Lessons Learned From 2010 Tax Returns
In 2001, the Bush administration passed into law, temporary tax cuts that were to lapse in 2009. However, when the Obama administration took over, they repealed and made changes to part of the Bush tax cuts and these changes had a significant follow on the 2010 tax year. Also the repealed Bush tax cuts, the Obama administration also introduced many changes to the tax code under the stimulus package. These many changes to the tax code between 2009 and 2010 have made tax returns in both years a nightmare.
Lessons Learned From 2010 Tax Returns
As the head of the National Taxpayer Advocate, Nina Olson stated that the 2010 tax year was one of the worst tax seasons ever. Reports from government watchdog organizations such as the Government responsibility Office (Goa) and the Treasury Inspector normal for Tax administration (Tigta) have also revealed major flaws in the tax returns for the two years in question, with mistakes being made by both taxpayers and the Irs itself. Therefore, as the 2011 tax year draws neigh, it is leading to reflect on some of the mistakes of 2010 tax year and possibly enhance on the upcoming tax year.
First Time Home Owners Credit
One of the major complications for the 2010 tax year was handling the First-Time Home Owners Credit. This reputation that lapsed in 2010 had some changes over the time that it was in effect, and these changes have brought quite some confusion. The taxpayers who took the reputation in 2008 were to repay the ,500.00 reputation to the Irs beginning in 2010 in installments of 0.00 for a period of 15 years. However, those who took the reputation in 2009 and 2010 were not required to make any repayments. Those who took the reputation in the later two years also got a higher reputation of ,000.00. According to a record from Tigta, the Irs overpaid taxpayers by 3 million straight through wrongly allocating the homeowners credits. The complications of the reputation also resulted in many taxpayers' tax refunds being delayed for a while. The taxpayers generally affected were those who took the 2008 reputation and had whether sold their homes and/or those who took less than the reputation cap for that year.
The Earned wage Tax reputation (Eitc)
The other area that brought errors in 2009 and 2010 tax returns was the Eitc, at one time known as the development Work Pay credit. In 2009, the Irs reported errors of .4 million relating to this credit. The Tigta also reported a high error rate for the 2010 tax year for this credit. Finding into the 2011 tax year, taxpayers will need to ensure that they follow the guidelines for qualification and follow the rules in case,granted when claiming this credit.
Unemployment Benefits
Unemployment Benefits was other area that had many errors in the 2010 tax year. The errors were generally brought about by the changes in handling the benefits in 2009 and 2010. In 2009, the benefits were not fully included in the wage for taxation purposes. However, in the 2010 tax year, the whole unemployment benefits were to be included in the wage section and the relevant taxes were required to be paid.
Roth Ira Conversions
The Roth Ira conversions were other area that brought obscuring in the 2010 tax year. For the first time, taxpayers who earned over 0,000.00 in incomes were allowed to convert their customary Ira accounts into Roth Ira accounts in 2010. For one to do this, he or she was predicted to pay taxes on the equilibrium on one's Ira list in order to move funds to a Roth Ira. Many taxpayers in this wage bracket went for the conversions. However, there was also a window in case,granted until September 2011, technically, to re-characterize the Ira account. Re-characterizing the list means reversing the conversion by transferring funds from the Roth Ira list back to a customary Ira account. The complications of conversions and re-characterizations brought quite some obscuring to taxpayers in the 2010 tax year and are predicted to work on many as they record their 2011 taxes in year 2012.
These are some of the areas that taxpayers will need to look out for when filing their 2011 tax returns. Furthermore, there are some new tax reliefs and changes to the tax code that work on the 2011 tax year and taxpayers will need to look out for these new tax changes as well.
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