded the personal exemption which is $3,700 for 2011
Repeal of itemized deduction limits (temporary):
The amount of itemized deductions that a taxpayer may claim was reduced, to the extent the taxpayerʹs AGI is above a certain amount. This limitation is also repealed until 2012. Pease limit cut 3% of itemized deductions.
Reduction of Employee Social Security tax
This update provides important Social Security information for 2011. By law, some numbers change automatically each year to keep the program up to date with price and wage levels. For 2011, the law reduced the employeeʹs share of the Social Security payroll tax by 2 percent. Employers still contribute the same tax rate as in 2011.
Estate and Gift Taxes
Prior to passage of the 2010 Tax Relief Act, the gift and estate tax regime was scheduled to revert on January 1, 2011 to the regime in place prior to 2001. In essence, the pre‐2001 regime allowed each U.S. citizen to give away, either during lifetime or at death, a total of $1 million without paying any gift or estate taxes; and, for each dollar in excess of such amount, there was a transfer tax assessed at rates ranging from 45‐55%. However, with the passage of the 2010 Tax Relief Act, the amount each U.S. citizen is now able to give away has been increased to $5 million, and the transfer tax rate paid on each dollar given away in excess of the $5 million has been capped at 35%. Expires 12/31/2012.
Credit Card Reporting
Businesses that accept credit and debit card payments will receive a Form 1099-K from their service provider in 2012 for transactions that occurred in 2011. Banks and other payment settlement entities are required to report credit and debit card and third-party network transaction to the IRS by February 28 for the preceding year. Some firms will receive multiple forms. The gross amount of reportable transaction will be listed by month, to assist those firms on a fiscal years basis.