Every year I compose a letter to my tax clients that discusses recent changes in tax laws that may affect them. Here is my letter for 2011
Dear Tax Client,
Happy New Year! Another tax season is almost upon us!
I was re-reading prior tax letters to you, my clients and it seems that every letter started out with amazement at all the tax law changes and a warning that because Congress acted so late in the year, that the IRS may be delayed in being able to accept your tax return! This year is no different! As you probably know several bills were passed in 2010 affecting your taxes including:
- Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, 2010. The extension of the Bush tax cuts.
- Patient Protection and Affordable Care Act (PPACA) (ObamaCare) and it’s amendment the Health Care and Education Reconciliation Act of 2010
- The Hiring Incentives to Restore Employment (HIRE) and the Small Business Jobs Act of 2010 offering tax credits to small business owners and employers.
How these bills will affect most of you:
The Tax Relief bill came so late in December that the IRS may be unable to accept individual returns until February 14, 2011 for clients that itemize deductions. This news may come as a disappointment to you, especially if you are expecting a refund.
Mostly this bill is good news for many of you. The Bush tax cuts are extended such as the child tax credit, the educator $250 tax deduction, the deduction for state and local sales tax instead of state taxes, the American Opportunity credit for college tuition (extended through 2012). Some additional provisions include:
Energy-efficient improvements tax credit.Homeowners will be eligible for a credit, if they install insulation, energy-efficient windows or roofs or buy energy-efficient fans, water heaters and furnaces through 2011. Bring me your receipt and energy rating if you purchased insulation, doors, windows, fans, water heaters or furnaces in 2010.
Mortgage insurance premiums will be extended through 2011.
Donations from IRAs to charities for taxpayers over age 70 ½ has been extended through 2011.
A cut in Social Security tax from 6.2% to 4.2% just for 2011. This is like getting a 2% raise! Self employed taxpayers will also have a 2% reduction in self-employment taxes. You should see this tax reduction in your paychecks starting by January 31.
The Patient Protection bill is phased in over four years. Most of the provisions that have a tax impact to not begin until January 1, 2012. The provisions that may affect you now include:
Adoption credit. The maximum amount of the adoption credit is $13,170 for tax years starting in 2010 and the credit is fully refundable.
Health plan coverage of adult children. Adult children can be covered under an employer-provided accident or health plan until their 26th birthday.
Over the counter drugs cannot be purchased using a flexible spending accounts, healthcare reimbursement arrangements or health savings accounts without a prescription. Both my daughter and I take daily over-the counter medicine that I pay from my Healthcare Savings Account. I asked my doctor write a prescription for the drugs. I keep this paper with my tax documents in case I am audited.
Landlords must provide 1099MISC forms to all service providers paid more that $600 in a calendar year.
This year I am asking all of my clients to read and sign a 1040_Engagement_Letter. You can bring it along with you to our appointment or sign and mail it with your tax paperwork if you prefer. I cannot complete or deliver you tax return without this signed engagement letter form you.
If you would like a Client Organizer to assist you in collecting and organizing your tax information, please email me and I will email you a personalized organizer.
Please visit my website CarolToppCPA.com for a copy of the engagement letter, a tax return checklist and articles on taxes that you may find helpful.
I look forward to seeing you again,
Carol Topp, CPA