2010 irs tax changes
DESCRIPTION
TRANSCRIPT
U.S. TAX CHANGES
2010
AND BEYOND
Tax Relief, Unemployment Insurance Reauthorization and
the Job Creation Act of 2010
Extended the “Bush Tax Cuts”
until 31 December 2012
TOPICS FOR DISCUSSION
U.S. ESTATE TAXES
U.S. INCOME TAXES
FOREIGN ACCOUNTS
U.S. ESTATE TAXES– 2011 & 2012
Exemption $5 million per person Lifetime aggregate – gift and estate tax GST also now $5 million per person Portable to surviving spouse:
unused portion of last deceased spouse ( multiple marriages)Irrevocable election on estate tax returnNot GST exemption
U.S. ESTATE TAXES– 2011 & 2012
Federal estate tax rate: 35%
Stepped-up basis: beneficiaries receive property with stepped-up basis to date of death values.
U.S. ESTATE TAXES– 2010
Election:
2011 rules retroactively applied:$5 million exemption35% tax ratestepped-up basis to beneficiaries
2010 rules – elect to apply:unlimited exemptionno estate tax to payno stepped-up basis to beneficiaries
U.S. Gift Taxes
Annual gift tax exclusion - 2011: $13,000 per donee $136,000 to NRA spouse
Annual gift tax exclusion – 2012: same but subject to inflation adjustment
Additional gift tax exemptions:Direct tuition and medical payments
U.S. ESTATE TAXES– 2013
$1 million estate tax exclusion and gift tax exemption
55% estate and gift tax rate
U.S. Income taxesU.S. Income taxes
Requirement to file tax return - 2010
Single: <65 ……gross income = $9,350Single: 65+……. =$10,750
MFJ: <65 (both spouses) =$18,700MFJ: 65+ (one spouse) =$19,800MFJ: 65+ (both spouses) =$20,900
MFS: any age …………. =$3,650
HH: <65 ……………. =$12,050HH: 65+……………. =$13,450
U.S. Income taxesU.S. Income taxes
Child’s tax credit
Reduces tax liabilityMaximum $1,000 per qualifying childReduced $50 for each $1,000 of MAGI over:
$110,000-joint filers$75,000- unmarried individuals$55,000- MFS
Credit cannot exceed:Regular tax + AMT
Less certain credits
U.S. Income taxesU.S. Income taxes
Additional child’s tax credit
Refundable creditGreater of:
(1) 15% of taxable income >$3,000, or(2) excess of SECA > earned income credit, if have 3 or more qualifying children.
Less: the child’s tax credit used to reduce tax.
U.S. Income taxesU.S. Income taxes
Qualifying childQualifies as a dependentUnder the age of 17 years old at years endU.S. citizen or resident alienMust include on tax return the child’s name and SS#
Qualifying relative Specified relative (e.g., grandchild) Gross income < exemption amount ($3,650-2010) Taxpayer provides > 50% support Is not qualifying child of another Exception: Parents are not required to file a return and
does not file a return; or files on to claim tax refund.
U.S. Income taxesU.S. Income taxes
Phase outs and limitations postponed until 2013
• Itemized deduction limitation• Personal exemption phase out• Standard deduction marriage penalty
U.S. Income taxesU.S. Income taxes
Income tax rates:
Instead of 15%, 28%, 31%, 36% and 39.6%For 2011-2102: 10%, 15%, 25%, 28%, 33%, and 35%For net L-T capital gains and qualified dividends: 15%Non-corporate taxpayer: 0% tax (if subject to 15% tax)
to the extent would be taxed at 10% or 15%.
Example: MFJ, both spouses <65 up to $86,700 MFJ, both spouses > 65 up to $88,900
U.S. Income taxesU.S. Income taxesSelf-employed individuals
Can deduct health insurance costs (AGI)For 2010, also allowed in computing SECA.For 2011, SECA reduced from 15.3% to 13.3%
up to $106,800 net SE income.2.9% medicare tax on SE income > $106,800From 2013: +0.9% hospital insurance (HI) on wages
and SE net income >$250,000 – MFJ$125,000 – MFS$200,000 – everyone else.
U.S. Income taxesU.S. Income taxes
Surtax on unearned income
Beginning 2013 Imposed on individuals, estates and trusts Medicare contribution tax = 3.8% For individual: computed on the lesser of:
(1) net investment income or(2) excess of MAGI over threshhold:
$250,000 – MFJ or surviving spouse$125,000 – MJS$200,000 – everyone else.
U.S. Income taxesU.S. Income taxes
Miscellaneous
• 40% penalty on any understatement of attributable to anto an undisclosed foreign financial asset (from 2011)
• 6 year statute of limitations for assessment of tax on understatement of income attributable to foreign financial assets for any return filed after Mar. 18, 2010, and for any return for which
assessment period has not yet expired as of 18/3/10• Sex-change costs qualify as medical expense• Breast augmentation for cosmetic purposes - not
Foreign Financial AssetsForeign Financial Assets
Foreign Bank Account Report – FBAR
Accounts > $10,000 on any given day in tax yearAggregate of accounts = include all accountsFinancial interestSignature authority (volunteer for amuta)Penalty $10,000 for not filing each yearPenalty of $100,000 or 50% of account balance for
each year if willful failure to fileU.S. person must file
Foreign Financial AssetsForeign Financial Assets
Foreign Bank Account Report – FBAR
bank accounts brokerage accounts mutual funds unit trust accounts maintained with a financial institution or
other person engaged in the business of a financial institution
Commingled fund and hold equity interest Keren Hishtalmut ? Kupot Gemel ?
Foreign Financial AssetsForeign Financial Assets
Foreign Bank Account Report – FBAR
U.S. PERSON: Citizen or resident of U.S.Domestic partnershipDomestic corporationDomestic trust or estatePersons in and doing business in U.S.
Foreign Financial AssetsForeign Financial Assets
Foreign Bank Account Report – FBAR
Relief from FBAR rules:
For 2009 and earlier years, U.S. person does not include“person in and doing business in U.S.”
If signature authority only, deadline for FBAR for 2009 and earlier years = 30 June 2011
Commingled funds not apply to funds other than mutualfunds for 2009 and prior
Foreign Financial AssetsForeign Financial Assets
HIRE Act
• For years beginning after 18 Mar 2010• U.S. individual• “specified foreign financial assets”• Aggregate value > $50,000• Report on tax return
Foreign Financial AssetsForeign Financial Assets
HIRE Act
“Specified Foreign Financial Assets:
• Any financial account maintained in a “foreign financialinstitution”
• Any stock or security issued by non-U.S. person• Any interest in foreign entity• Any financial instrument or contract held for investment
and issued by non-U.S. person
Foreign Financial AssetsForeign Financial Assets
FATCA
30% withholding tax at source payments to “foreign financial institutions” no agreement with IRS to disclose “U.S. accounts”
Withholding applies to U.S. source income “U.S. account” = any financial account held by
“specified U.S. person” or U.S. owned foreign entity
