Tax Increases ARE Coming~Unless Congress Takes Action! (Part 5)

Tax Cuts Are Scheduled To Sunset!  (Part 5) In continuing with my efforts on informing you about the coming changes in our tax code, this 5th installment on the “Sunset Rules” speaks specifically to the average working class taxpayer~You and Me! I’ve been talking to you over the past several mailings about the expiring tax credits that are set to take effect if our Congress does not reinstate them before the end of this year. Simply put, they will expire and we will ALL Pay More Taxes!  In this issue I want to address married taxpayers who typically file “Married Filing Joint” on their tax return. As you will read, if you are married you will be penalized, unless congress acts soon to reinstate this expiring rule. I will also touch on “personal exemptions” and the “phase out rules” for higher income taxpayers. Okay. Here we go: Standard Deduction – In 2010, the standard deduction of taxpayers filing married joint status is twice the amount of someone filing under the single status. Beginning in 2011, the so-called marriage penalty is back: joint filers’ standard deduction will be only 167% (instead of 200%) of the single amount. For a married couple in the 28% bracket, the result is additional tax of about $525. Phase-Out of Personal Exemptions – For years before 2006, the personal exemptions were phased out for high-income taxpayers. Then, in 2006 through 2010, that phase-out was gradually reduced to where there is no phase-out in 2010. However, the reduction will no longer apply after 2010, and, in 2011, the phase-out reverts to the rules in effect before 2006. This only impacts high-income taxpayers. Although the phase-out threshold income amounts for 2011 are not currently available, they will be approximately $250,000 for a married couple, $210,000 for head of household and $170,000 for single individuals. The loss of each exemption for a high-income taxpayer in the 36% tax bracket will result in an additional tax of approximately $1,300. Thus, a family of four would see an increase of $5,200. Phase-Out of Itemized Deductions – At the same time that the exemption phase-out was being reduced (see immediately preceding item), the phase-out of itemized deductions for high-income taxpayers was also being reduced. Thus, for 2011, the high-income taxpayer’s itemized deduction phase-out returns. The phase-out impacts all deductions other than medical, investment interest, casualty and gambling losses. The deductions are phased out by an amount equal to 3% of the taxpayer’s AGI in excess of the AGI phase-out threshold, but not more than 80% of the deductions can be phased out. The phase-out threshold for most individuals will be approximately $170,000, which is significantly less than the exemption phase-out amount for married joint or head of household filers. The tax impact on an affected taxpayer will be 28% to 39.6% of the lost deductions. Many of you have Health Savings Accounts (HSA’s) and Educational Savings Account. In my next installment of the Expiring Sunset Rules, I’m going to talk about the changes coming your way in regards to these types of accounts. I’ll also touch on the Home Energy Improvement Credit. Please stay tuned! E-File Florida is very happy to help you with questions regarding these “Sunset Rules”. Feel free to contact our office by calling 954-583-8534 or by email at info@efileflorida.com. You can also visit us on the Internet at http://www.efileflorida.com for more great tax tips and articles. IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s).   Esther Hastings, EA E-File Florida helps individuals and small business owners to lower their tax bills and maximize their tax refunds. We actually enjoy getting to know our clients and have built a solid reputation of delivering excellent personal service while maintaining the highest level of integrity within the tax preparation industry. We welcome the opportunity to make you a Raving Fan!

Contact Us: PH (954) 583-8534 Fax (954) 583-8557 info@efileflorida.com www.efileflorida.com Are you tired of being in DEBT? Click Here. (I HIGHLY recommend this “get out of debt” program!)

Tax Increases ARE Coming~Unless Congress Takes Action! (Part 4)

