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U.S. TAX CHANGES 2010 AND BEYOND
Visit our website : www.dscpa-israel.com Email :  [email_address] Tel: 02 - 629 4272
<ul><li>Tax Relief, Unemployment Insurance Reauthorization and  </li></ul><ul><li>the Job Creation Act of 2010 </li></ul><...
<ul><li>TOPICS  FOR  DISCUSSION </li></ul><ul><li>U.S. ESTATE TAXES </li></ul><ul><li>U.S. INCOME TAXES  </li></ul><ul><li...
U.S. ESTATE TAXES– 2011 & 2012 <ul><li>Exemption </li></ul><ul><li>$5 million per person </li></ul><ul><li>Lifetime aggreg...
U.S. ESTATE TAXES– 2011 & 2012 <ul><li>Federal estate tax rate:  35% </li></ul><ul><li>Stepped-up basis:  beneficiaries re...
<ul><li>U.S. ESTATE TAXES– 2010 </li></ul><ul><li>Election: </li></ul><ul><li>2011 rules retroactively applied: </li></ul>...
<ul><li>U.S. Gift Taxes </li></ul><ul><li>Annual gift tax exclusion - 2011: </li></ul><ul><li>$13,000 per donee </li></ul>...
<ul><li>  U.S. ESTATE TAXES– 2013 </li></ul><ul><li>$1 million estate tax exclusion and  </li></ul><ul><li>gift tax exempt...
<ul><li>U.S. Income taxes </li></ul>Requirement to file tax return - 2010 Single:  <65 ……gross income = $9,350 Single:  65...
<ul><li>U.S. Income taxes </li></ul><ul><li>Child’s tax credit </li></ul><ul><li>Reduces tax liability </li></ul><ul><li>M...
<ul><li>U.S. Income taxes </li></ul><ul><li>Additional child’s tax credit </li></ul><ul><li>Refundable credit </li></ul><u...
<ul><li>U.S. Income taxes </li></ul><ul><li>Qualifying child </li></ul><ul><li>Qualifies as a dependent </li></ul><ul><li>...
<ul><li>U.S. Income taxes </li></ul>Phase outs and limitations postponed until 2013 <ul><li>Itemized deduction limitation ...
<ul><li>U.S. Income taxes </li></ul><ul><li>Income tax rates: </li></ul><ul><li>Instead of 15%, 28%, 31%, 36% and 39.6% </...
<ul><li>U.S. Income taxes </li></ul><ul><li>Self-employed individuals </li></ul><ul><li>Can deduct health insurance costs ...
<ul><li>U.S. Income taxes </li></ul><ul><li>Surtax on unearned income  </li></ul><ul><li>Beginning 2013 </li></ul><ul><li>...
<ul><li>U.S. Income taxes </li></ul><ul><li>Miscellaneous </li></ul><ul><li>40% penalty on any understatement of attributa...
<ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>Accounts > $10,000...
<ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>bank accounts </li...
<ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>U.S. PERSON: </li>...
<ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>Relief from FBAR r...
<ul><li>Foreign Financial Assets </li></ul><ul><li>HIRE Act  </li></ul><ul><li>For years beginning after 18 Mar 2010 </li>...
<ul><li>Foreign Financial Assets </li></ul><ul><li>HIRE Act  </li></ul><ul><li>“ Specified Foreign Financial Assets: </li>...
<ul><li>Foreign Financial Assets </li></ul><ul><li>FATCA </li></ul><ul><li>30% withholding tax at source </li></ul><ul><li...
