Since Washington DC will be celebrating the local holiday of Emancipation Day on April 15th, Federal returns will be due the following Monday, April 18th, 2011. This gives procrastinators more time to delay the inevitable. One catch may be the state returns. It is unclear how many states will also go along with this localized holiday. Since NC DOR offices will be open on April 15th, your NC return may still be due on time even if the US gives you an extension of 3 days. We'll wait and see if NC releases more details on this unique event this year.

More info

• Personal and dependent exemptions are $3,700, up $50 from 2010.
  
  
• The new standard deduction is $11,600 for married couples filing a joint return, up $200, $5,800 for singles and married individuals filing separately, up $100, and $8,500 for heads of household, also up $100. The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50.
  
  
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000, up from $68,000 in 2010.
  
  
• The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
  
  
• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $102,000 for joint filers, up from $100,000, and $51,000 for singles and heads of household, up from $50,000.

Source

Congress has finally brought some clarity to the estate tax situation with the recent tax legislation that was signed. Here are the highlights:

• You can now choose to apply the new or old rules to estate in 2010.
• The old rules - No estate taxes but everyone has carryover rather than stepped up basis in the assets they inherit. (In reality some designated assets will receive stepped up basis through a lower exclusion).
• The new rules - 35% estate tax on assets greater than 5 million. All assets receive a stepped up basis to their FMV as of the date of death. Also, the $5 million exemption is portable, so that if a spouse dies after 2010 and doesn't use all their exemption then the surviving spouse can inherit the unused portion through 2012.
  

While the death tax is seen as completely unfair and should be rid of completely by many, this seems to be a fair compromise that will exempt the vast majority of estates and offer the tax benefits of the stepped up basis to the majority of Americans.

Source 1
Source 2

The wait is over, and congress finally figured out what our tax rates will be next month. Talk about procrastination!

The good - the tax breaks that were extended:

• The lowered tax rates we enjoy today will be extended for two years, until 2012.
• 15% rates on LT capital gains and qualified dividends was extended for 2 years (or 0 percent if you are in the bottom two tax brackets).
  
• Those paying PMI can continue to deduct the PMI premiums on Schedule A if they meet income limits in 2011 (but not 2012).
• Bonus depreciation (used to be 50% of the cost of the asset in year 1) has been increased to 100% for 2011. This makes it operate very similarly to Section 179 depreciation deduction, except bonus depreciation doesn't apply to used purchases. It 2012 it goes back to 50%, and then in 2013 it disappears.
• Luxury auto deduction cap is 11,060 per year, which is the same as 2010, but would have dropped if this law had not been signed.
• Section 179 - 500,000 in 2010, 500,000 in 2011, 125,000 in 2012.
• This is a big one that is off most radars - AMT exemption patch for 2010 and 2011 at 72,450 for MFJ. For years this has been a last minute fix, but in 2011 we will have certainty for a change.
• A new FICA tax reduction of 2% for employees (employer half of FICA remains same).
• Continue the repeal of the personal exemption and itemized deduction phaseouts on higher income filers. This also applies to sole proprietors who will receive a 2% reduction in their 2011 self employment tax.
  
• $250 teacher deduction for supplies purchased personally
• Extend the child tax credit at $1000 per child rather than $500, as well as the current rules for how much of this credit can be refunded.
• Marriage penalty relief in the tax brackets.
• Keep the max child care expenses eligible for the credit as 3000 per child rather than 2,400.
• Extend the Earned Income tax credit qualification of a third child.
• Extends the tax benefit properties of Coverdale Education Savings accounts for two more years.
• Remove the time limit on student loan interest deductions for two more years.
• Extend the American Opportunity Tax Credit for tuition and fees for two more years. This is a much more generous credit than the Hope Credit.
• Ability to deduct state sales taxes paid rather than income taxes paid for itemizers.
• Extend the tuition deduction as an above the line deduction.
• the ability to make a tax-free transfer of up to $100,000 directly from an IRA to a qualified charity.
• The energy credit for qualified improvements to your home is extended, but at it's pre-2009 less generous amount.
  

