Are you an active participant?
Are you an active participant in your employer’s retirement plan?
A “yes” answer can affect your federal income tax deduction for contributions to your traditional IRA.
For 2011 and 2012, the maximum contribution to a traditional IRA is $5,000 (plus an additional $1,000 when you’re over age 50). When you’re an active participant in your employer’s plan, how much of that you can deduct may be limited.
Not sure of your status?
Look at the middle box on line 13 of Form W-2 — the one labeled “Retirement plan.” When the box is checked, you’re considered an active participant.
The next question — should the box be checked? — can cause confusion for both employers who prepare Form W-2 and employees who use Form W-2 to file tax returns.
That’s because the rules differ for different types of plans. For example, when you’re eligible to participate in a defined benefit plan, you’re an active participant even if you choose to not take part. Your eligibility is enough to trigger “active” status.
For 401(k) plans, you’re an active participant when you elect to make contributions. If you decide not to contribute, you may still be considered an active participant, depending on what other amounts were allocated to your account during the year.
Please call us at Dye Whitcomb 970.207.9724 if you need more information about the meaning of active participation. We’re ready to help.
Taxpayers will have until April 17, 2012 to file their 2011 tax returns since April 15, 2012 is on a Sunday and the Emancipation Day holiday observed in the District of Columbia falls on April 16, 2012.
The IRS will begin accepting e-file returns on January 17, 2012.
The extended deadline for individual returns will be October 15, 2012
What is income?
No matter what the weather report says, each new year brings a flurry of information returns. These forms report the income you received during the prior year, and the size of the paper blizzard is partly due to the definition of “gross income” in the federal tax code.
That definition encompasses all income earned anywhere in the world, including cash and non-cash receipts from sources such as bartering, discharge of debts, and illegal activities.
In addition, you probably noticed there’s no reference to amount. So, although you might not get an information form for amounts under specified limits — the familiar $600 figure for Form 1099-MISC, for example — that income is reportable on your tax return.
Despite the broad nature of the term, not everything you receive is considered gross income. For instance, rebates, refunds, and purchase price adjustments are specifically excluded. Gifts, inheritances, and proceeds from life insurance policies are other familiar exclusions.
However, in contrast to gross income, exclusions tend to be narrowly defined. An illustration: While proceeds from life insurance policies are generally not taxable to you as a beneficiary, interest earned on the proceeds typically is.
Your state may have different rules on what’s includable and excludable when calculating income.
Give us a call if you have questions about the tax effect of your receipts during 2011. We’ll help you dig out the answers 970-207-9724
Colorado provides a Property Tax/Rent/Heat Rebate, commonly known as the “PTC Rebate,” for low-income seniors and disabled individuals. Qualified applicants can receive up to $792 — $600 for rent or property tax paid and a maximum rebate of $192 for heating expenses they have paid.
The rebate has been available to Colorado residents since 1979 and was claimed by more than 23,000 applicants last year. The actual rebate total is based on the applicant’s income and expenses. Any Colorado resident who meets the requirements for the rebate should submit the 2011 rebate application, Form 104PTC, which is available from the Department of Revenue’s Taxation Web site at www.TaxColorado.com on the PTC page.
What are the eligibility requirements?
- You have resided in Colorado for the entire year.
- A single person with total income of less than $12,313.
- A married couple with total combined income of less than $16,205
- You (either husband or wife) are 65 or older by Dec. 31, or are a surviving spouse at least 58 years old by Dec. 31.
- You were disabled for the entire year, regardless of age.
- You are not claimed as a dependent on any other person’s federal income tax return.
- You are lawfully present in the United States.
- You apply for the rebate with the 104PTC form and the DR 4679 PTC affidavit, available at www.TaxColorado.com Click on the PTC button at the top of the page for the 104PTC booklet with instructions.
How to check the status of a rebate check
The status of a PTC rebate will not be available until April 15, 2012 or 12 weeks after the application is filed, whichever is later. Depending on when the application is approved, installment payments are issued in April, July, October and January.
Persons who apply for the PTC rebate and who have Internet access can go to www.Colorado.gov/RevenueOnline and click on Individual to check the status of their most current installment payment. This system will not show the full rebate amount.