Return preparers will have much to discuss with their clients about their 2011 returns, both before and after the year's end.

Although major legislation was not passed this year, expiring provisions, e-filing mandates and new preparer requirements will no doubt add to the conversation.

"It's been relatively quiet," said CCH principal tax analyst Mark Luscombe. "The Bush tax cuts were all extended so that's not a year-end issue. There might be some planning issues regarding extension of the AMT, and the deduction for state sales tax where you might want to go out of your way to take advantage of them in 2011. Usually Congress gets around to extending them but with the focus on fundamental tax reform, many of these could go away."

The mandatory e-filing requirement now requires preparers who file 11 or more returns to e-file, Luscombe noted. "This will push a lot more preparers into the mandatory requirement," he said.

Broker reporting of stock basis is new for 2011, noted Luscombe. "It only applies where stock is acquired after Jan. 1, 2011, so if you bought it sometime during the year and then sold it, the broker is required to include not only the sales price of the stock on the From 1099-B, but also the basis."

Conversions from a traditional IRA to a Roth IRA were big in 2010, Luscombe indicated, because of the elimination of the income limitation and the opportunity to spread the income from the conversion into 2011 and 2012.

(For more year-end tax planning tips, see Tax Strategy, page 16).

"Returns for 2011 will be the first year to report the income from the 2010 Roth conversion," observed Luscombe. "The default was the spread; to elect out of it, taxpayers paid the entire tax on their 2010 return. If they didn't, then they pay half on their 2011 return, and half on their 2012 return."

Another item from 2010 to be aware of is the employee retention credit, part of the HIRE Act, which applies to employees that were hired after March 10, 2010 and before the end of 2010. The credit is worth the lesser of $1,000 or 6.2 percent of the retained worker's wages during a consecutive 52-week period.

The Healthcare Reform Act contains a requirement for W-2 reporting of healthcare premiums, Luscombe noted. "This was so the IRS can track who is covered in terms of eventually imposing penalties on people who are not covered. It's optional for 2011, but some W-2s this year will reflect it," he said.

The Making Work Pay credit, which was on 2010 returns, has disappeared, replaced by a payroll tax deduction that isn't reflected on the tax return.

For the first time, there's a separate line on the return - Line 59(b) - for first-time homebuyers who have a repayment obligation that requires Form 5405 to be attached.

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Some of the tax breaks available this year may be gone next year or may be around in a diminished form, advises Harris Abrams, senior tax analyst for Thomson Reuters. "There's a great deal of uncertainty over what Congress will do to stimulate the economy," he said. "It's generally better if you have an upcoming expense to do it this year rather than next. That's even more true with credits and deductions that may be gong away at the end of the year."

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