Visit our website : www.dscpa-israel.com Email :  [email_address] Tel: 02 – 629 4272
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2010 IRS Tax Changes

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2010 IRS Tax Changes

  1. 1. U.S. TAX CHANGES 2010 AND BEYOND
  2. 2. Visit our website : www.dscpa-israel.com Email : [email_address] Tel: 02 - 629 4272
  3. 3. <ul><li>Tax Relief, Unemployment Insurance Reauthorization and </li></ul><ul><li>the Job Creation Act of 2010 </li></ul><ul><li>Extended the “Bush Tax Cuts” </li></ul><ul><li>until 31 December 2012 </li></ul>
  4. 4. <ul><li>TOPICS FOR DISCUSSION </li></ul><ul><li>U.S. ESTATE TAXES </li></ul><ul><li>U.S. INCOME TAXES </li></ul><ul><li>FOREIGN ACCOUNTS </li></ul>
  5. 5. U.S. ESTATE TAXES– 2011 & 2012 <ul><li>Exemption </li></ul><ul><li>$5 million per person </li></ul><ul><li>Lifetime aggregate – gift and estate tax </li></ul><ul><li>GST also now $5 million per person </li></ul><ul><li>Portable to surviving spouse: </li></ul><ul><ul><li>unused portion of last deceased spouse ( multiple marriages) </li></ul></ul><ul><ul><li>Irrevocable election on estate tax return </li></ul></ul><ul><ul><li>Not GST exemption </li></ul></ul>
  6. 6. U.S. ESTATE TAXES– 2011 & 2012 <ul><li>Federal estate tax rate: 35% </li></ul><ul><li>Stepped-up basis: beneficiaries receive </li></ul><ul><li> property with stepped-up basis to </li></ul><ul><li> date of death values. </li></ul>
  7. 7. <ul><li>U.S. ESTATE TAXES– 2010 </li></ul><ul><li>Election: </li></ul><ul><li>2011 rules retroactively applied: </li></ul><ul><li>$5 million exemption </li></ul><ul><li>35% tax rate </li></ul><ul><li>stepped-up basis to beneficiaries </li></ul><ul><li>2010 rules – elect to apply: </li></ul><ul><li>unlimited exemption </li></ul><ul><li>no estate tax to pay </li></ul><ul><li>no stepped-up basis to beneficiaries </li></ul>
  8. 8. <ul><li>U.S. Gift Taxes </li></ul><ul><li>Annual gift tax exclusion - 2011: </li></ul><ul><li>$13,000 per donee </li></ul><ul><li>$136,000 to NRA spouse </li></ul><ul><li>Annual gift tax exclusion – 2012: </li></ul><ul><li>same but subject to inflation adjustment </li></ul><ul><li>Additional gift tax exemptions: </li></ul><ul><li>Direct tuition and medical payments </li></ul>
  9. 9. <ul><li> U.S. ESTATE TAXES– 2013 </li></ul><ul><li>$1 million estate tax exclusion and </li></ul><ul><li>gift tax exemption </li></ul><ul><li>55% estate and gift tax rate </li></ul>
  10. 10. <ul><li>U.S. Income taxes </li></ul>Requirement to file tax return - 2010 Single: <65 ……gross income = $9,350 Single: 65+……. =$10,750 MFJ: <65 (both spouses) =$18,700 MFJ: 65+ (one spouse) =$19,800 MFJ: 65+ (both spouses) =$20,900 MFS: any age …………. =$3,650 HH: <65 ……………. =$12,050 HH: 65+……………. =$13,450
  11. 11. <ul><li>U.S. Income taxes </li></ul><ul><li>Child’s tax credit </li></ul><ul><li>Reduces tax liability </li></ul><ul><li>Maximum $1,000 per qualifying child </li></ul><ul><li>Reduced $50 for each $1,000 of MAGI over: </li></ul><ul><li>$110,000-joint filers </li></ul><ul><li>$75,000- unmarried individuals </li></ul><ul><li>$55,000- MFS </li></ul><ul><li>Credit cannot exceed: </li></ul><ul><li>Regular tax + AMT </li></ul><ul><li>Less certain credits </li></ul>
