Tax Season is Almost Here Again!

We are surprised how quickly the year has passed!  It is once again time to prepare for the filing of your 2011 income tax returns.

We are happy to announce that LFS Professional Services, Inc. will now have an office in McVille, ND, located in the McVille City Office Building.

Our company recently purchased the tax preparation and accounting practice of Darrell Moon who has been providing these services to the McVille area since 1972.

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.

What’s New?

In 2011 the standard deduction for married couples filing a joint return is $11,600, up $200 from 2010 and for singles and married individuals filing separately its $5,800, up $100 from 2010.  The additional standard deduction for the blind and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of households, also up $50.

The personal and dependent exemption for tax year 2011 is $3,700, up $50 from 2010.  Once again in 2011, individual taxpayers will be entitled to the full personal exemption amount regardless of the amount of their adjusted gross income.  This however, is set to expire in 2012.

The Making Work Pay Credit expired at the end of 2010.

On December 17, 2010 the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act was signed into law.  This extended the Bush tax cuts through 2012.  Items extended include the American Opportunity Credit, Tuition and Feed Deductions, Child Tax Credit, Educators Expense Deduction, State and Local Sales Tax Deduction and the Student Loan Interest Deduction.  Also, long-term gains for assets held at least one year are taxed at a flat rate of 15% for taxpayers above the 25% tax bracket.  For taxpayers in lower tax brackets, the long-term capital gains rate is 0% through 2012.Energy Tax Credits for Homeowners expire at the end of 2011 and are not as generous as in previous years.  In addition, a taxpayer who has claimed an amount of $500 or more in any previous years is not eligible for this tax credit.

To claim the First-Time Homebuyer Credit for 2011, you (or your spouse if married) must have been a member of the uniformed services or Foreign Service or an employee of the intelligence community on qualified official extended duty outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010.

As in 2010, you can gift up to $13,000 per individual without owing any gift tax in 2011.

Changes for Farmers & Business

On April 13, 2011, President Obama signed into law the Comprehensive 1099 Taxpayer and Repayment of Exchange Subsidy Overpayments Act of 2011 which repealed the expanded Form 1099 reporting requirements for payments of $600 or more in a trade or business to corporations and of gross proceeds paid for any type of property (which would have become effective in 2012).  It also repealed the Form 1099 reporting requirements for rental property that are not part of a trade or business.

The standard business mileage rate for operating your vehicle is 51 cents per mile from January 1st to June 30th and 55.5 cents per mile for the remainder of 2011.  The rate for 2012 is also 55.5 cents per mile.

The Self-employed Health Insurance Deduction is no longer allowed to be used in calculating your Self-Employment Tax.

The Social Security maximum earnings base for 2011 is $106,800.  There is no maximum limit on earnings subject to Medicare taxes.

For wages and salary during 2011, the employee share of Social Security was reduced by 2% to 4.2%.  As of this writing discussions are taking place about extending this “tax holiday”.

The maximum amount you can elect to deduct under the Section 179 expense election for property you placed in service in 2011 is $500,000.  This is schedule to decrease to $139,000 in 2012.
For 2011 bonus depreciation has been increased to 100% for property purchased and placed in service after September 8, 2010 and before January 1, 2012.  Bonus depreciation is set to return to 50% for 2012.  To qualify the property must be new and 20 year property or less.

Section 451(d) of the Internal Revenue Code and 1.451-6 of the regulation, allows farmers to defer the reporting of crop insurance and disaster payments.  Proceeds can be deferred one year from the year damage occurred.  The deferral of crop and hail insurance is an all or none election.  Insurance proceeds that are related directly to revenue/price coverage without significant yield losses are not eligible for deferral.

1099 Forms need to be prepared for businesses and farms that have made payments to individuals totaling $600 or more for such things as commissions, rents, custom work and for payments to independent contractors.  The deadline for filing 1099 Forms is January 31, 2012.  It is important that all required forms be filed as penalties for late and non-filing have been increased dramatically!

Withholding Taxes and W-2 Forms are required for all wages paid to employees for non-farm, $1,700 for domestic employees, $150 for cash farm wages and all farm wages paid with commodities.  If the total farm wages exceed $2,500, all employees must receive a W-2 Form.  Employer’s children under age eighteen are exempt from Social Security, Medicare and income tax withholding but are still required to receive a Form W-2.  The deadline for filing W-2 Forms is January 31, 2012.

We Are Ready to Help

Our experienced staff is looking forward to being of service to you again this year.

Our Tolna office will be open on Wednesday mornings during tax season and our McVille office will be open Wednesday afternoons during tax season.

We are available for year-end tax planning and are currently taking appointments for this tax season.  Appointments for all locations can be made by calling 701-247-2458.