Tax Law Changes : Tax-Year 2010 Businesses

Pick a topic from the list below to learn about the tax changes:

5-Year Carryback of Applicable Net Operating Losses (NOLs) and Losses From Operations

The Worker, Homeownership and Business Assistance Act of 2009 allows most taxpayers to elect a 3, 4, or 5-year carryback period for an applicable NOL or loss from operations to offset taxable income in those preceding taxable years. This change applies to tax years ending after December 31, 2007, and beginning before January 1, 2010. The election is irrevocable, and generally can be made for only one tax year. An NOL carried back five years may offset no more than 50 percent of a taxpayer's taxable income in that fifth preceding year.

For a corporation, the election must be filed no later than the due date (including extensions) for the corporation's tax return for its last tax year beginning in 2009. If the corporation filed its return without making the election, under section 301-9100-2(b) of the Procedures and Administrative Regulations, the corporation can still make the election within 6 months of the due date of the return (excluding extensions).

For more information, see the Instructions for Form 1139 (Rev. August 2010). Also see Notice 2010-58, the FAQ web pages, and Revenue Procedure 2009-52.

Last Updated: November 13, 2010

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Affordable Care Act Tax Provisions

Información en Español: Disposiciones del Acta del Cuidado de Salud de Bajo Precio

The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that take effect this year and more that will be implemented during the next several years. The following is a list of provisions now in effect; additional information will be added to this page as it becomes available.

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.

Changes to Flexible Spending Arrangements

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. The new standard applies only to purchases made on or after Jan. 1, 2011, so claims for medicines or drugs purchased without a prescription in 2010 can still be reimbursed in 2011, if allowed by the employer’s plan. A similar rule goes into effect on Jan. 1, 2011 for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions for 2011.

For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers.

FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.

IRS partners can spread the word to their clients with the help of a Health Plan Changes flyer and a drop-in article, Does your Healthcare Program need a checkup?

Health Coverage for Older Children

Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.

Excise Tax on Indoor Tanning Services — First Quarterly Payment Due Nov. 1, 2010

A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. The first payment of the tax was due Monday, Nov. 1. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. For more information on the tax and how it will be administered, see our news release, video, questions and answers and legal guidance.

Employer-Provided Health Coverage — Not Taxable; Reporting Requirement Optional in 2011

Starting in tax year 2011, the Affordable Care Act requires employers to report the value of the health insurance coverage they provide employees on each employee's annual Form W-2. However, to provide employers the time they need to make changes to their payroll systems or procedures in preparation for compliance with this requirement, the IRS will defer the reporting requirement for 2011, making that reporting by employers optional in 2011.

The revised Form W-2 for 2011 is now available in draft for viewing. This is the W-2 that most employees will receive in early 2012. The draft form includes the codes that employers may use to report the cost of coverage under an employer-sponsored group health plan.

This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee's income, and it is not taxable.

For information, see our news release, draft form and guidance.

Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,170 per child, up from $12,150 in 2009. It also makes the credit refundable, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to filling out Form 8839, Qualified Adoption Expenses, eligible taxpayers must include with their 2010 tax returns one or more adoption-related documents.

For more information, see our news release, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31 and Revenue Procedure 2010-35.

Qualified Therapeutic Discovery Project Program

This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants were required to have their research projects certified as eligible for the credit or grant. IRS guidance describes the application process.

Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010, were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29, 2010, advising whether or not the application for certification was approved. For those applications that were approved, the letter also provided the amount of the grant to be awarded or the tax credit the applicant was eligible to take.

The IRS published the names of the applicants whose projects were approved as required by law. Listings of results are available by state.

Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury, the page on the HHS website and our questions and answers.

Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found in Notice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Other information on requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance.

Medicare Part D Coverage Gap "donut hole" Rebate

The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.

Additional Requirements for Tax-Exempt Hospitals

The Affordable Care Act adds requirements in the Internal Revenue Code that tax-exempt hospitals must meet to maintain their tax-exempt status. More information can be found in Notice 2010-39, which solicits written comments on the application of the new requirements. Comments must have been submitted by July 22, 2010.

Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers

The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. More information can be found in Notice 2010-71, which provides proposed guidance and solicits comments on the new fee, and on Form 8947, Report of Branded Prescription Drug Information.

Modification of Section 833 Treatment of Certain Health Organizations

The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. Guidance can be found in Notice 2011-04, which provides procedures for a taxpayer to obtain automatic consent to change its method of accounting for unearned premiums.

Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers

The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. Initial guidance on the application of this provision can be found in Notice 2011-2, which also solicits comments on the application of the amended provision.

For More Information

For tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.

Last Updated: December 27, 2010

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Alcohol and Cellulosic Biofuel Fuels Credit

2009 Changes

The following changes apply to the alcohol and cellulosic biofuel fuels credit.

  • For ethanol sold or used after 2008, the credit rate is lowered.
  • For fuel produced, and sold or used, after 2008, the credit is expanded to include the cellulosic biofuel producer credit.
  • For fuel sold or used after 2008, the percentage of denaturants included in the volume of alcohol used to figure the credit is lowered.

For more information, see Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit.

Last Updated: October 14, 2010

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Alternative Fuel Vehicle Refueling Property Credit

For property placed in service in tax years beginning in 2009 and 2010, the alternative fuel vehicle refueling property credit is increased. For property that relates to hydrogen, the maximum credit per location is increased to $200,000. For all other property, the credit percentage is increased to 50% and the maximum credit per location is increased to $50,000 ($2,000 for nondepreciable property).

For more information, see Form 8911, Alternative Fuel Vehicle Refueling Property Credit.

Last Updated: October 18, 2010

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Alternative Motor Vehicle Credit

For tax years beginning after 2008, the personal use part of the alternative motor vehicle credit is allowed against the AMT.

Also, a credit is available for 10% of certain costs of converting a new or used motor vehicle to a qualified plug-in electric drive motor vehicle and then placing it in service after February 17, 2009, and before 2012. The maximum credit is $4,000 per vehicle.

For qualified hybrid vehicles weighing more than 8,500 pounds, the credit has expired for vehicles purchased after 2009. If the credit is extended, this article will be revised.

For more information, see Form 8910, Alternative Motor Vehicle Credit.

Last Updated: October 18, 2010

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Biodiesel and Renewable Diesel Fuels Credit

2009 Changes

The following changes apply to the biodiesel and renewable diesel fuels credit.

  1. For fuel produced after 2008, biodiesel and renewable diesel do not include any liquid eligible for the alcohol and cellulosic biofuel fuels credit.
  2. For fuel produced, and sold or used, after 2008:
    • The credit rate for the biodiesel and biodiesel mixture credits increased to $1.00 per gallon.
    • Camelina is added to the list of virgin oils from which agri-biodiesel is derived.
    • The definition of renewable diesel changed.
  3. Biodiesel produced, sold, or used after September 30, 2009, must meet the new ASTM D6751 cold soak filtration test. The original April 1, 2009, deadline was extended by Notice 2009-34.

For more information, see Form 8864, Biodiesel and Renewable Diesel Fuels Credit.

2010 Changes

The biodiesel and renewable diesel fuels credit has expired for fuel sold or used after 2009. If the credit is later extended, this article will be revised.

Last Updated: October 14, 2010

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Build America Bonds

A build America bond is a bond issued after February 17, 2009, and before 2011 that qualifies as a tax-exempt bond that is not a private activity bond, and for which an election is made by the issuer.

A tax credit of 35% of interest payable on build America bonds is available to the bondholder, unless the issuer elects to receive a direct payment in lieu of the credit to the bondholder. The amount of credit is taxable as interest income to the bondholder. The unused credit is not deductible, but can be carried forward to succeeding tax years. Use Form 8912, Credit to Holders of Tax Credit Bonds, to claim the credit.

