Tax Returns are due October 15th
There are also no further extensions for these either. Please make sure we
have your information as soon as possible.
C Corporations with
a September 30 year end are due December 15th
These returns can be extended for six months but you must pay any taxes due
by the December 15th due date.
Last week the Small
Business Jobs Act of 2010 was passed. This bill has several tax breaks for
businesses. Some of the breaks a very interesting and many of us can benefit
The most significant tax
break is increases to Section 179 expensing. Section 179 allows small
business to deduct the cost of most furniture, fixtures and equipment. Under
the old rules small businesses could expense up to $250,000 of qualifying
property. Under the new law, for tax years beginning in 2010 and 2011, the
$250,000 limit is increased to $500,000. Even more interesting the new law
also makes certain real property eligible for expensing. The $500,000 of
property that can be expensed can include up to $250,000 of qualified real
property (qualified leasehold improvement property, qualified restaurant
property, and qualified retail improvement property).
Similar to the Section 179 deduction businesses were allowed to speed up
there deprecation deduction by using bonus depreciation. Bonus depreciation
allows a business to deduct 50% of the purchase price of most new personal
property. The new law extends the bonus depreciation to 2010.
The new law increases the first year deduction of startup costs from $5,000
to $10,000. Startup costs are expenses that would normally be deductible
except that occurred before a business is officially open for business. Once
a business opens for business all of the startup costs are accumulated and
under the old law the first $5,000 is deducted immediately and the remainder
is deducted over 15 years. Under the new law the first $10,000 is deducted
immediately and the remainder is deducted over 15 years.
A couple other tax breaks that will affect many of us are a little more
technical in nature. The new law allows business owners to deduct the cost of
health insurance incurred in 2010 for themselves and their family members in
calculating their 2010 self-employment tax. Why just for 2010? Don’t get me
started. Also cell phones are removed from listed property category. This
means that cell phones can be deducted or depreciated like other business
property, without onerous recordkeeping requirements.
A couple other breaks
seem to encourage the sale of businesses.
First the new law gives a 100% exclusion of gain from the sale of small business
stock for qualifying stock acquired after Sept. 27, 2010 and before Jan. 1,
2011. Small business stock is stock in a C Corporation that has gross assets
less $50 million (the government has a very different definition of small
business than you and I) and is engaged in active business. In other words if
you start a new business in a C Corporation after September 27 and before the
end of the year and you hold on to the company for at least 5
years, when you sell the stock you will not have to pay tax on
The other is a break for selling the assets of a converted S corporation.
Generally, a C corporation converting to an S corporation must hold onto any
appreciated assets for 10 years following its conversion or face a
business-level tax imposed on the built-in gain at the highest corporate rate
of 35%. The new law shortens the holding period of assets subject to the
built-in gains tax to 5 years if the 5th tax year in the holding period
precedes the tax year beginning in 2011.
There are some other tax breaks that all though they are interesting they
probably will not be helpful for most of us.
WARNING among other things one of the
ways this bill is paid for by increasing penalties for not filing 1099s. The
law increases the penalties for failure to file a correct information return
from $15 to $30, and the calendar-year maximum increases from $75,000 to
$250,000. The minimum penalty for each failure due to intentional disregard
increases from $100 to $250. Please remember that beginning in 2012 the
requirements for 1099 filing explode.
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This Week's Quote
Congress can raise taxes because it can persuade a
sizable fraction of the populace that somebody else will pay — Milton Friedman