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Watch Out for these Expired Tax Breaks
Posted By Miranda Marquit On 02/24/2011 @ 7:29 am In Taxes | 12 Comments
During the last two years, many of us have become accustomed to a number of tax breaks that were instituted to help during a time of economic difficulty. However, these tax breaks were never meant to last forever — and they haven’t. Tax breaks that you might have been counting on are disappearing, and you might be in trouble.
In some cases, the disappearing tax breaks are a bit of a nuisance. In other cases (especially for those who should have taken a required minimum distribution on an IRA in 2010), though, the absence of a tax break you have come to rely on might be a little more difficult to deal with financially. As you file your taxes, here are some things to be aware of with regard to a reduction in tax breaks.
These tax breaks are just gone. They haven’t been extended, or offered for a reduced “value.” Don’t make the mistake of thinking you can take these:
In order to reduce the burden on retirees whose retirement accounts were decimated by the stock market losses, the requirement to take required minimum distributions was waived. However, that waiver ended with the year 2009. You should have taken your RMD in 2010. If you didn’t, you are likely subject to a 50% tax penalty — which could be very difficult to deal with. If you have a good reason for skipping your RMD in 2010 (“I forgot” and “I didn’t know” probably won’t work), you can take the distribution ASAP and send a letter of explanation along with Form 5329, which is an application to waive your penalty.
It is important to be up to date on tax law. Just because you enjoyed a tax break in 2009 or 2008 doesn’t mean that it was available in 2010. Double check, and consider consulting with a tax professional to make sure that you aren’t claiming something you shouldn’t be.
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