Last Updated: October 14, 2010

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Cancellation of Debt

Certain businesses can make an irrevocable election to delay recognition income from the cancellation of business debt arising from the reacquisition of certain types of business debt repurchased in 2009 or 2010. If you make this election, you cannot exclude, for the tax year of the election or any subsequent tax year, the income from the cancellation of such indebtedness based on a title 11 bankruptcy case, insolvency, qualified farm indebtedness, or qualified real property business indebtedness.

Income is deferred until the 5th year after the reacquisition (4th year for reacquisitions in 2010), then the income is included ratably over the following 5 years.

The debtor must include an election statement with the tax return in the year the debt is reacquired. The statement must clearly identify the debt instrument and the amount of income deferred.

If elected, certain exclusions for cancellation of debt income would not apply to the income from the discharge of such debt for the year of the election or any later year.

For more details, including how to make the election, see section 108(i) of the Internal Revenue Code, Temporary Redulations sections 1.108(i)-3T, and Revenue Procedure 2009-37 on page 309 of the 2009-36 Internal Revenue Bulletin.

Last Updated: November 09, 2010

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Carbon Dioxide Sequestration Credit

2009 Changes

A credit of $20 per metric ton is allowed for qualified carbon dioxide captured at a qualified facility and disposed of in secure geological storage and, if captured after February 17, 2009, not used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project.

A credit of $10 per metric ton is allowed for qualified carbon dioxide captured at a qualified facility and used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and, if captured after February 17, 2009, disposed of in secure geological storage.

For more information, see Form 8933, Carbon Dioxide Sequestration Credit.

Last Updated: October 13, 2010

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COBRA Premium Assistance Credit

The American Recovery and Reinvestment Act of 2009 allows a credit against certain employment taxes for providing COBRA premium assistance to assistance eligible individuals. An assistance eligible individual is any qualified beneficiary if at any time during the period beginning on September 1, 2008, and ending on December 31, 2009, the beneficiary is eligible for COBRA continuation coverage, the beneficiary elects coverage, and the qualifying event that allows the beneficiary to get coverage is the involuntary termination of the covered employee's employment during this period. The Continuing Extension Act of 2010 extended the end of the eligibility period to May 31, 2010. For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA continuation coverage and pays 35% of the amount of the premium.

The 65% of the amount of the premium not paid by the assistance eligible individual is reimbursed to the employer or other entity maintaining the group health plan. The maximum period for which the reimbursement can be provided for any beneficiary is 9 months. The Department of Defense Appropriations Act of 2010 (DDAA) extended the period of assistance from 9 months to 15 months. The reimbursement is made through a credit against employment tax liabilities. The credit is taken on line 12a of Form 941, line 11a of Form 944, or line 13a of Form 943 once the 35% of the premium is paid by or on behalf of the assistance eligible individual. The credit is treated as a deposit made on the first day of the return period (quarter or year).

Anyone claiming the credit for COBRA assistance payments must maintain the appropriate information to support their claim.

For more information, see Publication 15 (Circular E), Employer's Tax Guide.

Last Updated: October 13, 2010

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Credit for Employer Differential Wage Payments

Eligible small business employers may be able to claim a credit for differential wage payments made to qualified employees after 2008 and before 2010. The credit is 20% of the first $20,000 of qualified differential wage payments made to each qualified employee. For more information, see Form 8932, Credit for Employer Differential Wage Payments.

Last Updated: October 13, 2010

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Depletion

The temporary suspension of the taxable income limitation on percentage depletion from the marginal production of oil and natural gas is applicable for tax years beginning after 2008 and before 2010.

For more information, see chapter 9 of Publication 535, Business Expenses.

Last Updated: October 18, 2010

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Depreciation and Section 179 Expense

SBJA and Section 179 Deduction

A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property.

The Small Business Jobs Act (SBJA) of 2010 increases the IRC section 179 limitations on expensing of depreciable business assets and expands the definition of qualified property to include certain real property for the 2010 and 2011 tax years.

Under SBJA, qualifying businesses can now expense up to $500,000 of section 179 property for tax years beginning in 2010 and 2011. Without SBJA, the expensing limit for section 179 property would have been $250,000 for 2010 and $25,000 for 2011.

