Reporting your capital gains for 2011 is going to be more complicated. You will have to use two forms. For 8949 and Schedule D. The reason? Basis reporting rules that went into effect for securities bought after 2010 and sold in 2011 and later. All sales will be listed on the 8949, and the totals will be carried to Schedule D. Separate 8949s must be filed for sales where the basis is reported by the broker, for sales where the tax basis isn’t reported and for any disposition where no 1099-B is received reporting the gross proceeds. This way, the Service will be able to cross-check the basis information it receives with the sellers’ returns.
Recent News Articles
Dec 8
Capital Gains
Dec 8
Donations
Donating to a charity the right to use a timeshare is not a tax-saver, the Tax Court says. The unsuccessful trader and his wife donated a week’s stay in their Caribbean timeshare as a prize in a charity’s auction, and then claimed a charitable deduction for the rental value of the unit plus a portion of the maintenance fee. Unfortunately for them, the law doesn’t allow any deduction.
Dec 8
Social Security
- The tax rates are in limbo. For 2011, the rate on employees was reduced by two percentage points, to 4.2%, while the rate paid by employers stayed at 6.2%. But this cut is set to expire after Dec. 31. We think Congress will extend the break for 2012 and possibly expand the reduction to 3.1% for employers and employees. The Medicare tax is not affected by this, remaining 1.45% on all wages in 2012.
Dec 8
Business Taxes
- If you are a sole proprietor, hiring your spouse can cut your tax bill. The tax savings come from a medical plan. By offering family coverage for all employees, you can receive health insurance under your spouse’s policy. And if you have no other employees, you don’t incur an extra out-of-pocket cost. The entire cost of the medical plan can be deducted as a business expense, an Appeals Court says, as long as the spouse is a bona fide employee. In this case, a farmer hired his wife and paid her $100 a month plus health insurance. The Court sent the case back to Tax Court to determine if she truly was his employee. However, the odds on a favorable ruling are good, since she spent an average 40 hours a week helping with the crops, caring for livestock and keeping the books (Shellito, 10th Cir.). The business expense deduction reduces the farmer’s income tax and SECA tax bills.
The payroll tax break in effect for 2011 only trims two percentage points off the employee portion of the tax for the self employed portion of the tax for the self employed as well as workers on payrolls. For freelancers,that reduces the Social Security portion of the self-employments tax from 12.45% to 10.4%, bringing the total tax (including the Medicare portion) to 13.3%. Keep this in mind when you file your taxes this year.
Mar 28
Watch Out for Medicare Fraud
Frequently scammers posing as Medicare specialists will ask for bank account or credit card numbers. Treat your medicare card like a credit card. Do not give out your medicare card number to anyone. Your first and best defense is protecting your Medicare number.