January 2011 Archives

January 7, 2011

IRS Extends Filing Deadline

The IRS announced this week that taxpayers will have until Monday, April 18, 2011 to file their 2010 tax returns and pay any taxes due. The usual April 15th deadline was extended by three days because Emancipation Day, a holiday observed by the District of Columbia, falls on Friday, April 15th this year. Taxpayers who file for extensions will have until October 17, 2011 to file their 2010 tax returns.

In addition, because of the year-end tax changes signed into law in December 2010, some people will have to wait until mid- or late February before they file their returns. The IRS needs to make changes to its systems before it can process certain types of returns. Taxpayers who can't file their returns until the IRS changes its systems include:

• taxpayers who claim itemized deductions on Form 1040 Schedule A

• taxpayers who claim higher education deductions on Form 8917, and

• teachers who claim a $250 deduction for classroom expenses.

January 6, 2011

Year-End Tax Changes for Businesses

The Tax Relief Act of 2010, signed into law on December, 17, 2010, contains a wide range of income tax, estate tax, and unemployment insurance changes affecting individuals and businesses. For small businesses, the two most significant changes involved bonus depreciation and Section 179 expensing.

Bonus Depreciation Increased to 100% for 2011 and 50% for 2012

Bonus depreciation was first enacted in 2008 as a temporary measure to help our ailing economy. As first enacted and then extended for two years, the deduction was a first-year 50% bonus deduction. It allowed taxpayers to depreciate 50% of the cost of qualified property during the first year the property was placed in service. It was scheduled to expire at the end of 2010.

Under the tax laws passed in December 2010, bonus depreciation is extended and increased to 100 percent for qualified investments made after September 8, 2010 through the end of 2011. In addition, 50% bonus depreciation will be available in calendar year 2012.

Section 179 Expensing Increased to $125,000 for 2012

Section 179 allows you to currently deduct in one year the cost of long-term assets purchased that year instead of deducting the cost over time under regular depreciation rules. For 2010 and 2011, the maximum annual amount you could deduct under Section 179 was $500,000, subject to a phase-out once your total expenditures exceeded $2 million. The annual deduction limit was scheduled to go down to $25,000 in 2012, with a $200,000 overall property value limit. Under the new tax laws passed in December 2010, the Section 179 deduction limit is increased to $125,000 and the overall property value limit to $500,000.