The $500,000 amount provided under the new law is reduced, but not below zero, if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $2,000,000.

The definition of qualified section 179 property will include qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property for tax years beginning in 2010 and 2011.

SBJA also removes cellular telephones and similar telecommunications equipment from the definition of listed property for tax years beginning in 2010.

Depreciation limits on business vehicles. The total depreciation deduction (including the section 179 expense deduction) you can take for a passenger automobile (that is not a truck or a van) you use in your business and first placed in service in 2010 is increased to $3,060. The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2010 is increased to $3,160.

Caution. These limits are reduced if the business use of the vehicle is less than 100%.

Last Updated: October 14, 2010

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Domestic Production Activities Deduction

For tax years beginning after 2009, the percentage used to figure the domestic production activities deduction increases to 9%.

Also, for tax years beginning after 2009, taxpayers with oil-related qualified production activities income must reduce the domestic production activities deduction by 3% of the least of the following amounts.

  1. Oil-related qualified production activities income (QPAI),
  2. QPAI, or
  3. Adjusted gross income for an individual, estate, or trust (taxable income for all other taxpayers) figured without the domestic production activities deduction.

For more information on this deduction, see Form 8903, Domestic Production Activities Deduction, and its instructions.

Last Updated: October 19, 2010

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Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance

Generally, corporations and a certain automotive partnership can elect under section 168(k)(4) to accelerate pre-2006 unused research credits or minimum tax credits in lieu of claiming the special depreciation allowance for certain eligible qualified property acquired after March 31, 2008, and placed in service before January 1, 2010 (before January 1, 2011, for long production period property and noncommercial aircraft).

A corporation that did not make a section 168(k)(4) election for its first tax year ending after March 31, 2008, may make the election for extension property placed in service generally before January 1, 2010. In addition, corporations that made the section 168(k)(4) election can elect not to apply section 168(k)(4) to extension property. Generally, extension property is:

  • Qualified property under section 168(k)(2) that is acquired after March 31, 2008, placed in service in 2009, and that is not property described in section 168(k)(2)(B) or (C); and
  • Qualified property described in sections 168(k)(2)(B) and (C), that is acquired after March 31, 2008, and placed in service in 2010.

For more information, see chapter 3 of Publication 946. Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax - Corporations; and Revenue Procedure 2009-33.

Last Updated: October 18, 2010

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Health Savings Accounts (HSAs)

2010 Changes

Eligibility. For 2010, a qualifying high deductible health plan (HDHP) must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $5,950 for self-only coverage and $11,900 for family coverage.

Employer contributions. Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. For 2010, you can contribute up to the following amounts to a qualified individual's HSA.

  • $3,050 for self-only coverage or $6,150 for family coverage.
  • $4,050 for self-only coverage or $7,150 for family coverage for a qualified individual who is age 55 or older at any time during the year. The $7,150 limit is increased by $1,000 for two married individuals who are age 55 or older at any time during the year provided and each spouse has a separate HSA.

Employers are allowed to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee.

For more information, see Health Savings Accounts in the 2010 Publication 15-B Employer's Tax Guide to Fringe Benefits.

2011 Changes

Eligibility. For 2011, a qualifying high deductible health plan (HDHP) must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $5,950 for self-only coverage and $11,900 for family coverage.

Employer contributions. Up to specified dollar limits, cash contributions to the HSA of a qualified individual (determined monthly) are exempt from federal income tax withholding, social security tax, Medicare tax, and FUTA tax. For 2011, you can contribute up to the following amounts to a qualified individual's HSA.

  • $3,050 for self-only coverage or $6,150 for family coverage.
  • $4,050 for self-only coverage or $7,150 for family coverage for a qualified individual who is age 55 or older at any time during the year. The $7,150 limit is increased by $1,000 for two married individuals who are age 55 or older at any time during the year provided and each spouse has a separate HSA.