The bad - the tax breaks that were not extended:

• The ability for standard deduction filers to deduct a portion of their real estate taxes. This means that it won't be an option in 2010. This benefit was originally targeted at senior citizens who owned their home outright but didn't benefit from the real estate tax deduction because of the lack of mortgage interest.
• The $400/$800 Making Work Pay credit of 2009 and 2010 was not extended.
  

Also, NC has not adopted these tax changes yet, and may not do so with the budget cuts they are facing.


Source 1:
Source 2:
Source 3:
Source 4:

The IRS has adjusted the 2011 mileage reimbursement rates to reflect current costs of operating a vehicle. In 2011 the approved rates are:

• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

Link

It has been debated, but now settled by the IRS. Spouses of owners who are on the company health insurance policy will generally not qualify for the health insurance credit that was a key party of the recent Obamacare legislation. While this may be disappointing to many who legitimately employ their spouse in the business, it should not come as a surprise to anyone as this is in line with the general spirit of tax law.

Today the IRS answered "no" in Notice 2010-82:

The definition of "family members" for purposes of § 45R does not specifically refer to spouses. However, spouses of certain business owners are excluded from being taken into account as employees by operation of the ownership attribution rules in the Code. Therefore, the following individuals also are not taken into account as employees for purposes of § 45R: (1) the employee-spouse of a shareholder owning more than two percent of the stock of an S corporation; (2) the employee-spouse of an owner of more than five percent of a business; (3) the employee-spouse of a partner owning more than a five percent interest in a partnership; and (4) the employee-spouse of a sole proprietor. See § 45R(e)(1)(A); 1372(b), 318, 416(i)(1)(B)(i).

Link

There is no change in the amount that you can contribute to your 401K, 403(b), of 457(b) in 2011, due to the lack of an increase in the inflation indexes. So in 2011, plan to put $16,500 or less in your 401K.

The catch up contribution max continues to be $5,500 as well for those over 50.

Simple IRA contribution limits remain at $11,500 in 2011.

IRA limits remain at $5,000 as well in 2011.

Link

The IRS has delayed the enactment of the portion of the Obama Healthcare Reforms that require employers to disclose the Health Insurance premiums that they pay on an employee's W-2. This is welcome news because it delays the additional paperwork that this portion of the law would require, even if it is for only a year.

Source

Social security recipients will not be receiving a cost of living adjustment in 2011 for the second year straight. The annual increases are tied to the CPI, and for the second year straight it didn't increase enough to warrant an increase in social security benefits.

Lawmakers are considering a one time $250 payment to recipients to make up for this lack of an increase. This is similar to the move they did in the past.

Source

Employers and small businesses need to beware of any emails coming from EFTPS, the federal tax payment processing system. These emails are attempts to steal your information and ultimately your money. The IRS and the EFTPS system do not operate by email, so you can always disregard an email from these entities.

Source

Corey Pfaffe, CPA answers this common question that young churches and start-ups have about their IRS status. His advice, it's not required for churches to complete the application but could be helpful in establishing once and for all that donations are tax-deductible.

More here

The NC legislature has created a new tax credit for NC Businesses that will refund some of the unemployment taxes they have had to pay on NC workers. Once the forms are finalized we'll have to see how this works out, but it could offer some real benefit to NC Businesses who have been hit hard by increasing unemployment rates.

"Effective for the 2010 and 2011 taxable years, small businesses with cumulative gross
receipts from business during the taxable year not exceeding $1,000,000 may claim a
refundable income tax credit equal to 25 percent of contributions made during the taxable
year to the State Unemployment Insurance Fund for wages paid for employment in North
Carolina." Source

G.S. 105-129.16J.
Temporary unemployment insurance refundable tax credit:
A new section was added to allow a tax credit for small businesses that make
contributions to the State Unemployment Insurance Fund with respect to wages paid for
employment in this State. A small business is defined as a business whose cumulative
gross receipts from the business activity for the tax year do not exceed one million
dollars ($1,000,000). The amount of tax credit allowed is 25% of the qualified
contributions to the State Unemployment Insurance Fund and applies to taxable years
2010 and 2011 only.
This credit may be claimed only against corporate and individual income taxes. If the
credit exceeds the amount of tax for the taxable year reduced by the sum of all credits
allowable, the excess is refundable. The refundable excess is governed by the
provisions governing a refund of an overpayment by the taxpayer of the tax imposed in
Article 4. In computing the amount of tax against which multiple credits are allowed,
nonrefundable credits are subtracted before refundable credits.

