Making Sense of the Cents: Tax Law Changes for 2011

The “Taxman” is a dreaded image, as most of us cannot even begin to understand many of the rules, rates and regulations that make up our tax laws. Things can get even harder when they make changes—and some of the practices you’ve been used to over the years can now result in an audit. Patch is here to help you understand some of the differences coming for 2011.

There is one change this year that everyone can appreciate: an April 18 tax return deadline.

“Washington, D.C., has a national holiday [Emancipation Day] that falls on April 15, so the due date is always the following day on April 16,” said Barbara Vondra, a Darien resident who has run her own practice here for the past eight years. “Well, because this year April 15 falls on a Friday their holiday is technically a Saturday, but because holidays [aren't observed on weekends], they have until Monday to file their tax returns.”

The extra time is a welcome relief for those who have a habit of waiting until the last second to file their tax returns and now gives everyone the weekend to make sure they do it right. Vondra recommends using the time to plan for the future. “You kind of have to look at your whole tax situation, look at where your next year is going to be, where this year is going to be and do some tax planning in that respect,” she said.

For some people, that may include planning way ahead. The estate tax (commonly referred to as the "death tax"), was put on hold for 2010, but it's back this year in a different form. There was talk about returning to a $1 million exemption (no tax for estates worth less than $1 million) with amounts exceeding that being taxed at 55 percent. But the agreed upon changes mean the untaxable amount will now be $5 million dollars, with the taxation rate reduced to 35 percent.

This is a major change for many local residents, according to accountant Kevin Kane, who has been a CPA for the past 31 years.

“By raising the limit from $1 million dollars to $5 million dollars, it takes guys like you and me out of the picture," Kane said. "You have to be extremely wealthy in our society for this estate tax to affect you in any way.”

Though they were set to expire at the end of 2010, the President George W. Bush-era tax rates passed in the early part of the millennium will continue to be in effect.

“The single biggest thing people need to understand about this tax act is that it wasn’t something that brought about a lot of changes, it is something that kept the status quo in place,” Kane said. “As you prepare your personal income tax returns you’re going to see that things look a lot like they looked in the previous year.”