We are surprised how quickly the year has passed! On the income tax scene Congress continues to work on last minute income tax bills as of the date of this letter, but you can be assured we stay abreast of all the latest changes as they occur!
We are once again making our tax organizers available, for free, to anyone who requests one if you have not used one in the past please call the office to request one for 2011, as it is our attempt to be as thorough as possible in the preparation of your return. If you received an organizer last year we will mail this year’s organizer to the same address. The tax organizer may not be enough however, and we wanted to bring some special items to your attention below.
Home Owner Energy Credits
If you (and spouse if married) made or are considering investing in insulation, storm windows or doors, high efficiency furnaces or water heaters or similar energy improvements there is a 10-30% Federal income tax credit available in many cases. The bad news? It is limited to a maximum of $500!
Recent IRS scrutiny of home mortgage interest deductions now require us to carefully track refinancings and the use of loan proceeds. Please provide us with any new home loan information, closing statements from any re-financings, and a summary of what any additional loan proceeds were used for.
A scary IRS court case in 2008 reminds us of the rules on charitable contributions. ALL deductions of any amount must have a receipt. Any individual contribution over $250 must also have an acknowledgement letter from the charity, and the letter must be dated by the date we file your return. The letter should show the date and amount of any individual contribution over $250, and should also state that no goods or services were received in return for the contribution.
If you have read any news in the last year you know that the IRS is looking closely for offshore accounts. If you have an account, rental property, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund) please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.
Deductible mileage rates changed during the year. Please provide us with the number of medical miles you drove during the year for this deduction. This includes trips to the doctor, dentist, pharmacy, dialysis, as well as any charity related volunteer work mileage. Medical expense deductions are still limited to 7.5% of your AGI.
A major revision of college credits by President Obama has provided us with the “American Opportunity Credit”, a special credit for undergraduate college students. If you have children in college or near to college, please discuss some options with us to assure that you receive the best benefit for these costs.
If you own rental property, this year the IRS has demanded substantially more information. We now need, FOR EACH PROPERTY SPERATELY, the physical location, the type of property (single-family, duplex, etc), and Forms 1099-K received, and a record, by property of the number of days rented and the number of days used for personal purposes.
Roth IRA Conversions
You will be continue to hear from lots of “experts” this year that you need to convert your retirement accounts to Roth IRAs. While there are a number of advantages to conversions, there are an equal number of disadvantages that carry some major tax consequences. Please do not convert your accounts in 2011 without coming in to see us for an appointment to discuss both the positives and negatives. All conversions for 2011 must be completed by December 31, 2011.
Effective 1/1/2009 the amount you may give to one person in one year without any return filing requirements has been increased to $13,000. Additionally, Congressional inaction on the estate tax front requires most people that have any substantial net worth to immediately consider estate planning. Please contact us to discuss these issues.
Worthless Stocks and Bonds
If you own stocks or bonds that became worthless this year please be sure to provide us with the cost and purchase dates so that we can take any allowable deductions.
There is still time to setup an appointment for year end tax planning by December 31. We recommend a meeting if you have had any major changes during 2011 or are expecting major financial changes in 2012 such as retirement, inheritances, etc. Give us a call at 466-2493 to set up an appointment.
Future Income Tax Rates & Other
Now that Congress has extended the 2010 tax levels to 2012 for all taxpayers, we are able to much more accurately plan for 2012. Congress has also dramatically changed the estate tax rules for the future. In both cases we highly recommend that when you are getting your information to us for your 2011 Federal tax return that you set an appointment for an after tax season “Tax Tune Up” to examine tax and estate planning strategies.
If you receive a new Form 1099-k please be sure to bring it to us, it may have a direct impact on your return.
There are literally hundreds of other changes, extensions and deletions that we will consider this year while preparing your return. Please rest assured that we will utilize our best resources to once again provide you with timely, complete and accurate service while keeping your tax burden to the lowest legal amount. Thank you again for your continued support.
Bailey & Co.
Jared Zwygart, CPA; Weston Flamm, CPA; James Washburn, CPA