Williams’s Sara LaLumia, the University of Chicago’s James Sallee and the Treasury Department’s Nicholas Turner took it upon themselves to figure out if policies like the Child Tax Credit (CTC), the dependent exemption and the Earned Income Tax Credit (EITC, which is more generous for families with more children) are pushing mothers with due dates in January to move their children’s births forward, so as to reap another year of tax benefits. They actually aren’t the first ones to tackle this question. They cite at leastfourpreviousstudies that found that parents alter birth timing to maximize tax and other public benefits. And sure enough, their research backs that up.
In March 2010, the President approved two huge pieces of tax legislation: the Hiring Incentives to Restore Employment Act and the Patient Protection and Affordable Care Act. Numerous tax provisions from these two bills take effect over the next several years. Will you be able to identify the tax changes that may impact your clients’ tax returns? Here’s a quick list of the things you will want to be familiar with.
1. Tax timeline in the health care reform act—when each provision takes effect. These are major tax changes spread over the next 8 years!
2. The additional Medicare Tax on unearned income and wages found in the new Health Bill (the hottest tax topic of the year)
3. How the Gillet case affects the tax return of a same-sex couple. Is filing “Married Filing Joint” permitted?
4. The 5 tests for qualifying a child as a dependent and who can claim the child after a divorce.
5. The new rules for basis reporting starting in 2011 (Form 1099-B).
6. Cancellation of debt (and exceptions to COD Income (Section 108).
7. The myriad adjustments to gross income such as health savings accounts and prepaid tuition accounts.
8. Changes to itemized deductions including the new charitable contribution rules, the home mortgage rules and medical expenses.
9. Features and effective dates for the American Opportunity Tax Credit (Hope Credit) and the Lifetime Learning Credit.
10. The over 60 provisions that expire at the end of 2010; Ordinary income tax rates, capital gains rates, EIC, child tax credit, dependent care credit, limit on itemized deductions and exemptions, etc. will all revert to 2001 law.
Need help pulling all the information together? Get the details on these and other issues related to individual income taxes in Part 1 of CPE Link’s Federal Tax Update webcasts scheduled November-January. Course includes 120 page downloadable manual containing hyperlinks to applicable code sections.