2011 Tax Legislation. My Alabama Taxes. Alabama Department of Revenue. AGA Presentation Individual Income Tax Fall, 2011

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1 Alabama Department of Revenue AGA Presentation Individual Income Tax Fall, 2011 James Lucy Director Individual and Corporate Tax Division My Alabama Taxes As a registered user you can: View & print copies of returns Make payments Recent filing & payment histories Request record changes (such as address) View letters from Department Send & receive messages to/from Department 2011 Tax Legislation 1

2 Full Employment Act of Allows deduction for employers that create new jobs for unemployed persons Deduction is percentage of gross wages and varies based on the hourly wage rate 50 percent of gross wages paid to each new hire if the wage rate is $14 per hour or higher Full Employment Act of percent of gross wages paid to each new hire if the wage rate is between $12 and $14 per hour 35 percent of gross wages paid to each new hire if the wage rate is between $10 and $12 per hour No deduction is allowed if the wage rate is less than $10 per hour Effective for tax years 2011 and 2012 Small Business Health Care Deduction Act Increases deduction to 200% of insurance premiums Less than 25 employees (for employers) after December 31,

3 Small Business Health Care Deduction Act Increases deduction to 200% of insurance premiums Annual wages of less than $50,000 (for employees) AGI less than $75,000 ($150,000 AGI) after December 31, Full Employment Act of Small businesses-50 or fewer employees $1,000 credit for each new job created Corporate Income tax Financial Institution Excise Tax Wages exceeding $10 per hour Full Employment Act of Available in tax year after employee has completed 12 months of consecutive employment after January 1,

4 Homeowners Insurance Retrofitting Provides income tax deduction to retrofit or upgrade home to make the residence more resistant to loss due to hurricane, tornado, etc. Effective June 9, Homeowners Insurance Retrofitting Lesser of: 50% of the cost of retrofitting or $3000 Available to taxpayers whether or not they itemize deductions. Effective June 9, Adjustment line has been added to Form 40. Income Tax Refund Check-Off Contribution to the Alabama Firefighters Annuity and Benefit Fund. beginning after December 31, New charity deduction- Schedule DC 4

5 Income Tax Refund Check-Off Contribution to the Alabama State Historic Preservation Fund. beginning after December 31, Federal Changes Affecting Alabama Roth IRA s Alabama income tax law is tied to the same treatment of the IRS Code that allows a 2010 rollover from a traditional IRA to a Roth IRA. Gain will be equally spread out and reported over tax years 2011 and

6 Depreciation Changes Alabama will follow the increased deduction allowed under the recently-enacted Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of Amends Section 168(k) of the IRC. Qualifying assets acquired after September 8, 2010 through December 31, 2011 will have a 100% bonus depreciation. Depreciation Changes Alabama is also following the increased deductions allowed by the Small Business Jobs Act of 2010, which amends Section 179 and 168 of the Internal Revenue Code. DISASTER RELIEF PAYMENTS Alabama will follow the IRS treatment of the qualified disaster relief payments under IRC 139. Not taxable as long as not in lieu of income. Except for unemployment compensation-alabama does not tax these payments. 6

7 Regulation Changes Gross Income Regulation , , Amends gross income regulation to reflect current law Requires resident individuals to report their entire distributive share of income as AL income regardless of source Credit allowed for taxes paid to other states Effective September 7, Electronically Filed Returns Individual Income Tax Returns 40 NR returns can be filed electronically for

8 Forms Changes The Department will not mail any income/business privilege tax forms this year. Can download and print all tax forms from our website. Will send to libraries and taxpayer service centers. MAILED FORMS Form 40-Individual Income Tax Schedule CR New calculation for credit for taxes paid to another state Credit is the lesser of: Tax due the other state using Alabama rates The tax due shown on the other state s return The tax due on the Alabama return The Alabama tax multiplied by the percentage of the non- Alabama AGI divided by the Alabama AGI 8

9 Questions?? Ann F. Winborne, CPA