Employers are allowed to make larger HSA contributions for a nonhighly compensated employee than for a highly compensated employee.

For more information, see Health Savings Accounts in the 2011 Publication 15-B.

Last Updated: November 09, 2010

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Investment Credit

Generally, the energy credit from the following properties was scheduled to expire after 2008 but has been extended through 2016.

  • Qualified fuel cell property.
  • Qualified microturbine property.
  • Solar energy property.

For tax years beginning after October 3, 2008, the energy credit can offset the alternative minimum tax.

For periods after February 17, 2009, the investment credit includes the qualifying advanced energy project credit.

For periods after 2008, the $4,000 limit on the energy credit for qualified small wind energy is repealed.

You may elect to treat qualified property placed in service as part of a qualified investment credit facility after 2008 as energy property for purposes of the energy credit instead of taking the renewable electricity production credit.

For more information on the investment credit, see the Instructions for Form 3468, Investment Credit.

Last Updated: October 13, 2010

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Maximum Automobile Value for Using the Cents-Per-Mile Valuation Rule

2010 Changes

For 2010, an employer providing a passenger automobile for the personal use of an employee may determine the value of the personal use by using the vehicle cents-per-mile value rule if the vehicle's fair market value on the date it is first made available to the employee does not exceed $15,300 for a passenger automobile other than a truck or van, or $16,000 for a truck or van. For more information, see Cents-Per-Mile Rule on page 23 of the 2010 Publication 15-B.

Last Updated: November 11, 2010

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Original Issue Discount (OID)Tables

Advance Release of 2010 Original Issue Discount (OID) Tables

The Internal Revenue Service has released the Original Issue Discount (OID) tables for January through October of 2010. The tables will be reposted in January 2011 to include information received during November and December of 2010. The following tables are included:

Section I-A

Section I-B

Section I-C

Section II (U.S. Treasury STRIPS table)

Section III-A through III-F: (Section III-D includes 17 new Short-Term Notes and Section III-F includes 44 new Short-Term Notes)

The 2010 tables are available in two formats text and PDF.

The 2010 OID tables in Microsoft Word, Excel, and HTML are available upon request at the following email address: Pub1212@irs.gov. Please specify desired format.

Prior year versions of the tables are also available.

2009 text PDF
2008 text PDF
2007 text PDF
2006 text PDF
2005 text PDF

You can also download the compressed (zipped) versions of the tables for the following prior years: 2004, 2003, 2002, 2001, 2000, 1999, 1998, 1997, 1996, and 1995.

Last Updated: December 09, 2010

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Partial Exclusion Increased for Gain From Certain Small Business Stock

Exclusion of gain from the sale of qualifying small business stock is increased to 100% for stock acquired after September 27, 2010, and before 2011.

For more information, see section 1202(a)(4).

Last Updated: October 18, 2010

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Penalty for Late Filing of a Partnership Return

For tax years beginning in 2009, the late filing penalty for a partnership return is $89 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year. No penalty will be imposed if the partnership shows that the late filing was due to reasonable cause.

For tax years beginning after 2009, the late filing penalty for a partnership return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year. No penalty will be imposed if the partnership shows that the late filing was due to reasonable cause.

For more information about this penalty, see the Instructions for Form 1065, U.S. Return of Partnership Income.

Last Updated: October 18, 2010

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Penalty for Late Filing of an S Corporation Return

For tax years beginning after 2009, the late filing penalty for an S corporation return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation's tax year. No penalty will be imposed if the corporation shows that the late filing was due to reasonable cause.

If tax is owed with the return, the penalty is increased. For more information, see the Instructions for Form 1120S, U.S Income Tax Return for an S Corporation.

Last Updated: October 18, 2010

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Plug-in Electric Drive Motor Vehicle Credit

You may be able to claim this credit for certain new plug-in electric vehicles with at least four wheels you placed in service for business or personal use in tax years beginning after 2008. You can generally rely on the manufacturer's certification that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies.

For more information, see Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit.