The IRS has tightened up in response to the abuses it saw over the years dealing with donating a used car to a charity to get the deduction of its fair market value. They rewrote the tax laws so that you can only get a deduction for what the charity sells the car for if it disposes of the car. Clark Howard notes that some charities are selling the cars to brokers at liquidated prices, and leaving the donors high and dry with a paltry deduction. The moral, do your research before you donate and find out what the charity plans to do with your car and where it will likely end up. More info about donating a car at Edmunds.com

President Obama today signed the new small business tax bill that offers accelerated deductions that are aimed to stimulate investment in equipment and grow the economy. The details of the bill are outlined well here. The biggest benefit I see is increased immediate expensing of equipment in 2011 (the prior limit was set at 25,000, and now it is 500,000), the continued increase to the luxury car depreciation limits, and the health insurance deduction for the self employed when figuring self employment taxes.

More info.

Quickfinder.

CCH.

In a follow up to this post, Cornell University and other nonprofits are facing greater scrutiny as they compete with private businesses on an even playing field. To level the playing field of taxation, the IRS assess Unrelated Business Income Tax on charities and other tax exempt entities (Your IRA) when they delve into the business sector). Read more here.

If you have someone over 18 that you have hired as a nanny, housekeeper, maid, private nurse, caretaker, butler, or personal assistant and they work in your home then you likely will owe the employment taxes for your household worker. If you pay a person more than 1,700 in 2010 then you must worry about this tax. You will report the salary at the end of the year on a form W-2 and also on your personal tax return. You will be responsible for submitting the social security taxes on their wages, as you are the employer. For more info on this aspect of income tax, read here.

Those with flexible spending accounts will find that part of the Obama health care changes include a change to what is an eligible expense for their FSA or HSA. Over the counter medications are not going to be reimbursable in 2011 unless they are prescribed by a doctor (so stock up now). This will also make is more difficult to spend and remaining FSA dollars at the end of the year so that they won't be lost. This law change will align the definition of deductible medical expenses for schedule A, FSA, and HSAs.

More Info

Want to see what your taxes would look like if the Bush tax cuts are left to expire? What about what they would look like under President Obama's proposed tax structure? This website will give you a quick look at just some of the main changes between the different administrations.

Bottom line, if the Bush tax cuts are allowed to expire for everyone, we are all looking at some major tax increases. Fortunately, I don't think anyone expects this to happen in an election year. This will bode well for lower income brackets, but I don't think anyone expects much relief for the higher income brackets.

So check it out, and see how politics can really impact your bottom line (to the tune of thousands if you have multiple kids)

Link

The treasury department has issued a ruling that beginning in 2011 most businesses will be required to use the EFTPS federal wire transfer system for payment of their employment taxes. There is a small exemption for those who pay in less than 2,500 per quarter.

So if you are still taking your federal tax deposit to the bank with form 8109, you should go ahead and get the EFTPS set up for your business so that you can hit the ground running in 2011. It is free and saves you a trip to the bank. However, it is a sign of the times when the federal government won't accept legal tender that it creates, that the rest of the business world uses daily without complaint, for payment of its own taxes.

By the way, the penalty for paying with a check rather than using the electronic transfer system is steep. Failure to use EFTPS when required results in a "failure-to-deposit" penalty of up to 15% of the amount required to be electronically deposited, even if the taxes are timely paid by paper. I would hope they would show grace during the transition.

Source 1
Source 2

Here are a few notes on the federal COBRA Premium assistance program under the American Recovery and Reinvestment Act.

• Eligible workers pay 35 percent of the premium to their former employers.
• The employer receives a payroll tax credit on form 941/944 for the other 65%.
• To qualify you must have been involuntarily separated from your job between Sept. 1, 2008, and May 31, 2010.
• This subsidy is reduced if your filing status is single and your modified adjusted gross income exceeds $125,000 ($250,000 if you file a joint return). If your modified adjusted gross income exceeds $145,000 ($290,000 for joint filers), you do not qualify for the subsidy.
• For assistance-eligible individuals, the qualifying event must occur on or before March 31, 2010, and the COBRA subsidy may apply for up to nine months. (03/1710)
• An employer may reduce its payroll tax deposits during a quarter by the amount of subsidy provided during the quarter. However, in all cases, credit for the subsidy must be claimed on the employer’s payroll tax return.

