Accounting Professor Addresses New Tax Law for 2010 Filers
Contact: Steve Colburn, 581-1982; George Manlove, (207) 581-3756
ORONO — University of Maine accounting professor Steve Colburn is available to discuss how some recent tax law changes will affect taxpayers filing 2010 returns.
Overall, individuals and business will pay much less in income taxes for 2010 and beyond because of the new tax law changes, according to Colburn, who also oversees the Maine Business School’s free public tax-assistance program offered by accounting students each spring.
New tax rules are complicated and often difficult to understand, says Colburn, who suggests filers check with a tax professional or the IRS for detailed help.
On Dec. 17, 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Act), passed earlier in December by the House and Senate. The procrastination by Congress in passing the law so late in the year will affect when some individuals may file their 2010 tax returns, according to Colburn. Folks who: 1) itemize their deductions by filing Schedule A, or 2) claim tuition and fees deductions (not credits) for higher education, or 3) claim the $250 deduction for out-of-pocket expenses for kindergarten through grade 12 teachers, will have to wait until mid to late February to file because the IRS needs that time to reprogram its computers, he says. The IRS will send out a notice letting affected taxpayers know when to file.
The good news is that the Tax Act extended for the 2010 and 2011 tax years certain tax benefits that had expired before the 2010 tax year including: 1) the choice to deduct state and local sales and use taxes instead of state and local income taxes on Schedule A; and 2) the deductions mentioned above for tuition and fees and for teachers.
Another benefit for 2011 will reduce payroll (FICA) taxes paid by workers and the self-employed by two percentage points. Typically, employees pay a Social Security tax equal to 6.2 percent of wages (up to $106,800 in wages for 2010). This rate will drop to 4.2 percent for 2011, saving a maximum of $2,136 for 2011.
Marginal tax rates also were kept at 2009 levels and not increased by three percentage points, as originally scheduled, for tax years beginning after 2010.
The bad news is that some special tax benefits available in 2008 and or 2009 are not available in 2010. These deductions included: 1) the additional standard deduction amount (up to $500 if single or $1,000 if married filing jointly) for property taxes paid to state and local governments by non-itemizers, and 2) the exclusion of up to $2,400 in unemployment benefits.
Even though 2010 is over, filers may still do one major thing to reduce their 2010 tax burden: contribute to a conventional IRA by April 15, 2011.
Doing so will allow filers to deduct up to $5,000 ($6,000 if over age 50 by Dec. 31, 2010) on 2010 tax returns.
The IRS has forms and publications (Publication 17 is very helpful for individuals, but the 2010 version may not be available for a while) at www.irs.gov and at its 324 Harlow St., Bangor office, which has IRS employees available.
Colburn can be reached at (207) 581-1982 or at colburn@maine.edu for more information.