Alfred A Cohen, CPA

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Due to the passing of the Tax Relief Act in mid December, 2011 taxes are very similar to 2010 taxes. The act extended many provisions expired or due to expire. Tax rates and long-term capital gains rates remain the same. Due to the passing of the Tax Relief Act, employee Social Security withheld will remain at 4.2% of wages for the first 2 months of 2012. The maximum earned income subject to the 4.2% rate is $ 18,350 for the 2 months. Anything above will be taxed at 6.2%. The Social Security taxable wage base for 2012 is $ 110,100.

Due to inflationary increases, personal exemptions, standard deduction, and income tax brackets have been adjusted, see Annual Limits.

Some of the items extended due to the Tax Relief Act include: deductibility of mortgage insurance premiums, tax free distributions from IRA’s when contributed to a charity, deduction for tuition and related expenses, state and local sales taxes, school teachers deduction, and non business energy credit( at a reduced rate).

Some of the items extended until December 31, 2012 include: marriage tax penalty relief, child tax credit, increased earned income credit, liberalized child and dependent care credit rules, and student loan interest deductions.

The provision for 2010 that allowed self-employed individuals to deduct health insurance premiums when calculating income subject to Social Security and Medicare was not extended.

Beginning in 2011, credit card companies are required to report payee’s transactions in a new Form 1099K.

The contribution limit for employees contributing to 401k, 403b, and 457b plan increases from $16,500 to $17,000. Contribution limits for IRA’s and Simple IRA’s remain the same. The over 50 catch up contribution has remained the same.

There no longer is an income limitation to qualify to roll a traditional IRA to a Roth IRA. For all conversions beginning in 2011, the income tax is due in the year of conversion.

The making work pay credit expired at December 31, 2010.

Beginning in 2011 all tax returns have to be electronically filed.

Beginning in 2011, Form 1099-B, Proceeds from Broker and Barter Transactions will now include the cost basis of the securities sold.

Beginning in 2011, credit card companies are required to report payee’s transactions in a new Form 1099K.

The contribution limit for employees contributing to 401k, 403b, and 457b plan increases from $16,500 to $17,000. Contribution limits for IRA’s and Simple IRA’s remain the same. The over 50 catch up contribution has remained the same.

There no longer is an income limitation to qualify to roll a traditional IRA to a Roth IRA. For all conversions beginning in 2011, the income tax is due in the year of conversion.

The making work pay credit expired at December 31, 2010.

Beginning in 2011 all tax returns have to be electronically filed.

Beginning in 2011, Form 1099-B, Proceeds from Broker and Barter Transactions will now include the cost basis of the securities sold.

Home Newsletters January 2012

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