Photo: Flickr / rangerholton
Tax season is upon us (cue the groans), which means you’d better start tallying those deductions and organising your paperwork. We tapped Barbara Weltman, nationally-recognised tax attorney with J.K. Lasser, for comment on five significant changes to 2011’s 1040.
1. Changes to Schedule D
Instead of listing capital gain and loss transactions on Schedule D with additional entries on Schedule D-1, now you’ll need to list short- and long-term capital gain and loss transactions on the new Form 8949. The totals are then transferred to Schedule D, which acts as a summary.
Who it affects: Anyone selling shares of stocks, bonds, etc. in a taxable account. It could also affect landlowners and collectors, says Weltman.
Keep track: Check the mail for a 1099 B form from your brokerage account, which you can use to tally up your short- and long-term gains and losses.
2. New Form 8938
All U.S. citizens must fill this out, which may be required in addition to the annual reporting of foreign accounts with the Treasury (on TD 90-22.1) each June.
Who it affects: Americans holding foreign accounts.
Keep track: Check Form 8938 for instructions to figure out whether you qualify to file. “It offers extensive examples,” says Weltman. Also view these essential tax tips for Americans living abroad.
3. Self-employment savings
Thanks to the payroll tax cut, self-employed taxpayers score a 2 percentage point reduction on the employee portion of their Social Security taxes (self-employed workers pay both employee and employer shares). This is shown in Schedule SE.
As a bonus, these workers can still deduct the full employer’s share on their tax returns, making this change a win-win, says Weltman.
Who it affects: Self-employed taxpayers.
Keep track: Crack open your filing cabinet to review last year’s income and expenses. Also check out this post for more info on what you can and can’t deduct in 2011.
4. Schedules L and M are no longer in use.
The Making Work Pay Credit listed on Schedule M and used in 2009 and 2010 has expired. Same goes for Schedule L, which was used for additional standard deduction amounts on items like real estate taxes, sales tax on car purchases and disaster losses, says Weltman.
Who it affects: Homeowners, car buyers, green taxpayers.
Keep track: Check here for a list of other consumer-friendly deductions that expired in 2011.
5. Alternative minimum tax exemptions on Form 6251 increased.
Thank inflation for this one, says Weltman. For single filers, the 2011 amount has increased to $48,450, $74,450 for married couples filing jointly or qualifying widowers, and $37,225 for married couples filing separately.
Who it affects: Married couples filing together or independently; single taxpayers and widowers.
Keep track: Decide your filing status first, then sure to crunch the numbers to ensure you’ll get the best tax break, says Weltman.
Ready for tax season? See which tax documents to keep, toss or shred >