Wednesday, January 12, 2011

IRA Charitable Distributions Renewed for 2010 and 2011

These release from the IRS allows for some planning opportunities for those taxpayers that have Required Minimum Distributions and that are Charitably Inclined:

Quoted from IRS Employee Plan News dated 1/12/2011 - "The qualified charitable distribution provisions were renewed for 2010 and 2011, allowing individuals age 70½ or over to exclude from gross income up to $100,000 that is paid directly from their individual retirement accounts (excluding SEP or SIMPLE IRAs) to a qualified charity. The excluded amount can be used to satisfy any required minimum distributions that the individual must otherwise receive from their IRAs for 2010 and 2011. The deadline for making a 2010 QCD is January 31, 2011. The election to treat a January 2011 QCD as having been made in 2010 is made by including the QCD on the individual’s 2010 income tax return.

To qualify as a QCD, the IRA trustee must make the distribution directly to the qualified charity. Any distributions, including any RMDs, which the IRA owner actually receives cannot qualify as QCDs. Likewise, any tax withholdings on behalf of the owner from an IRA distribution cannot qualify as QCDs.

IRA owners who have received their 2010 RMDs may not recontribute those distributions to an IRA to have them redistributed directly to a qualified charity as a QCD. However, if an IRA owner received a distribution in excess of his or her 2010 RMD, the owner can roll the excess to another or the same IRA within 60 days of receiving the distribution and then have the funds paid directly to the qualified charity as a QCD."

Monday, January 10, 2011

Mandatory Electronic Filing for Individual Tax Returns

Due to Federal law changes, Gaylor Tax Services LLC is required to electronically file all individual income tax returns with the IRS starting in 2011. This includes individual, Trust and Fiduciary income tax returns and will at this time prohibit the office from even offering to mail the tax return on behalf of you, our client.

The IRS has not provided specific provisions for how a taxpayer may opt out at this time, but there will be that opportunity once clarification is obtained.

Electronically filed returns are safe and provide efficient processing by the IRS as they do not have to manually enter the tax return and thereby avoid entry errors by IRS entry clerks.

If you have any questions please feel free to contact the office.

Monday, January 3, 2011

A Tax Holiday to Start 2011?

New law payroll tax holiday - with the recent tax changes that were signed in late December there was a pleasant "tax holiday" for earned income. For remuneration received during 2011, the 2010 Tax Relief Act reduces the employee Social Security tax rate by two percentage points to 4.2%. (Similarly, for self-employment income for tax years beginning in 2011, the combined Social Security tax rate under the SECA tax is reduced by two percentage points to 10.4%.) As a result, for 2011, employees will pay only 4.2% Social Security tax on wages up to $106,800 (and self-employeds will pay only 10.4% Social Security self-employment taxes on self-employment income up to $106,800). This translates to an increase to take home pay for the individual taxpayer of up to $2,136 for the 2011 tax year. So at a glance, this seems to be a nice benefit (I don't want to comment on politics of reducing the funding to the Social Security program by making this change but want to highlight that appears to be the ramification to this "tax holiday".)