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Emancipation Day 2012: Federal Tax Returns due April 17th

For Tax Season 2012, the due date for the 1040 family of returns for 2011 is April 17, 2012. Read More

Registered Tax Return Preparer Competency Exam Information Released

In news release IR–2011–111 the IRS announced that the Registered Tax Return Preparer competency exam is now available. Paid preparers who obtain a PTIN before April 18, 2012 have until December 31, 2013, to pass the exam. Read More

Payroll Tax Holiday Extended to February 29, 2012

The Temporary Payroll Tax Cut Continuation Act of 2011 has temporary extended the 2 percentage point reduction in the social security tax rate through February 29, 2012. Read More

Penalty Relief for U.S. Citizens Residing in Canada and Other Countries

Following extensive publicity surrounding IRS enforcement of foreign bank account reporting rules, many U.S. citizens living abroad have only recently became aware of their U.S. tax reporting requirements. Read More

New Guidance on Ponzi Scheme Theft Losses

The IRS has issued Rev. Proc. 2011-58 addressing situations in which a lead figure involved in an investment theft loss known as a Ponzi scheme dies before being charged with criminal theft. Read More

Contractor′s Transportation Expenses to Temporary Worksites are Nondeductible Commuting Expenses

The Tax Court ruled that an independent contractor′s transportation expenses to a series of temporary work locations outside of his Cherry Hill, NJ, home were nondeductible commuting expenses. Read More

New York Personal Income Tax Reform
The New York legislature convened a special session and voted in favor of personal income tax reform.
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Wisconsin Child and Dependent Care Deduction A Department of Revenue release reminds taxpayers they may subtract child and dependent care expenses on their Wisconsin returns starting in tax year 2011. Read More

Alabama Gross Income Tax Rule
The Alabama Department of Revenue has finalized three income tax regulations collectively referred to as the "gross income tax" regulation.
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State Tax Issues
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References

The Tax Institute has created several quick reference cards and overviews to update tax professionals on tax law changes, aid in return preparation, or assist with counseling clients. The quick reference cards contain very high level explanations of the key information while the overviews provide in-depth explanations.

Available Quick Reference Cards:

Impact of Key Tax Law Changes — Calendar Year 2011 and 2012
2011 State - IRC Conformity Chart
2011 State Snapshot and Return Filing Information
Balance Due Chart — Payment options for taxpayers facing a balance due
Federal Filing and Payment Options for Taxpayers Considering Extensions

Available overviews:

Tax Relief Act of 2010
Health Care Reform Acts of 2010

Question of the Week

Q: We were reviewing a client′s 2011 tax situation. The client has sold several long–held stocks and mutual funds and expects to have net capital gain of about $1,000. To offset the gain, he′d like to sell one particular stock for a loss. He told us that the stock has been and should continue to be pretty volatile through the end of the year. However, he′d like to buy it back early in 2012, assuming the price is still low, in the expectation that it will increase in value in the future. If he sells the stock in December, can he deduct the loss and then buy it back in January?

A: Your client can certainly sell the stock and buy it back, but he may not be able to deduct the loss. Under the "wash sale rules" of §1091, a taxpayer who sells stock or securities at a loss and, within 30 days before or after the sale, buys substantially identical stock or securities, may not deduct the loss or use the loss to offset other gains. Instead, the disallowed loss is added to the taxpayer′s basis in the stock.

Example. On December 20, 2011, a taxpayer sells 100 shares of QXR Common A for $4,000. The taxpayer′s basis in the QXR shares is $5,000. On January 2, 2012, the taxpayer purchases 100 shares of QXR Common A for $4,100. Because a wash sale has occurred, the taxpayer cannot deduct the $1,000 loss. The taxpayer′s basis in the repurchased shares is $5,100 ($4,100 purchase price + $1,000 disallowed loss).

The wash sale rules prevent a taxpayer from selling stock and buying it back shortly thereafter for the sole purpose of creating a deductible loss. Note that if the taxpayer in this example waits more than 30 days to repurchase the stock, the loss would be fully deductible. Also, if the taxpayer bought a different type of stock–QXR Preferred, for example–he would not have a wash sale. Whether the repurchased stock is "substantially identical" to the sold stock depends on facts and circumstances.

A wash sale also occurs if the taxpayer sells stock and substantially identical stock is purchased within 30 days by:

The taxpayer′s spouse
A corporation or other entity that the taxpayer controls
An IRA (traditional or Roth) owned by the taxpayer

For more information on wash sales, see "What is a wash sale?" in the Tax Research Center′s tax knowledge base. Although the loss from a wash sale is not deductible on the current year tax return, taxpayers must still report the transaction on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D. Instructions for reporting a wash sale are located in the Schedule D (Form 1040) Instructions.

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Health Care Estimators

Use these estimators to help clients understand potential financial impacts of the health care legislation to their personal situation and / or on their business.

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Quick Links

The Tax Institute has compiled useful tax-related links to assist you.

Experiencia en Español

El Tax Institute emplea a profesionales que son fluidos en Español, aquí usted puede obtener respuestas a sus preguntas impositivas en Español.

Para que podamos servirle mejor, El Tax Institute ha compilado enlaces útiles que tratan de temas impositivos.

TAX in the News

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