More info can be found here.

Mark your calendar, because in a few weeks you will be free from NC's sales tax, even if it is only on certain items, and only for a few days.

When: August 6-8, 2010
What Qualifies: Clothing, footwear, and school supplies of $100 or less per item; school instructional materials of $300 or less per item; sports and recreational equipment of $50 or less per item; computers of $3,500 or less per item; and computer supplies of $250 or less per item will be exempt from sales tax.

Source

Maybe you have received the email or heard the rumor going around that the new health care law is going to make your employer provided health care benefits a taxable benefit in the future. I know I have personally heard this rumor many times from different clients or acquaintances.

Well fortunately it is FALSE. The new health care law does require that your tax free benefits be printed on your W-2, but it is for informational purposes only, and not as additional income. It would be similar to the way your employer reports the retirement contributions on your W-2. It's purpose is twofold (as far as I can tell).

1. It proves to the IRS that you are covered under a health plan, and that you are not subject to the penalties that are assessed against the uninsured.

2. It proves to the IRS the value of your employer benefits, becuase insurance companies that provide high dollar "Cadillac Plans" will have to pay a tax beginning in 2018 on those plans. Note the insurance company pays the tax, not the employee (but don't kid yourself if you don't think that cost won't get passed on to the customer).

So the good news is that this benefit will continue to be a tax free benefit (as long as employers can afford to provide it). The bad news is that employers and payroll preparers will have a new task each year as they prepare the W-2 forms.

Link

By now you have probably heard that the new health care act passed by Congress will require businesses to send a multitude of new 1099's that they were not required to send in the past. Exemptions for corporations and suppliers under the old law have been removed beginning in 2012.

One congressman has seen the potential mountain of paperwork and burden this is going to create for taxpayers as well as the IRS who has to process all this info. He is introducing a bill that will repeal the 1099 mandate and restore the old rules. I think this is a bill that everyone can get behind.

If you have a binding contract on a home but weren't able to close by the June 30th deadline, you are in luck. Congress extended the Homebuyer credit deadline to September 30th. More details can be found here or at irs.gov

Due to the expiration of the tax law that made Coverdale/Education IRA's a tax free college savings vehicle, in 2011 the earnings that are withdrawn from that account will be taxable. You would think that congress would have a more long term horizon for college funding options, but this really shows a lack of planning and foresight. I always preferred the Coverdale over the 529 becuase it was more flexible in allowing you to use it towards expenses at a private elementary, middle, or high school, not just college. This will be the death of the Coverdale account though.

So if you are one of those who tried to do the right thing and fund your kid's college education, you do have a few options before the end of the year:

• Spend the money on qualified expenses (tuition and fees to college or K-12, new computer, internet access)
• Roll the Coverdell money into a 529 savings plan, penalty-free, as long as the accounts have the same beneficiary.

If you don't act then the earnings from the account will be taxable when you withdraw them, and you could face a 10% penalty if the earnings aren't used for college expenses.

Source

Here is an excellent website with a description of the many penalties the IRS may levy against a taxpayer, as well as a list of the possible ways you might be able to get the IRS to abate (forgive) those penalties.

With new laws, comes new documentation...
If you are hiring and plan to take advantage of the tax brakes offered to those who hire a previously unemployed worker, you will need that employee to complete and sign form W-11 (or a statement showing the equivalent). This is part of the new HIRE act passed by Congress recently.

If you thought the tax code was long and arduous enough, Congress would like to inform you that they have added thousands of new pages for you to pour through. While many of the laws in the new health care bill deal with insurance, some have nothing to do with it except they are an effort to pay for the changes by raising taxes. The AICPA and a few other sources have done a noble task of summarizing this mammoth of a tax law change. It offers some benefits to those who are uninsured and small businesses, but it increases many reporting requirements which is not going to sit well with the HR and accounting departments as these are phased in over the next few years.

