Some Items to Check Before Filing Your Return

Here's a quick and dirty list of things that are commonly missed or done incorrectly, and should be checked before filing your return:

1. If you are self-employed and pay Medicare premiums, be sure to include the costs in the calculation of your self-employed health insurance deduction.
2. Bonus Depreciation:
• Is allowed only on new purchases;
• Items purchased between January 1 and September 8, 2010, are eligible for 50% bonus depreciation;
• Items purchased between September 9 and December 31, 2010, are eligible for 100% bonus depreciation;
• You can elect out of the bonus depreciation. You need to assess your business tax situation and determine if taking the bonus deprecation will be a waste in the current year. You may need the depreciation more in future years.
3. Schedule A, State Taxes - I have often seen a deduction taken for vehicle tax renewals. This tax is only deductible on Schedule A if is based on the value of the vehicle. If you see "Ad Valorem", this is the portion that is deductible. This applies to your property taxes as well. Non Ad Valorem taxes are not deductible.
4. Mortgage interest deduction is limited to the interest on $1,000,000 of home aquisition debt ($500,000 for MFS). Home equity debt is limited to interest on $100,000 ($50,000 for MFS). 
5. Before taking losses related to S-Corporations or Partnerships, it is CRITICAL that you have the basis to take the losses.
6. There are many opportunities for errors with rental properties, as well as some rule changes. I'll cover rentla properties in the next blog.

Form 941 News and Highlights

You have no doubt heard of the changes to the Form 941 and the filing.  I've compiled a list of the highlights you may want to pay attention to before filing this year.

• One of the biggest changes - and hopefully you are already aware of this change - the EMPLOYEE tax rate for social security withholding is 4.2%.  The "matching" EMPLOYER tax rate remains the same at 6.2%.  Medicare remains at 1.45% for both.
• Also note that wages subject to social security maxes out at $106,800.
• Advance payment of earned income credit is no longer available - as of December 31, 2010. 
• I can't resist some editorial comment on this:  While I understand there has been some abuse of the EIC, I fail to see how requiring families to wait until after the end of the year and filing their tax return will do anyone much good. Many folks are struggling to survive - to keep a roof over their heads and feed their families - without this reduction in their monthly income. Decreasing the monthly income of families will do nothing to help our continued failing economy. And worse, while the US Treasury has made an effort to stop lower income families from getting large refunds when the file the taxes because they've found the refunds get spent on unneeded luxury items rather than needed to sustain a household, this change will do nothing to assist in alleviating this concern.
• Your payroll tax payment MUST, I repeat MUST, be made via the Electronic Federal Tax Payment System (EFTPS). You can no longer take a paper coupon (Form 8109) to your bank with a check.

To enroll in EFTPS