TAX BENEFITS OF THE NEW JOBS ACT

New Jobs Act brings tax benefits
On Monday, September 27, the president signed the Small Business Jobs Act of 2010 (H.R. 5297). Among its provisions:
• §179 expanded: For tax years beginning in 2010 and 2011, expense limit is increased to $500,000 and phaseout threshold increased to $2 million;
• §179 for (some) real estate: For tax years beginning in 2010 and 2011, taxpayers can elect to treat certain real estate as §179-eligible. Qualifying real estate includes:
o Qualified leasehold improvements;
o Qualified restaurant property; and
o Qualified retail improvement property.
• Bonus depreciation extended: Available for property purchased through December 31, 2010;
• Luxury auto depreciation increased: As a result of the extension of bonus depreciation, first-year depreciation of automobiles is bumped up $8,000;
• Deduction for start-up expenditures increased: Under IRC §195, increased from $5,000 to $10,000 for taxable years beginning in 2010 (only);
• Exclusion for small business stock: For purchases made after the date of enactment and before January 1, 2011, the exclusion for small business stock under IRC §1202 is increased to 100%;
• Five-year carryback for general business credits: Effective for credits determined in the taxpayer’s first taxable year beginning after December 31, 2009 (one year only), the carryback period for an “eligible small business” is increased from one to five years. In addition, the credit is not subject to the AMT limitation;
• Built-in gain period shortened to five years: For taxable years beginning in 2011 (only), the recognition period for the BIG tax is shortened to five years;
• Deduction for health insurance for SECA purposes: For 2010 (only), the deduction for self-employed health insurance is also a deduction for purposes of the SE tax;
• Cell phones removed from listed property: Permanent and effective for tax years ending after 2009;
• Information reporting required for rental property: Effective for payments made after December 31, 2010, rental real estate is treated as a trade or business for information reporting purposes. IRS to prescribe de minimis exceptions;
• Higher information return penalties: Penalties under IRC §6721 are substantially increased beginning in 2011; §457 plans can include Roth accounts: For tax years beginning after December 31, 2010; and Rollovers from elective deferral plans to in-plan Roth accounts allowed: Effective on the date of enactment. Will allow a two-year deferral (2011 and 2012) for rollovers done in 2010.

Bipartisan Poll Highlights Small Business Concerns Regarding Health Care Law

I thought that you might be interested in a new health care small business poll. This poll goes right along with what I am hearing from our clients.

Larry Kopsa CPA

(The FINANCIAL) -- FinChannel.com reports, "Six months after enactment of the new health reform law, the U.S. Chamber of Commerce has released a national bipartisan poll of 590 small business leaders." The survey finds nearly 80% of small business leaders "expect their costs to increase as a result of the new law, and a majority say they will be less likely to hire new employees and more likely to reduce current health care benefits."

The survey also finds that "regardless of whether the business is 20 employees or 200 employees, at least 75% of small business leaders across all sizes expected their costs to rise as a direct result of the legislation" -- and that "60% of small business leaders say that as a result of the new health care law, they are more likely to consider reducing healthcare benefits to their employees."

The article also reports that "owners of small businesses are deeply unsettled about the present and concerned about the future. Fully 56% of actual small business owners (with 5 to 200 employees) are 'somewhat' or 'very uncertain' about 'making long-term business decisions and future business investments.'" and almost half "are somewhat/very uncertain that they will still exist five years from now."

http://www.finchannel.com/Main_News/Business/71441_U.S._Chamber%3A_Bipartisan_Poll_Highlighting_Small_Business_Leaders%E2%80%99_Concerns_with_Health_Care_Law/

Tough Questions For Obama About ObamaCare

Forbes magazine just published an interesting article about healthcare comparing what we were told it was compared to apparently what it is. Remember "you don't need to read the bill, just pass it and then you can read it."

If you are interested in health reform I thought you would be interested in this. I thought that the section on "Is it a tax or is it not a tax" was especially interesting.

Click the link below to read the full story:

http://blogs.forbes.com/merrillmatthews/2010/09/22/tough-questions-for-obama-about-obamacare/?partner=alerts

Larry Kopsa CPA

CAN I STILL TRANSFER MONEY TO MY CHURCH FROM MY IRA WITHOUT TAX?

In the past I have been able to transfer money directly from my IRA to my church. This was a good deal because I did not have enough itemized deductions. Can I do that again this year?

Howard

Howard this was a good idea for the last couple of years but you will have to wait if you want to be sure that the donation will be tax free.

First a little background. This provision allowed taxpayers that were over 70½ up to $100,000 a year tax free from regular IRAs or Roths. Although this had been a popular tax break, lawmakers allowed it to lapse at the end of 2009 along with other popular easings, such as the sales tax deduction.

We anticipate that the President and Congress will deal with renewing the expiring provisions in the lame-duck session. You will have to wait and see.

INFORMATION IF YOU HAVE A FLEX PLAN OR A HEALTH REIMBURSEMENT ACCOUNT

Here is a change that is coming up that you need to be aware of.

If you have cash left in your flex plan or health reimbursement account consider buying over-the-counter drugs this year. The new health care law provides that for purchases after 2010, flex plans and HRAs can’t reimburse the cost of such medications. Payments are allowed only for prescriptions and insulin.

The same is true for for payouts from health savings accounts and Archer MSAs. There is a limited exception for plans using debit cards. The Internal Revenue will okay over-the-counter drug purchases made with the cards through January 15, 2011
to give debit card issuers a little extra time to reprogram their computer systems.

Don't forget that plans will have to be amended by June 30, 2011 to comply with the rules. The revision must be retroactive to Jan. 1 (or Jan. 15 for plans using debit cards).

HOW THE GOVERNMENT IS IMPACTING SMALL BUSINESS

Every time you turn around it seems that government is slapping regulation and requirements on small business.

Here are some facts from the Small Business Administration (SBA). Small businesses:

•Represent 99.7% of all employer[s]
•Employ just over half of all private-sector employees
•Pay 44% of total U.S. private payroll
•Have generated 64% of net new jobs over the past 15 years
•Create more than half of the nonfarm private gross domestic product (GDP)
•Hire 40% of high-tech workers (such as scientists, engineers and computer programmers)
•Are 52% home-based and 2% franchises
•Made up 97.3% of all identified exporters and produced 30.2% of the known export value in FY 2007.
•Small firms produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large-firm patents to be among the 1% most cited.

Further, if you look to the Kauffman Foundation, startup firms are the “sole engine” of job creation in the U.S. economy. Kauffman crunched a data set from the Census Bureau covering the years 1977-2005. In all but seven years during that period, existing businesses cut an average 1 million jobs, while firms in existence for a year or less created 3 million

Here is an article from Forbes magazine that summarized the problem.

http://blogs.forbes.com/greatspeculations/2010/09/03/government-declares-war-on-small-business/?partner=alerts