As we enter the 2011 tax return filing season, we again recognize that many different tax forms underwent administrative and legislative changes over the past year. This article reviews some of the changes to the 2011 Form 1040 – U.S. Individual Income Tax Return for income tax residents.

  • Form 1040 Due Date: The due date is April 17, 2012 because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia. The April 17 due date applies even for taxpayers who do not live in the District of Columbia.
  • Roth IRA Conversions:  A taxpayer who converted or rolled over an amount to a Roth IRA in 2010 and chose to report the taxable amount on his 2011 and 2012 returns must report the amount that is taxable on his 2011 return.
  • IRA Deduction: A taxpayer may be able to take an IRA deduction if he was covered by a retirement plan and his 2011 modified AGI is less than $66,000 ($110,000 if married filing jointly or qualifying widow(er)). If the taxpayer’s spouse was covered by a retirement plan, but the taxpayer was not, he may be able to take an IRA deduction if his 2011 modified AGI is less than $179,000.
  • Standard Deduction: For 2011, the standard deduction is $5,800 for single filers and for married persons filing separately, $11,600 for joint filers and qualifying widow(er)s, and $8,500 for heads of household. Schedule L (Standard Deduction for Certain Filers) is no longer in use. A taxpayer does not need it to figure his 2011 standard deduction.
  • Exemptions: The amount for each exemption for 2011 is $3,700.
  • Self-Employment Tax: Maximum amount of self-employment income subject to FICA tax is $106,800; no ceiling on Medicare wage base. The self-employment tax rate is reduced from 15.3% to 13.3%. Health insurance costs for a taxpayer and his family are no longer deductible in computing self-employment tax.
  • First-time Homebuyer Credit: To claim the first-time homebuyer credit for 2011, the taxpayer (or his or her spouse if married) must have been a member of the uniformed services or Foreign Service or an employee of the intelligence community on qualified official extended duty outside the U.S. for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.
  • Schedule D: New Form 8949, Sales and Other Dispositions of Capital Assets, replaces Schedule D-1. Taxpayers must complete new Form 8949 before completing Schedule D, in order to report the sale or exchange of a capital asset not reported on another form or schedule. A taxpayer who sold a covered security in 2011 should be sent a Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, from his broker that shows his basis. This will help in completing Form 8949. Generally, a covered security is a security acquired by the taxpayer after 2010, with certain exceptions explained in the instructions for Form 1099-B.

This article reviews only a few of the major changes which may appear on your 2011 tax return. If you have any questions about the above changes, or your 2011 tax return, please contact your tax return preparer or info@thewolfgroup.com.

This newsletter is for informational purposes only. It should not be construed as tax, legal, or investment advice. Information has been gathered from sources believed to be reliable, but individual situations can vary and you should consult with your investment, accounting and/or tax professional.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY THE WOLF GROUP TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.