One change that will effect many but has not been widely publicized...starting in 2012 you have to send anyone who you pay more than $600 to a 1099. Corporations are no longer excluded. This is a major change and is going to create some major paperwork headaches.

High earners (those with income over $250,000) are clearly in the cross-hairs, so if this is you it would be wise to do some planning before this coming tax wave hits.

AICPA

FarmCPA

NY Daily News

Christian Science Monitor

President Obama signed into law today the HIRE Act to help offer some tax benefits to encourage employers to hire the unemployed workers.

From the IRS Website
"WASHINGTON — Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks."

Other provisions in the bill:
One benefit was that it extends the higher section 179 depreciation expenses for 2010 so that it is the same as it was in 2009 ($250,000).

Increased reporting requirements and penalties for failing to report on large foreign investment income.

Link

If you are thinking about hiring a relative, consulte this site to see if you can still qualify for the HIRE credit (it depends on your business structure).

The IRS has created a new 1099 form filing requirement starting in 2011. It is for credit card companies and similar third party payers to report the amount they processed for your business. As long as this filing responsibility is passed on to the credit card issuers, hopefully this will not be a major change for most filers.

Link

If your employer offers stock options to you as an incentive, be sure to read up on the rules and regulations regarding their exercise and sale. Not doing so could lead to a very costly tax bill. The following articles are helpful in understanding the ins and outs of stock options.

Article 1

Article 2

Clark Howard is reporting good news to those who are unemployed. Benefits are being extended beyond the original deadline, offering more time for people to find employment and get back on their feet.

"There is a new extension of jobless benefits for 99 weeks in select states (These states include Alabama, Arizona, California, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Massachusetts, Maine, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, New York, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Washington, Wisconsin and West Virginia.)"

Cobra subsidies are also being extended by one month to March 2010.

Link

If you run a business that delivers property digitally, you need to be aware of a change in the sales tax code effective 1/1/10. NC now charges sales tax on the download or electronic delivery of software, photos, periodicals, and much more. Check out this press release for more information.

Link

The State of NC had a cash crunch last year when people were filing and requesting refunds. The payments were slow but steady. This year the state seems to be falling into this same scenario due to the slowing economy and tightened budget. So my advice to you, file ASAP and be patient with the state.

Here is the site to check on the state of you NC refund once you have filed.

The courts have ruled against the IRS and allowed a deduction for a sex reassignment operation. While the IRS said this was elective and not medically necessary, the courts said it was necessary based on the psychiatric necessity for the person's mental health. So the take home lesson here is to make sure you have a doctor's order or prescription on file before you take a medical deduction on your tax return.

"O’Donnabhain’s lawyers argued that because gender-identity disorder is a recognized mental disorder that is generally treated with hormones and surgery, the costs are legitimate medical deductions."

Link

Below are the details on the $6,500 homebuyer credit for existing homeowners.

• Must have owned your prior home for 5 years (Be ready to prove it)
  
• Must buy a new home and live there as a personal residence for 3 years. (Sell it too soon and you will be refunding the money)
• The credit is for 10% of the purchase price of the home, for a maximum of $6,500 (married filing joint).
• The credit is for those with an adjusted gross income below $250,000 if married/125,000 if single.
• The credit is reported on form 5405
  

Source

The IRS has published the following general schedule so that you can know when to expect a refund payment. Payments are made on Fridays, and it is generally the second friday after your return is received. Note that these are just general guidelines and they do not guarantee your payment by any date. Also note that paper checks are processed later and then you have the mail lag as well.

The state of NC does not provide any schedule like this, and with the budget problems we faced last year I wouldn't expect a refund by them to be processed too quickly.