Tax Cuts Are Scheduled To Sunset!  (Part 4) If you’ve been reading my posts over the past few weeks (I hope you have!), you know that we, as american taxpayers, are scheduled to experience an increase in our tax bill to Uncle Sam over the next few years~beginning with this upcoming tax season. There are numerous tax cuts that are set to expire unless congress reinstates them before the end of this year. If they are allowed to “Sunset”, we will all pay more tax! In my previous writings to you, I’ve outlined some of the changes that will take place if nothing is done. Today, I want to explain a few of these changes that will affect anybody that has a dependent child(ren) under 17, anyone who may be attending college and those taxpayers that traditionally qualify for the earned income credit. These particular changes are scheduled to take effect for the 2011 tax return. (Not this upcoming tax season~but next.) Here they are: Earned Income Credit – This refundable credit currently has four categories of low-income working taxpayers, with the credit increasing as the number of children increase, up to three or more. In 2011, the “three or more children” category will go away, and taxpayers with three or more children will have to use the two or more category. This can reduce the credit for low-income taxpayers with three or more children by up to about $600. Child Credit – The tax law provides a tax credit for each of a taxpayer’s children under the age of 17. This credit will drop to $500 (was $1,000 in 2010) per child. Since this credit phases out for higher-income taxpayers, it will generally impact lower-income taxpayers. American Opportunity Education Credit (AOEC) – This credit took the place of the Hope Education credit in 2009 and 2010. Where the Hope Credit is non-refundable (can only offset one’s income tax liability), the AOEC was 40% refundable, and where the Hope Credit is for only the first two years of post-secondary education expenses, the AOEC allowed a credit for the first four years of post-secondary education expenses. In addition, prior to 2009, the Hope credit was limited to a maximum of $1,800 per student but the AOEC maximum was $2,500 per student. If the AOEC is not extended, low-income taxpayers will lose out on the refundable feature of the AOEC and those students in their third and fourth year of post-secondary education. Middle-income taxpayers will also be affected, because the point at which the credit phases out due to income limitations was 60% higher under the AOEC than under the Hope credit rules. Higher-income taxpayers are generally not affected since both credits are phased out for higher-income taxpayers. As you can see, some of these tax cuts are really beginning to hit close to home, as they affect the average american, working class taxpayer. I’m not here to make any political statements, but these are the facts concerning the increases that we will all experience if our congress does nothing before the end of the year. I’m not done with highlighting all the changes! There is still more to come. Stay Tuned!! E-File Florida is very happy to help you with questions regarding these “Sunset Rules”. Feel free to contact our office by calling 954-583-8534 or by email at info@efileflorida.com. You can also visit us on the Internet at http://www.efileflorida.com for more great tax tips and articles. IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s). Esther Hastings, EA E-File Florida helps individuals and small business owners to lower their tax bills and maximize their tax refunds. We actually enjoy getting to know our clients and have built a solid reputation of delivering excellent personal service while maintaining the highest level of integrity within the tax preparation industry. We welcome the opportunity to make you a Raving Fan!

(I HIGHLY recommend this “get out of debt” program!)Are you tired of being in DEBT? Click Here.

Tax Increases ARE Coming~Unless Congress Takes Action! (Part 3)

Tax Cuts Are Scheduled To Sunset!  (Part 3) In my previous postings, I’ve been talking about the tax cuts that are set to expire if they are not re-instated by congress before the end of this year. If these tax cuts are allowed to “Sunset”, they will have an impact on just about every taxpayer in the country. The result will simply be that we will all pay MORE TAX! In this writing, I’m going to highlight some of the changes that will affect taxpayers for  tax year 2011. Although you won’t feel the effects of these changes for this year, you WILL feel them for the 2011 tax return. Here we go: Tax Rates – As part of the Bush era tax cuts, the marginal tax rates (they increase with taxable income) were reduced to 10, 15, 25, 28 and 33 percent. These rates are set to return to their original levels of 15, 28, 31, 36 and 39.6 percent. The 10% and 15% brackets will be replaced with a single 15% bracket. This results in an increase for everyone! Those in the previously lowest bracket (10%) will see a tax increase of approximately 5%, while others will see increases ranging approximately from 2% to 6%. In addition, an expanded 15% bracket for a married couple filing a joint return has applied for several years as relief for the “marriage penalty.” This will not apply as of 2011. Instead, the top of the 15% bracket for joint returns will be about 167% of the end point for single returns rather than the 200% it has been. Capital Gains Rates – Also, as part of the Bush era cuts, the capital gains rates were substantially reduced, but will return to their old levels of 10% for anyone in the 15% regular tax bracket and 20% for all others. That is up from 0% and 15% in 2010. This will impact investors, business owners and home owners when they sell a capital asset. Qualified Dividends – Generally, qualified dividend income is dividend income from stock held for 60 days or longer before the ex-dividend date. These dividends, for a number of years, have been taxed at capital gains rates (0% – 15%). However, the law providing these beneficial rates expires at the end of 2010 and all dividend income will be taxed at ordinary income rates (15% to 39.6%). This will generally impact investors holding income stocks and mutual funds. These individuals will see an overall tax increase greater than just the general 2% to 6% rise noted above. These tax cuts that I’ve mentioned are just the beginning. In my next writing to you, I will highlight a few changes that will impact anyone who has dependent children under 17, has a member of the family who attends college or anyone who may qualify for the Earned Income Credit. Stay tuned! E-File Florida is very happy to help you with questions regarding these “Sunset Rules”. Feel free to contact our office by calling 954-583-8534 or by email at info@efileflorida.com. You can also visit us on the Internet at http://www.efileflorida.com for more great tax tips and articles. IRS CIRCULAR 230 Required Notice – IRS regulations require that we inform you as follows: Any Federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction as tax related matter(s).   Esther Hastings, EA E-File Florida helps individuals and small business owners to lower their tax bills and maximize their tax refunds. We actually enjoy getting to know our clients and have built a solid reputation of delivering excellent personal service while maintaining the highest level of integrity within the tax preparation industry. We welcome the opportunity to make you a Raving Fan! Contact Us:  PH (954) 583-8534 Fax (954) 583-8557 info@efileflorida.com www.efileflorida.com Are you tired of being in DEBT? Click Here.   (I HIGHLY recommend this “get out of debt” program!)