Tuesday, May 31, 2011

Tax Man News

By J.C. Harrison, Simplified Business & Tax

Be sure to fine-tune your estimated tax payments and withholding for 2011 if you owed a lot of tax for 2010 or you expect you'll be short for this year. You need to adjust estimated tax payments now. But you can wait until year-end to boost withholding, because withheld tax is treated as if paid evenly over the year. Additional income tax can be withheld from a Dec. IRA payout, for example. You needn't prepay all the tax you might owe for 2011, just an amount equal to 90% of it, or 100% of your 2010 tax bill (110% if your AGI exceeded $150,000 in 2010). Doing so avoids the underpayment penalty, even if you end up owing IRS a lot of tax.
 Self-employeds can amend prior year returns to deduct Medicare premiums as part of their income tax deduction for health insurance on Form 1040, IRS says in Pub. 535. Many didn't write off the premiums in pre-2010 years because the instructions for those prior years said the amounts were not deductible. Pub. 535 and the 1040 instructions for 2010 now expressly allow this write-off.

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