Last Updated: October 18, 2010

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Plug-in Electric Vehicle Credit

You may be able to claim this credit for certain new two- or three-wheeled or low-speed four-wheeled plug-in electric vehicles you acquired after February 17, 2009, and placed in service for business or personal use. The credit is generally 10% of the vehicle's cost. The maximum credit is $2,500 per vehicle. You can generally rely on the manufacturer's certification that a specific make, model, and model year vehicle qualifies for the credit.

For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit.

Last Updated: October 18, 2010

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S Corporation Built-in Gains Tax

For tax years beginning in 2009 or 2010, no tax is imposed on the net recognized built-in gain of an S corporation if the 7th year in the 10-year recognition period ended before the tax year.

For more information, see the Instructions for Schedule D (Form 1120S), Capital Gains and Losses and Built-in Gains.

Last Updated: November 04, 2010

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Self-Employment Tax

2010 Changes

Maximum amount subject to tax. The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2010 remains $106,800. All net earnings of at least $400 are subject to the Medicare part of the tax.

Optional methods to figure net earnings. For tax years beginning in 2010, the dollar thresholds for using the optional methods to figure net earnings from self-employment have increased. You may use the farm optional method to figure your net earnings from farm self-employment if your gross farm income was $6,720 or less or your net farm profits were less than $4,851. The nonfarm optional method may be used to figure your net earnings from nonfarm self-employment if your net nonfarm profits were less than $4,851 and also less than 72.189% of your gross nonfarm income.

In 2010, the maximum social security coverage under the optional methods is four credits, the equivalent of $4,480 of net earnings from self-employment.

Last Updated: November 13, 2010

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Social Security and Medicare Taxes

2010 Changes

The maximum amount of wages subject to the social security tax for 2010 is $106,800. There is no limit on the amount of wages subject to the Medicare tax.

2011 Changes

The maximum amount of wages subject to the social security tax for 2011 is $106,800. There is no limit on the amount of wages subject to the Medicare tax.

Last Updated: November 16, 2010

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Standard Mileage Rate

2010

For 2010, the standard mileage rate for the cost of operating your car for business use is 50 cents per mile.

Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.

Medical- and move-related mileage. For 2010, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 16.5 cents per mile.

See Transportation under What Medical Expenses Are Includable in Publication 502 or Travel by car under Deductible Moving Expenses in Publication 521, Moving Expenses..

Charitable-related mileage. For 2010, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.

Last Updated: October 25, 2010

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Work Opportunity Credit

Two new targeted groups have been added to the work opportunity credit:

  • Unemployed veterans, and
  • Disconnected youth.

An unemployed veteran is a veteran hired after 2008 and before 2011 who:

  • Has been discharged or released from active duty in the U.S. Armed Forces at any time during the 5-year period ending on the hiring date, and
  • Received unemployment compensation under state or federal law for at least 4 weeks during the 1-year period ending on the hiring date.

A disconnected youth is an individual hired after 2008 and before 2011 who:

  • Is at least age 16 but not yet age 25 on the hiring date;
  • During the past 6 months, has not attended or has not regularly attended any secondary, technical, or post-secondary school for more than an average of 10 hours per week, not counting periods during which the school was closed for scheduled vacation;
  • During each consecutive 3-month period within the past 6 months, was not employed or was employed and earned an amount less than he or she would have earned working for the applicable minimum wage 30 hours every week during the 3-month period; and
  • Does not have a certificate of graduation from a secondary school or a General Education Development (GED) certificate or has a certificate that was awarded at least 6 months ago and he or she has not held a job (other than occasionally) or been admitted to a technical or post-secondary school since receiving the certificate.

For more information, see the Instructions for Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit.

Use Form 5884, Work Opportunity Credit, to claim the credit.

Last Updated: October 18, 2010

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Upcoming Tax Dates

November 10 (Employees who work for tips)
If you received $20 or more in tips during October, report them to your employer - Details

November 11 (Everyone)
Federal Holiday (Veterans Day) - Details

November 27 (Everyone)
Federal Holiday (Thanksgiving Day) - Details

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