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Disappearing Tax Exemptions

August 17th

Many taxpayers found themselves very disappointed when the time came to file their 2010 tax returns. Most people weren’t prepared for the amount of tax liabilities they would be responsible for, leaving many with tax debt. Despite the extension of certain Bush-era tax rates, many of the breaks that had previously existed were abolished this year. Taxpayers should ensure that they are fully aware of all the changes to the tax code.

Given the constant fluctuations in the tax code at present, taxpayers should be certain to visit publisher’s web sites for any updates to tax books they may have bought. The IRS has also been struggling to keep its web site, www.irs.gov fully up-to-date with all the latest changes.

The following are some of the most significant tax breaks to have disappeared this year:

  • Exclusion from income of up to $2,400 in unemployment compensation. For 2010 all unemployment payments were generally subject to taxation.
  • Add-ons to the standard deduction for net disaster losses, as well as that for real estate taxes
  • Government retiree credit
  • Itemized or Increased Standard Deduction for state or local sales
  • Homebuyer’s credit. For 2010 the credit was generally only available to those who had signed a contract prior to May 1 and closed before October 1.

Now that the debt ceiling agreement has been reached, President Obama has announced plans to simplify the tax code further. If successful, these changes ought to make the process of filing tax returns much easier for us, as well as for the IRS. There are also newer tax breaks appearing, particularly relief directed at small businesses.

It is therefore important to keep abreast of any changes that may be appearing, both to ensure that no former tax breaks are included on forms, and also to make certain that any new benefits or changes are included as well.

 
 
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