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Wednesday, January 5, 2011

IRS Kicks of 2011 Tax Season with Deadline Extended to April 18th

WASHINGTON- The IRS announced yesterday that taxpayers have until Monday, April 18 to file their 2010 tax returns and pay any tax due.  Emancipation Day, a  holiday observed in the District of Columbia, falls this year on Friday, April 15.  By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year.  Taxpayers requesting an extension will have until October 17 to file.  This extension however, still is not an extension to pay taxes.

The IRS also reminded taxpayers impacted by recent tax law changes that using e-fil is the best way to ensure accurate tax returns and will result in getting faster refunds.

New tax law will delay 2010 return processing

The IRS has announced that it will take until mid to late February before their system will be able to process certain income tax returns due to the late tax law changes.

Individual income tax returns affected include those with the following, a Schedule A for itemized deductions, a claim for higher education expenses, a claim for educator expenses, and a claim for state or local sales taxes.

This delay will apply to all filers, whether they file electronically or by paper.

New Tax Law passed in December

December 2010-- The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 was signed into law on December 17, 2010.  This legislation will keep tax rates the same as they have been for another two years, keeping the Bush-era income tax cuts in place.  The law also allows a 13-month extension of unemployment benefits.

Capital gains and dividend rates also stay the same, at 15% and 0%  for the next two years.  The law also patches the alternative minimum tax by increasing the AMT exemption for 2010 and 2011.

Many tax breaks that expired at the end of 2009 were also extended, retroactively.  Some of these include; the teachers' deduction for buying classroom supplies, and the deduction for college expenses. 

This law also included a reduction in the social security taxes for employees, from 6.2% to 4.2% on wages up to $106,800.  Self-employed individuals will also see a decrease in their tax.

The estate tax was restored, retroactively for 2010, with a top rate set at 35% and the exclusion amount set at $5 million.

For more information on how this new law will affect you, please contact our office.