For the 2011 tax season, taxpayers should be mindful of four changes to tax reporting rules when they begin the unexciting task of filing tax returns.
These changes would be of utmost relevance to investors, Roth converters, PayPal merchants, and offshore tax cheats.
Capital Gains and Losses
In most cases, investors will have to use the new Form 8949 to report capital gain and loss transactions for traded securities. The formerly used Schedule D is now a summary sheet for reporting total sales prices, basis, and other adjustments for all individual transactions, and for calculating the tax.
Form 1099-B’s provided by brokers will assist taxpayers on completing Form 8949.
In 2011, a taxpayer who converted to a Roth IRA from other types of retirement plans must report all income that results from the conversion on Form 8606.
Taxpayers who conducted conversions in 2010 must report half of the resulting income in tax-year 2011; the rest is reported in 2012, unless all of the resulting income was reported in 2010.
All U.S. payment providers, such as PayPal, will be required by the Internal Revenue Service (IRS) to report sales information about certain customers who receive payments through these payment providers when they sell goods and services.
Although all sellers are expected to voluntarily report any sales to the IRS, payment service providers will be sending Form 1099-K to sellers who receive over $20,000 in gross payment volume for sales of goods or services and receive 200 payments for goods or services in the same calendar year.
A new amnesty program will impose lower penalties on taxpayers who have, so far, failed to report offshore accounts. The program will have a 27.5% penalty on the highest aggregate balance in a taxpayer’s overseas accounts in the 8 years before disclosure. Balances of $75,000 less face a 12.5% penalty. For some, it could be as little as 5%. The IRS says that these terms can change any time, and the program has no firm deadline but the program could end at any time.
In all instances, it is always a good idea to consult a tax professional for your particular tax situation.Related