IRS answers FAQs after filing a return
Once you have filed your 2011 tax return, you may still have a few tax questions. The IRS provides these answers to commonly asked questions.
* How can I check the status of my refund?
You can go online to check on your refund. Go to www.irs.gov and click on “where’s my refund?” Or call 1-800-829-4477 for automated refund information available 24 hours a day, seven days a week.
* What records should I keep?
Keep receipts, canceled checks, or other substantiation for any deductions or credits you claimed. Also keep records that verify other items on your tax return (W-2s, 1099s, etc.). Keep a copy of the tax return, along with the supporting records, for seven years.
* What if I discover that I made a mistake on my return?
If you discover that you failed to report some income or claim a deduction or credit to which you are entitled, you can correct the error by filing an amended tax return using Form 1040X.
* What if my address changes after I file?
If you move or have an address change after filing your return, send Form 8822 “Change of Address” to the IRS. You should also notify the Postal Service of your new address so that you’ll receive any refund you’re due or notices sent by the IRS.
With additional tax related questions, please contact our office at (317) 782-3070 or visit http://www.simonsbitzer.com.
It’s Tax Payback Time!
If you took certain actions in a prior year, you may now have additional taxes due on your 2011 tax return. Here are the details:
HOME BUYER CREDIT: If you bought a home in 2008 and took the first-time home buyer credit, you have another repayment installment due with your 2011 tax return. The 2008 tax credit was an interest-free loan that you have to pay back over a 15-year period.
ROTH CONVERSIONS: If you converted a traditional IRA to a Roth IRA in 2010 and opted to split the tax due from the conversion between 2011 and 2012, your first half of the tax is due on your 2011 tax return.
If you have questions regarding either of these two repayments, please contact our office at (317) 782-3070 or visit www.simonsbitzer.com.
Deadline for electing S corporation status is March 15
If you own a small business, you have until March 15, 2012 to choose S corporation status for this year. In order to become an S corporation, you’ll need the unanimous approval of all shareholders.
The principal advantage of an S corporation is that you avoid paying double taxes. In a traditional C corporation, profits are taxed at the corporate level and then they’re taxed again when paid to individual shareholders as dividends. In an S corporation, there are no taxes on earnings at the corporate level. Instead, profits or losses flow directly through to the shareholders. They pay taxes only once, when they report their share of earnings on their individual tax returns.
Another advantage: Doing business as an S corporation can be attractive in the early, unprofitable years of a start-up business. That’s because operating losses flow through your personal taxes, perhaps offsetting other taxable income.
There are some trade-offs for these tax benefits, though. If you’re an owner-employee and own more than two percent of the company, you’ll receive less favorable tax treatment for some fringe benefits. There are also ownership limitations. The company can have only one class of stock, there can’t be more than 100 shareholders, all of the shareholders must be U.S. citizens or residents, and the corporation must meet other restrictions.
Despite these drawbacks, doing business as an S corporation can still offer some tax planning advantages. If you can meet the ownership requirements, it might be well worth considering an S corporation election. Contact Simons Bitzer at www.SimonsBitzer.com or (317) 782-3070 for an in-depth analysis of the pros and cons for your company.
Two important tax deadlines approaching
March 15 – 2011 calendar-year corporation income tax returns are due. Extensions may be filed to give until September 17, 2012, to file.
March 15 – Deadline for calendar-year corporations to elect S corporation status for 2012.
April 2 – Deadline for payers who file electronically to send copies of 2011 W-2s to the Social Security Administration.
April 2 – Deadline for payers who file electronically to file 2011 information returns (such as 1099s) with the IRS.
Please contact Simons Bitzer & Associates at (317) 782-3070 or www.SimonsBitzer.com with questions or to schedule a complimentary consultation with one of our tax specialists.
Depreciation Rules, Cash Flow Best Practices, Unreimbursed Education Expenses Deduction
We’re posting our March eNewsletter.
Click here to read http://bit.ly/y34ii0.
Even if you don’t itemize, some deductions are available.
If you’ve given up itemizing deductions, you’re not alone. These days over half of all taxpayers find they’re better off using the standard deduction. Even if you take the standard deduction, you can also deduct some individual expenses on your 2011 tax return, including the following:
* IRA and HSA contributions:
On your 2011 tax return you may qualify to deduct up to $5,000 in contributions to a traditional IRA. That increases to $6,000 if you’re age 50 or older. Income limitations may apply in some cases. You cannot deduct contributions to Roth IRAs.
Health Savings Accounts (HSAs) are IRA-like accounts set up in conjunction with a high-deductible health insurance policy. The annual contributions you make to your HSA are deductible. Contributions are invested and grow tax-free. You are also allowed to withdraw money in the account tax-free to pay for your unreimbursed medical expenses. The HSA contribution limit for 2011 is $3,050 for singles and $6,150 for couples. An additional $1,000 may be contributed by those 55 and older.
* Student loan interest and tuition fees:
Deduct up to $2,500 interest on student loans for yourself, your spouse, and your dependents. For 2011, you can also deduct up to $4,000 of tuition and fees for qualified higher education courses. Income limitations apply and you must coordinate these deductions with other education tax breaks.
* Self-employment deductions:
If you’re self employed, you can generally deduct the cost of health insurance premiums, retirement plan contributions, and one-half of self-employment taxes.
* Other deductions:
Don’t overlook deductions for alimony you payand early savings withdrawal penalties. You may also be able to deduct certain moving expenses. To find out if your moving expenses qualify, visit IRS.gov and search for form 3903 suggests Joan Brockman, Tax Specialist at Simons Bitzer. Teachers can deduct up to $250 for classroom supplies that they purchased with their own money in 2011.
Contact Simons Bitzer at (317) 782-3070 for more information on these and other deductions you may be entitled to take on your 2011 tax return.
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