As usual, Uncle Sam has been at work changing, adjusting and introducing revisions to the tax code. Seems like "health" issues continue to be a part of the changing tax code.
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Last year we had the "Patient Protection and Affordable Care Act" with its far reaching implications for several years to come. Then, this year, The Health Care and Education Reconciliation Act, which creates two additional Medicare taxes for high income tax payers.
Good news for those folks who receive Social Security, benefits increased 3.6% for 2012. Over the last couple of years there was no increase due to the report of zero inflation. The zero inflation report also eliminated any adjustment in Standard Deduction or Personal Exemptions. Both increase for 2011 and 2012. Likewise, the tax brackets have been adjusted by the inflation index for 2011 taxes.
Some more good news, in April of 2011 the President signed the appeal of the controversial law of 2010 requiring expanded information reporting and use of 1099MISC Forms for businesses. This repeal was especially helpful for small businesses and landlords.
Capital Gains and Dividends continue with favorable tax rates but the IRS has added a new form for the Capital Gains reporting. Now in addition to Schedule D., taxpayers will also use the new form 8949. This form will be used to satisfy the new basis reporting requirements.
Energy Credits for home improvements is reduced for 2011. Also, since the maximum credit is $1,500 life-time, many tax-payers have used up their credit in the past. The American Opportunity Credit, which was set to expire in 2010, has been extended through 2012. It expands the original Hope Credit and is available for any of the four years of college.
The Alternative Minimum Tax continues to be an issue that congress seems to resist fixing. The AMT was created to ensure that anyone who benefits from certain tax credits or deductions still pays some taxes. Over the years, since it is not indexed for inflation and no revision or changes have been made it now becomes a concern. Many tax payers could become subject to additional taxes. So, instead of eliminating or fixing the problem, each year congress hold-off until very late in the year and then passes the AMT "Patch." The Patch is really a temporary fix in the form of an exemption.
With all of the changes in the tax code, Roger and Nedra of Eichlers Tax Service attended a number of tax schools and seminars. This year’s list included the University of Missouri and Kansas Farm and Business Tax Schools; several update schools for both federal and state tax issues and an in-depth five week course treating several aspects of individual taxes.
It seems that with every attempt to simplify the tax laws and filing requirements, taxes become more complex and always changing.