  12. 12. <ul><li>U.S. Income taxes </li></ul><ul><li>Additional child’s tax credit </li></ul><ul><li>Refundable credit </li></ul><ul><li>Greater of: </li></ul><ul><li>(1) 15% of taxable income >$3,000, or </li></ul><ul><li>(2) excess of SECA > earned income credit, if </li></ul><ul><li> have 3 or more qualifying children. </li></ul><ul><li>Less: the child’s tax credit used to reduce tax. </li></ul>
  13. 13. <ul><li>U.S. Income taxes </li></ul><ul><li>Qualifying child </li></ul><ul><li>Qualifies as a dependent </li></ul><ul><li>Under the age of 17 years old at years end </li></ul><ul><li>U.S. citizen or resident alien </li></ul><ul><li>Must include on tax return the child’s name and SS# </li></ul><ul><li>Qualifying relative </li></ul><ul><li>Specified relative (e.g., grandchild) </li></ul><ul><li>Gross income < exemption amount ($3,650-2010) </li></ul><ul><li>Taxpayer provides > 50% support </li></ul><ul><li>Is not qualifying child of another </li></ul><ul><li>Exception: Parents are not required to file a return and </li></ul><ul><li>does not file a return; or files on to claim tax refund. </li></ul>
  14. 14. <ul><li>U.S. Income taxes </li></ul>Phase outs and limitations postponed until 2013 <ul><li>Itemized deduction limitation </li></ul><ul><li>Personal exemption phase out </li></ul><ul><li>Standard deduction marriage penalty </li></ul>
  15. 15. <ul><li>U.S. Income taxes </li></ul><ul><li>Income tax rates: </li></ul><ul><li>Instead of 15%, 28%, 31%, 36% and 39.6% </li></ul><ul><li>For 2011-2102: 10%, 15%, 25%, 28%, 33%, and 35% </li></ul><ul><li>For net L-T capital gains and qualified dividends: 15% </li></ul><ul><li>Non-corporate taxpayer: 0% tax (if subject to 15% tax) </li></ul><ul><li>to the extent would be taxed at 10% or 15%. </li></ul><ul><li>Example: MFJ, both spouses <65 up to $86,700 </li></ul><ul><li>MFJ, both spouses > 65 up to $88,900 </li></ul>
  16. 16. <ul><li>U.S. Income taxes </li></ul><ul><li>Self-employed individuals </li></ul><ul><li>Can deduct health insurance costs (AGI) </li></ul><ul><li>For 2010, also allowed in computing SECA. </li></ul><ul><li>For 2011, SECA reduced from 15.3% to 13.3% </li></ul><ul><li>up to $106,800 net SE income. </li></ul><ul><li>2.9% medicare tax on SE income > $106,800 </li></ul><ul><li>From 2013: +0.9% hospital insurance (HI) on wages </li></ul><ul><li>and SE net income > </li></ul><ul><li>$250,000 – MFJ </li></ul><ul><li>$125,000 – MFS </li></ul><ul><li>$200,000 – everyone else. </li></ul>
  17. 17. <ul><li>U.S. Income taxes </li></ul><ul><li>Surtax on unearned income </li></ul><ul><li>Beginning 2013 </li></ul><ul><li>Imposed on individuals, estates and trusts </li></ul><ul><li>Medicare contribution tax = 3.8% </li></ul><ul><li>For individual: computed on the lesser of: </li></ul><ul><li>(1) net investment income or </li></ul><ul><li>(2) excess of MAGI over threshhold: </li></ul><ul><li>$250,000 – MFJ or surviving spouse </li></ul><ul><li>$125,000 – MJS </li></ul><ul><li>$200,000 – everyone else. </li></ul>
  18. 18. <ul><li>U.S. Income taxes </li></ul><ul><li>Miscellaneous </li></ul><ul><li>40% penalty on any understatement of attributable to an </li></ul><ul><li>to an undisclosed foreign financial asset (from 2011) </li></ul><ul><li>6 year statute of limitations for assessment of tax on </li></ul><ul><li>understatement of income attributable to </li></ul><ul><li>foreign financial assets for any return filed after </li></ul><ul><li>Mar. 18, 2010, and for any return for which assessment period has not yet expired as of 18/3/10 </li></ul><ul><li>Sex-change costs qualify as medical expense </li></ul><ul><li>Breast augmentation for cosmetic purposes - not </li></ul>
