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Some Relief from Self Employment tax for Sch C filers
Generally, small business owners may not deduct the cost of health insurance when calculating self-employment tax. Under the Small Business Jobs Act, and subject to specific statutory limitations (i.e. deduction is not available if self-employed individual is eligible to participate in an employer-subsidized health plan maintained by the employer of the taxpayer or the taxpayer’s spouse), business owners can deduct the cost of health insurance for themselves and their family in the calculation of their 2010 self-employment tax.
This means atleast some saving for the Sch C filers in the self-employment tax they would owe!
Tax filing begins Mid-February for few Taxpayers
Tax filing that normally would start first or second week of January has been delayed this year. The delay is to update and program the tax breaks included in a compromise tax bill President Obama signed last week into the IRS tax system.
People claiming any of these three items — involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.
This delay means millions of taxpayers will have to wait longer to get their refunds next year.
2011 Tax Benefits – Inflation Adjustments
Following inflation adjustments relate to the tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17 –
- Personal & Dependent Exemption increased to $3700
- Standard Deduction increased to $11,600 for MFJ, $5800 for Single and MFS, $8,500 for HOH. Additional standard deduction for blind people and senior citizens increased to $1,150 for MFJ and $1,450 for singles and HOH.
- Tax-bracket thresholds increase for each filing status.
- Maximum earned income tax credit(EITC) for low and moderate income workers and working families increased to $5,751. The maximum income limit for EITC increased to $49,078.
- Modified adjusted gross income threshold for lifetime learning credit begins to phase out at $102K for MFJ and $51K for singles and HOH.
HSA & FSA – Allows Prescribed OTC medicines & Drugs
Notice 2010-59 issued by the IRS on September 3rd, 2010 provides guidance on use of HSA & FSA accounts to pay for over-the-counter medicines and drugs.
As per the rules, beginning January 1, 2011, over-the-counter medicines and drugs will only be reimbursable from these plans if the individual obtains a prescription. The new rules clarify that a “prescription” means a written or electronic order for a medicine or drug that meets the legal requirements of a prescription in the state in which the medical expense is incurred and that is issued by an individual who is legally authorized to issue a prescription in that state.
Online Registration System for Paid Tax Return Preparers
All compensated tax return preparers are required to register under the new registration system and get a PTIN before preparing returns in 2011. Individuals who currently possess a PTIN will need to reapply under the new system but generally will be reassigned the same number.
Registration fee is $64.25, regardless of whether you currently possess a PTIN or not. Attorneys, Certified Public Accountants (CPAs), and Enrolled Agents (EAs) are not exempt.
Link to the New Registration System
Paid Preparers should apply for or renew their PTINs before January 1st, 2011.