Setting You Straight for 2011 Taxes

Keeping tax details straight is tough, for individuals and for companies. But the most important thing to remember is to be prepared.

It’s been reported that after 2012, many provisions are set to change back to where they were even before 2001. And last year’s 11th-hour tax changes, while favorable by most, are only temporary, meaning rates are set to spike in the future.

With tax season now kicking off, we seek the help of Laura Sanders from The Wall Street Journal whose article “Tax Changes for 2011: A Checklist” can help you prepare for what’s ahead. Pulling a few key pieces from her article, it’s time to get out your spreadsheets and start building your checklist.

Income Tax and Investment Tax Rates:

Income tax rates will carry over from last year with room for inflation adjustments. Investment tax rates remain low: zero for taxpayers in the 15% tax bracket and below; 15% for those in the 25% bracket and above.

Source: MarketWatch; IRS

Payroll Taxes:

Last year’s temporary two-percentage-point cut in the employee’s share of Social Security taxes remain the same.

Each partner of a married couple can again save a maximum $2,136. For most, this will come in the form of an automatic adjustment to withholding.

Roth IRA conversion:

The income limit for conversions has been permanently removed, so this year all taxpayers may still convert ordinary IRAs into Roth IRAs.

But taxpayers who convert to Roth IRAs in 2011 no longer have the option of deferring conversion income into later years, as was true for 2010 conversions. Those who converted in 2010 have until next Oct. 17 to decide whether to use this deferral.

Medical expenses:

Workers with Flexible Spending Accounts (FSAs) may no longer use pretax funds to pay for many over-the-counter medicines—aside from insulin—without a prescription. But FSA funds may still be used for other, nonprescription medical. For a list of what is allowed by law, see IRS Publication 502.

For an entire list of 2011 tax changes, check out the rest of Sanders article here.