Recent Tax Law Changes
As I’ve said before, tax laws are constantly changing and it’s important to stay abreast of the changes to ensure that your tax returns are accurate and you pay as little in taxes as legally allowed. Below are some recent changes, some of which will affect your 2011 tax returns and others that will impact you and/or your business in 2012.
1. Schedule M: No Longer Required
In prior years (2009 and 2010), you were given a $400 credit per person. This was replaced in 2011 with the 2 percent payroll tax reduction that reduced the Social Security contribution for employees from 6.2 percent to 4.2 percent. For self-employed individuals, this means that your self-employment tax went down from 15.3 percent to 13.3 percent (up to $106,800). Schedule M is no longer part of your tax package.
2. Health Insurance Deduction:
If you are self-employed or a partner in a business, you can now deduct what you pay for health insurance for you and your family when calculating your self-employment income. This should lower both your taxable income and self-employment taxes.
3. New Reporting Requirements:
Stock Sales - Schedule D: Starting in 2011, your 1099-B (which is the form that you receive from your broker for stock sales) will include the cost basis. This will help taxpayers know their true cost basis and will save time during tax season. This means, however, that you can’t embellish your cost basis and reduce your capital gains.
1099-K: This is a new form for those who have received payments via PayPal, Amazon or other electronic payment services. You will receive Form 1099-K if you earned over $20,000 a year or you were given more than 200 separate payments. If you sell a lot of things over Ebay, for instance, you may be subject to this and will receive a tax form that you haven’t in the past.
4. MTA Tax:
Self-employed individuals (including partners and members):
For tax years beginning on or after January 1, 2012, you’re not subject to the MCTMT if your net earnings from self-employment allocated to the MCTD are $50,000 or less for the tax year. (The threshold has increased from $10,000 to $50,000.)
Note: You’re still required to file your annual return for tax year 2011 on April 30, 2012, if your net earnings exceeded $10,000 in 2011.
Beginning with the second quarter (4/1/12-6/30/12), if your payroll expense for the quarter is $312,500 or less, you’re not subject to the MCTMT for that quarter.
If it exceeds $312,500, use the appropriate rate shown below.
|Payroll expense||MCTMT Rate|
|Over $312,500 but not over $375,000||.11% (.0011)|
|Over $375,000 but not over $437,500||.23% (.0023)|
|Over $437,500||.34% (.0034)|
Note: The payroll expense threshold for the first quarter remains $2,500 and the rate remains .34 percent. If your payroll expense exceeds $2,500 for January 1, 2012 through March 31, 2012, you’re subject to the MCTMT and must file a first quarter return due April 30, 2012.