Transmitted & Accepted (by 11:00 am) between...	Direct Deposit Sent	Paper Check Mailed
Jan 15 and Jan 21, 2010	Jan 29, 2010	Feb 5, 2010
Jan 21 and Jan 28, 2010	Feb 5, 2010	Feb 12, 2010
Jan 28 and Feb 4, 2010	Feb 12, 2010	Feb 19, 2010
Feb 4 and Feb 11, 2010	Feb 19, 2010	Feb 26, 2010
Feb 11 and Feb 18, 2010	Feb 26, 2010	Mar 5, 2010
Feb 18 and Feb 25, 2010	Mar 5, 2010	Mar 12, 2010
Feb 25 and Mar 4, 2010	Mar 12, 2010	Mar 19, 2010
Mar 4 and Mar 11, 2010	Mar 19, 2010	Mar 26, 2010
Mar 11 and Mar 18, 2010	Mar 26, 2010	Apr 2, 2010
Mar 18 and Mar 25, 2010	Apr 2, 2010	Apr 9, 2010
Mar 25 and Apr 1, 2010	Apr 9, 2010	Apr 16, 2010
Apr 1 and Apr 8, 2010	Apr 16, 2010	Apr 23, 2010
Apr 8 and Apr 15, 2010	Apr 23, 2010	Apr 30, 2010

Complete Chart

If there is a problem or delay, you can check on your refund at this website or call 1-800-829-1954 or 1-800-829-4477.

Source

The NC Department of Revenue has released a new withholding requirement for companies that use contractors that have an individual tax ID number (rather than a social security number) who earn more than $1,500. Contractors with ITIN's must have 4% of their pay withheld and then reported on their 1099 as NC withholding. For more information, see their website here.

Congress is looking to pass a bill that will allow a deduction of a 2010 charity donation on your 2009 tax return. The contribution has to go towards the Haiti relief efforts. You can't take the deduction in both years, but it gives you the option of taking the deduction in the year that benefits you the most. For more info, you can visit this site.

The IRS gives you the option to take your refund as an I bond this year if you feel inclined. You just need to tell your tax preparer or use form 8888 to request that all or part of your refund be issued as savings bonds rather than a direct deposit to your account or check sent to you. While I have nothing against I bonds, cash is king in my book, especially in an economy where cash flow is so tight.

Source

For ministers who are considering opting out of the social security system, here are some timing guidelines that you need to consider.

Article

Here is a good article on the rules waiters and other tipped employees face on their income.

The expiration of the estate tax has been met with much fanfare, but it doesn't come without it's share of complications as well. Such is the case with any changes I guess.

Some people will need to look over their wills to make sure that the amount that passes to their spouse is not tied to the estate tax exemption. With no estate tax exemption this year, you could be leaving your spouse empty handed if something happens to you. This is a planning tool to avoid estate taxes that may end up backfiring on a few people.

Another issue is the bumped up basis in an asset that you inherit. This is a huge timesaver for inherited property, becuase it is much easier to look up the price of a stock on a date of death than to go back through years of purchase records and reinvestment activity to determine a stocks original basis. Well with the expiration of the estate tax, the bumped up basis is also being threatened. What is a boon to a few (who actually faced an estate tax), is going to become a headache to the multitude (who received the benefit of the bumped up basis they inherit).

And since most see this is a temporary status until they agree to the terms of a new estate tax (or just let the current terms expire next year), it will create a year of exceptions to the otherwise well known rules.

Here is an article that explains the pros and cons of these changes well, as well as who is likely to benefit and who will pay more under the new law.

Wikipedia offers some insight quoted below on the ability to still receive some stepped up basis even under this new law (up to 1.3 million per estate), but it is not as cut and dry as the older rules.

"If the law does not change, for 2010 property transferred from decedents will be treated as if it is transferred by gift. This means the basis of the property for calculating capital gains when the recipient eventually sells the property will be the same basis as in the hands of the decedent. This is generally called carryover basis. However most recipients will effectively get the same result they would receive under present law, because section 1022 allows the executor of an estate to allocate up to 1.3 million in basis for singles and 3 million for surviving spouses to the property of the estate. This will effectively give most recipients a tax basis in the property equal to the full market value ie. "step up basis". See 26 U.S.C. § 1022."

Source

If you are an officer to an S Corporation, you are going to have to jump through some hoops to properly report your officer's health insurance premiums. The IRS has ruled that in order to get the deduction on your form 1040 like most business owners (self employed), you have to include the premiums as taxable income on your W-2, and then deduct it on your corporate return as wages expense, and then deduct it again on your personal return. So two minuses and one plus equals one deduction. The IRS isn't known for making things simple, but they make the rules.

Source