Small Business Job Act of 2010
This bill was signed into a law on September 27, 2010. I am going to cover some of the major provisions and implications of the act as they relate to the majority of my clients. However, that does not mean that there aren't provisions that apply specifically to your business so feel free to contact me about your specific situation.
There are a couple of provisions that affect depreciation. The 50% first year bonus depreciation option has been extended through 2010 (it previously expired at the end of 2009). The dollar limits on section 179 expensing has been increased from $250,000 to $800,000.
Cell phones are no longer required to be listed property. This means that substantial documentation of cell phone use for business purposes is no longer required. In addition, as long as a cell phone is provided to an employee primarily for business use, the personal use portion no longer has to be included in the employees gross income.
Health Insurance, assuming it is not available to a family via an employer, has been deductible to Schedule C self-employed individuals for several years. However, for 2010 the Small Business Job Act makes that deduction available against self-employment income, thereby reducing self-employment taxes (15.3%). This 2010 law has the potential to serve as a good tax planning tool. Assuming you are a Schedule C filer, you could prepay some 2011 health insurance in late 2010.
Rental Property Expense Reporting
Starting in 2011, those individuals or entities that receive rental income must report expense payments of $600 or more during the year via a 1099-MISC statement. This will potentially result in additional record keeping and reporting expenses. If you have rental property income, it is a good idea to get an individuals providing work on the property to fill out a W-9 form.
Higher Failure to File Penalties
Generally, the IRS has increased the penalties on failure to file of informational tax documents (W-2s, etc).
One Final Tax Planning Tidbit
This tip is not related to the Small Business Job Act. The HIRE Act allows a credit for employees hired in 2010 that stay employed for a year (if they were unemployed or worked less than 40 hours in the preceding 60 days prior to being hired). This credit can be claimed on 2011 tax returns. If you are thinking of hiring someone in late 2010 or early 2011 then it might be worth looking at. Feel free to contact me with questions about specifics.