Every worker gets to keep their raise for a little longer
Last year, every employee's take-home pay increased by 2% because businesses were required to reduce FICA tax withholdings by 2% and pay this amount directly to its employees. This payroll tax reduction was extended through the end of February 2012, and may be extended beyond this date.
A tax credit for businesses that retain their newly hired employees
Businesses that hired new employees in 2010 are eligible for a $1000 tax credit per employee hired when they file their 2011 tax return. This only applies if the new employee had been previously unemployed for at least 60 days and once employed, remained employed for at least 52 weeks.
All good things (like deductions and credits) must come to an end
Unless extended by Congress, 2011 is the last year for credits for working, college tuition, and energy-efficient improvements for your home along with deductions for sales tax, mortgage insurance premiums and teachers buying school supplies.
Where is my Social Security statement?
Even the Social Security Administration is cutting back. The annual statement it usually mails to taxpayers so they can verify their earnings history will no longer be mailed due to budgetary constraints. Taxpayers may contact their local Social Security Office to request their statements if they wish to review their earnings and potential Social Security benefits.
More disclosure from wholesalers and financial institutions
Originally slated to take effect in 2011, but now delayed until 2012, wholesalers and financial institutions are required to report their total sales data to the IRS by customer. This is part of an IRS strategy to identify businesses underreporting their gross sales. For example, once the IRS knows how much food and alcohol a restaurant buys from a wholesaler, it can estimate the restaurant's gross sales. If this estimate varies dramatically from the restaurant's tax return, the IRS is likely to initiate an audit. Along these same lines, credit card companies will now disclose to the IRS the amount of money deposited in a business bank account, and Ebay/Paypal must disclose how much a business is selling online.
The estate tax and gift tax exclusion roller coaster settles on $5M for two years
To say estate planning can be complicated is an understatement. Congress added to the complexity by changing the estate tax exclusion amount almost every year for the past decade. In 2011 and 2012, the estate tax and gift tax exclusion rests at $5M. Thus you can bequeath at your death or gift during your life up to $5M worth of assets and not be subject to any estate tax or gift tax. Anything above that amount could be subject to a 35% tax. In 2013, the threshold will drop to $1M and anything above that amount could be subject to a 55% tax!
Please note: The tax law changes listed above are meant to summarize the major changes in the tax law and should be discussed with your tax advisor as how they might be applicable to your specific situation.
