Eight Facts About Filing Status

The first step to filing your federal income tax return is to determine which filing status to use. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits and deductions, and your correct tax. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child.

Here are eight facts about the five filing status options the IRS wants you to know so you can choose the best option for your situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2008 & 2009, you have a dependent child and you meet certain other conditions.

As always, there are many different factors that can determine the most advantageous filing status for your particular situation.  Please call us if you have any questions.

Meck CPA Austin

1099 Reporting Updates

A trio of 1099 reporting requirements take effect this year:
1. Landlords must file 1099s if they pay a service provider $600 or more in 2011. Filings are due in early 2012. Landlords with low amounts of rental income are exempt from these rules, but the IRS hasn't announced what the threshold will be.

2. Brokers must list on 1099-B forms the tax basis of stock sold by customers. This reporting requirement applies only for shares that are purchased after 2010.

3. Credit card and debit card companies will issue 1099s on payments made in 2011 to merchants. Third-party networks, such as PayPal will have to give 1099s to payees with over 200 sales transactions and more than $20,000 in sales volume annually.

Meck CPA Austin

January Newsletter

Our January newsletter contains great tax tips and information about the 2010 Tax Relief Act. Click the link below to read more,  or follow the link and subscribe to get this great resource delivered straight to your inbox every month!

January Newsletter

Tax Updates: Estate Tax & Energy Credits

ESTATE & GIFT TAXES

The rejuvenated estate tax tops the list of new tax law changes. The exemption for 2011 rises to $5 million, with a 35% flat rate. That is significantly better than the $1 million exemption and 55% maximum rate that would have applied for this year if Congress had not acted.

Heirs also get to use the date-of-date value for assets inherited in 2011. The modified carryover basis rules that estates could elect to use in 2010 don't apply.

The estate tax exemptions are portable, so that when one spouse dies, the unused amount can go to the surviving spouse for use at his or her death.

The special estate tax valuation of real estate is revived as well for 2011. Up to $1,020,000 of realty used for farming or business can get discount valuation.

ENERGY CREDITS

The tax credits for energy saving home improvements is less juicy in 2011. The credit is now just 10%, down from 30%, and the previous $1,500 ceiling falls to $500. There are also caps on many items: No more than $150 can be claimed for furnaces adn water heaters, $200 for windows and $300 for biomass fuel stoves. The credit is no longer allowed for payments financed with state or federal subsidies. Credits claimed in prior years, including 2009 and 2010, will count against the $500. The 30% credit for alternative energy systems, such as solar panels, is not cut back.


Meck CPA Austin

2011 Standard Mileage Rates

Beginning 1/1/2011, the standard mileage rates for using a vehicle will be 51 cents per mile for business purposes, 19 cents per mile for medical or moving purposes, and 14 cents per mile for charitable purposes. A taxpayer using the business mileage rate treats 22 cents per mile as depreciation in 2011. However, a taxpayer cannot use the business mileage rate in certain situations (for example, when five or more vehicles are used simultaneously) or if the vehicle was previously depreciated using a method other than straight-line (such as MACRS, the Section 179 deduction, or bonus depreciation).

Meck CPA Austin