  19. 19. <ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>Accounts > $10,000 on any given day in tax year </li></ul><ul><li>Aggregate of accounts = include all accounts </li></ul><ul><li>Financial interest </li></ul><ul><li>Signature authority (volunteer for amuta) </li></ul><ul><li>Penalty $10,000 for not filing each year </li></ul><ul><li>Penalty of $100,000 or 50% of account balance for </li></ul><ul><li>each year if willful failure to file </li></ul><ul><li>U.S. person must file </li></ul>
  20. 20. <ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>bank accounts </li></ul><ul><li>brokerage accounts </li></ul><ul><li>mutual funds </li></ul><ul><li>unit trust </li></ul><ul><li>accounts maintained with a financial institution or </li></ul><ul><li>other person engaged in the business of a </li></ul><ul><li>financial institution </li></ul><ul><li>Commingled fund and hold equity interest </li></ul><ul><li>Keren Hishtalmut ? </li></ul><ul><li>Kupot Gemel ? </li></ul>
  21. 21. <ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>U.S. PERSON: </li></ul><ul><li>Citizen or resident of U.S. </li></ul><ul><li>Domestic partnership </li></ul><ul><li>Domestic corporation </li></ul><ul><li>Domestic trust or estate </li></ul><ul><li>Persons in and doing business in U.S. </li></ul>
  22. 22. <ul><li>Foreign Financial Assets </li></ul><ul><li>Foreign Bank Account Report – FBAR </li></ul><ul><li>Relief from FBAR rules: </li></ul><ul><li>For 2009 and earlier years, U.S. person does not include </li></ul><ul><li>“ person in and doing business in U.S.” </li></ul><ul><li>If signature authority only, deadline for FBAR for 2009 and </li></ul><ul><li>earlier years = 30 June 2011 </li></ul><ul><li>Commingled funds not apply to funds other than mutual </li></ul><ul><li>funds for 2009 and prior </li></ul>
  23. 23. <ul><li>Foreign Financial Assets </li></ul><ul><li>HIRE Act </li></ul><ul><li>For years beginning after 18 Mar 2010 </li></ul><ul><li>U.S. individual </li></ul><ul><li>“ specified foreign financial assets” </li></ul><ul><li>Aggregate value > $50,000 </li></ul><ul><li>Report on tax return </li></ul>
  24. 24. <ul><li>Foreign Financial Assets </li></ul><ul><li>HIRE Act </li></ul><ul><li>“ Specified Foreign Financial Assets: </li></ul><ul><li>Any financial account maintained in a “foreign financial </li></ul><ul><li>institution” </li></ul><ul><li>Any stock or security issued by non-U.S. person </li></ul><ul><li>Any interest in foreign entity </li></ul><ul><li>Any financial instrument or contract held for investment </li></ul><ul><li>and issued by non-U.S. person </li></ul>
  25. 25. <ul><li>Foreign Financial Assets </li></ul><ul><li>FATCA </li></ul><ul><li>30% withholding tax at source </li></ul><ul><li>payments to “foreign financial institutions” </li></ul><ul><li>no agreement with IRS to disclose “U.S. accounts” </li></ul><ul><li>Withholding applies to U.S. source income </li></ul><ul><li>“ U.S. account” = any financial account held by </li></ul><ul><li>“ specified U.S. person” or U.S. owned foreign entity </li></ul>
  26. 26. Visit our website : www.dscpa-israel.com Email : [email_address] Tel: 02 – 629 4272

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