Do you file your own tax return without the aid and assistance and crying shoulder of a tax professional? Brave soul. I agree with you– it should not be difficult for Americans to file their own returns. Well, no one is listening apparently. Here are three new forms for you to tackle this year (this is not an exhaustive list – but perhaps exhausting):
- Capital Gain/Loss Reporting on Your 2011 Tax Return. There is for 2011 a NEW form [Form 8949 http://www.irs.gov/pub/irs-pdf/f8949.pdf ] to report gains and losses of certain capital assets. It relates to basis. Securities brokers are now required to tell you what your basis was, starting with securities purchased/acquired in 2011. So, if you bought a security in 2011 and sold it in 2011, you will be filing Form 8949 for sure. But then if you sold anything in 2011, you will also be filing Form 8949. That includes real estate if not reported elsewhere in your return. Each transaction must be line itemed and separate forms filed for each type of transaction (long or short) and whether or not the broker reported basis or you did not get a 1099-B for the transaction. Find the instructions here http://www.irs.gov/instructions/i1040sd/ch02.html. If you are a day trader with 82 pages of stock trades, you may summarize on your e-filed form, but will need to send the detail to IRS with Form 8453. Simple, eh? 🙂 Oh yes, you will still file Schedule D, too.
- Foreign Asset Reporting. If you have foreign assets as of and after March 18, 2010, the government wants to know. You will include 2010 assets along with the 2011 assets on your 2011 tax return. You will ALSO continue to file the TDF90-22.1 to Treasury and the Form 8891 if you have Canadian retirement funds. Serious stuff – it is why we ask at least 4 times on the organizer if you have foreign assets. Here are the links to IRS to see the new form and the instructions: http://www.irs.gov/pub/irs-pdf/f8938.pdf http://www.irs.gov/pub/irs-pdf/i8938.pdf. You will find lists of the assets that must be reported on page 4 of the instructions along with complicated descriptions of who must file (page 1 through 3). As of last week, there was still discussion over real estate – it would appear that you do not have to report real estate in a foreign country even if it is a rental property…but what if it is held in an LLC—common in many countries? Then you don’t own real estate, you own a “capital or profits interest in a foreign partnership” or perhaps an “interest in any specified foreign financial asset(s) owned by the disregarded (ie single member) entity.” And bingo – you may have reportable assets. What about stock in foreign companies held in your trading account or 401(k)? Those are not reportable assets – IF you are buying/selling through a US brokerage. As I mentioned – this is serious stuff. DO NOT BLOW IT OFF. Seek advice and assistance if necessary. And DO NOT forget to mention foreign assets to your tax preparer. Please.
- Earned Income Tax Credit. The IRS encourages you to claim your credit if you are eligible : http://www.irs.gov/newsroom/article/0,,id=106429,00.html but warns that there are some stiff penalties for trying to fraudulently game the system. The IRS is really cracking down. And should IMHO. Remember to file Schedule EIC with your request for this refundable credit. For the first time, paid preparers are required to file Form 8867—we used to be able to fill it out and stuff it in a file, but now the IRS wants to see it. It is basically a checklist for preparers to remind us to ask a lot of questions to make certain that our clients are indeed eligible – so once again, we are cast in the role of watchdog. Sigh.