file 11 or more returns to e-file, Luscombe
noted. “This will push a lot more preparers
into the mandatory requirement,” he said.
Broker reporting of stock basis is new for
2011, noted Luscombe. “It only applies where
stock is acquired after Jan. 1, 2011, so if you
bought it sometime during the year and then
sold it, the broker is required to include not
only the sales price of the stock on the From
1099-B, but also the basis.”
Conversions from a traditional IRA to a
Roth IRA were big in 2010, Luscombe in-
dicated, because of the elimination of the
income limitation and the opportunity to
spread the income from the conversion into
2011 and 2012.
(For more year-end tax planning tips, see
Tax Strategy, page 16).
“Returns for 2011 will be the first year to
report the income from the 2010 Roth con-
version,” observed Luscombe. “The default
was the spread; to elect out of it, taxpayers
paid the entire tax on their 2010 return. If they
didn’t, then they pay half on their 2011 return,
and half on their 2012 return.”
Another item from 2010 to be aware of is
the employee retention credit, part of the
HIRE Act, which applies to employees that
were hired after March 10, 2010 and be-
fore the end of 2010. The credit is worth the
lesser of $1,000 or 6. 2 percent of the retained
worker’s wages during a consecutive 52-week
period.
The Healthcare Reform Act contains a requirement for W- 2 reporting of healthcare
premiums, Luscombe noted. “This was so the
IRS can track who is covered in terms of eventually imposing penalties on people who are
not covered. It’s optional for 2011, but some
W-2s this year will reflect it,” he said.
The Making Work Pay credit, which was on
2010 returns, has disappeared, replaced by a
payroll tax deduction that isn’t reflected on
the tax return.
For the first time, there’s a separate line
on the return — Line 59(b) — for first-time
homebuyers who have a repayment obligation that requires Form 5405 to be attached.
Crunch
FROM PAGE 1
HERE TODAY...
Some of the tax breaks available this year may
be gone next year or may be around in a dimin-
ished form, advises Harris Abrams, senior tax
analyst for Thomson Reuters. “There’s a great
deal of uncertainty over what Congress will do
to stimulate the economy,” he said. “It’s gener-
ally better if you have an upcoming expense to
do it this year rather than next. That’s even more
true with credits and deductions that may be
gong away at the end of the year.”
In particular, Abrams recommended “go-
ing green,” by taking advantage of energy
credits. “Look at ways to save energy around
the house by replacing or upgrading win-
dows, water heaters and skylights. At some
point you’ll have to replace them anyway,
and it’s better to buy something when you
can get the credit for it. The credit is set to
expire at the end of 2011. Sometimes these
credits do get extended, but you can’t bank
on it,” he cautioned.
BUT THAT’S NOT ALL
Other expiring items that may not be extended include the deduction for state and local
sales tax, and the research credit.
More than 60 percent of the rules in Circular 230 are new or changed as of Aug. 2,
2011, said Allen Calhoun, managing editor,
Business Entities and Tax Accounting at BNA
Tax & Accounting.
“With the expansion of Circular 230, prac-
tice before the IRS now includes preparing
the return or refund claim, not just filing the
return or claim,” he explained. “A lot of people
who were preparing but not signing the re-
turn before are now under the umbrella of
Circular 230. They have to register and get a
PTIN [preparer tax identification number],
take a test and will be subject to continuing
education requirements.”
Uncertain tax positions must be disclosed
on Schedule U TP for certain C corporations,
Calhoun pointed out. “The threshold is $100
million in assets this year, but that drops
down rapidly. It will be down to $10 million
with the 2014 tax year.”
Compliance on state returns is becom-
ing increasingly important, indicated Dan
Hughes, managing director of the tax group at
CBIZ. “We’re seeing significantly more state
notices,” he said. “They are targeting non-fil-
ers as well as filers, so we’re paying special
attention to the filing requirements in state
and local jurisdictions.”
“They’re chasing both people who owe,
and those who don’t own any tax. In some
cases states are imposing a penalty even if no
tax is due. In general, they’re becoming more
aggressive in revenue collection for both in-
dividuals and business entities.”
“We’re not anticipating any major legis-
lation before the end of the year,” he said.
“We’re encouraging our business clients to
go ahead and make qualifying purchases be-
fore the end of the year to take advantage of
bonus depreciation.”
An important and sometimes overlooked
break is the Section 179D Energy Efficient
Commercial Buildings Deduction, explained
Matt Becker, tax partner at BDO USA. “For
businesses that have made investments in
real estate, the accelerated deduction is for
up to $1.80 per square foot. It mirrors the
credit for energy-efficient home improve-
ments on the individual side.”
New York–based practitioner Barbara Welt-
man advises preparers to check the Small
Business Health Care Tax Credit. “Many small
businesses didn’t know about it last year, or
didn’t take it because they didn’t pay enough
to qualify,” she said.
MERCHANT CARD REPORTING
The merchant card reporting requirement
has caused some consternation among
preparers. The new rule requires the gross
amount of reportable transactions for the
calendar year and its corresponding months
to be reported to the IRS and the business
owner on Form 1099-K.
“The problem that many small businesses
face is that their gross transactions are being
reported and most small businesses just report the net sales on their tax returns, so by
definition we have a mismatch, according to
Roger Harris, president of Padgett Business
Services.
“Most people don’t have those records
right now, said Harris. “Every day, when they
account for cash back, tips and sales tax they
have to create permanent records.” AT
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