Note – Talk about Doctor prescribing OTC medicine for HSA to cover
1. The 2011 AMT exemptions are $48,450/$74,950/$37,225
Education Credits – Includes above-the-line deductions for educators who spend $250 for books, certain supplies, and materials used in the classroom.
1. 168(e)(3)(E)(v) and (E)(ix) – extended by Tax Relief Act to treat qualified restaurant and retail property as 15-yrRev. Proc. 2011-26 says restaurant and retail property fall within the definition of qualified leasehold property (normally, they are not allowed bonus depreciation).For 2012 the rules change significantly, 15-yr property is eligible for 50% bonus, but restaurant and retail property is NOT eligible for any section 179 or bonus.Make mention that the rules are tricky for Qualified Restaurant and Qualified Retail property which are distinguished from Qualified Leasehold property.
Beginning Jan. 1, 2011 prepares who prepare > 100 returns must efile unless they have a signed opt-out. Jan. 1, 2010 preparers of > 11 returns must efileCredit Card companies are sending Form 1099-Ks if receipts exceeded $20,000 or transactions exceed 200Separate line item on Schedule C for 2011IRS will match 1099-Ks v. Amount reported on return1099 Repeal – Any merchant who spent over $600 anywhere was required to send a 10995. Need documentation
1. Talk about problems with borrowing w/h for business use – STEALING, government frowns on this.
1. Per Rick Taylor – since investment returns are so low, the opportunity cost of forgoing the investment and paying the tax is smaller
Tax Season Reminders for Small Businesses
A Global Reach with a Local Perspective www.decosimo.comPOWER to the Tax People!MARK PRZYBYSZ, CPA – MARKPRZYBYSZ@DECOSIMO.COMBECKY MURPHY, CPA – BECKYMURPHY@DECOSIMO.COM
DECOSIMO 2012 TAX UPDATE WHAT IS IN, WHAT IS OUT AND HOW DOES IT AFFECT YOU?
EXPIRED PROVISIONS - 2010Individuals Making work pay credit Self employed health insurance premium deduction for SECA tax purposes 65% subsidy for payment of COBRA health care coverage continuation premiums (5/31/10) First time homebuyers credit Purchase of OTC via HSA accounts
TAX TIP Ask your doctor for a prescription for the OTC
EXPIRED PROVISIONS - 2010Business 5 year NOL carryback Enhanced deduction limit and phase-out for start-up expenditures Reduced from $10,000 to $5,000 Organizational Costs
TAX TIP Organizational costs and start-up costs are not the same
PAYROLL TAX UPDATE Employer – Side Payroll Tax Forgiveness 2% payroll tax cut Extended to February 29, 2012 Recapture Provision Individuals earning > $18,350 Add-on to 2012 tax liability
A Global Reach with a Local Perspective2010 Tax Relief Act www.decosimo.com
EXPIRING DEDUCTIONS - 2011 100% bonus depreciation Above-the-line deduction for qualified tuition Deduction for State and local general sales taxes Premiums for mortgage insurance Nontaxable IRA transfers to eligible charities Enhanced charitable contributions
TAX TIP Keep you charitable donation records!
EXPIRING CREDITS - 2011 AMT patch Credits allowed against regular tax and AMT Extenders Research credit New market credit Work opportunity credit Personal energy property credit
TAX TIP Research and experimentation Design, develop, or improve
HIGHLIGHTSTwo Year Extensions Bush tax cuts; Individual tax rates remain the same LTCG and qualified dividend tax rates No 3%/80% limitation on itemized deductions No phase-out of personal exemptions
TWO-YEAR EXTENSIONSNon-Refundable Child tax credit Adoption credit Dependent care credit Education credits ($1,500 of $2,500)Refundable Additional CTC Earned income credit Education credits ($1,000 of $2,500)
TWO-YEAR EXTENSIONS Extenders/Extensions for Business Child Care Facility Credit for up to $150,000 Bonus depreciation deduction drops to 50% Section 179 expensing reverts to “Pre-Bush” For a full list of expiring provisions see, “List of Expiring Federal Tax Provisions,” at www.jct.gov
CELL PHONES – NO LONGER“LISTED PROPERTY”Cell phones and similar devices used primarily for business areremoved from the “listed property” category. Effective starting with the 2010 tax year So…employees should not have to document personal vs. business use under the heightened substantiation rules for listed property Depreciation rules that apply to listed property no longer apply to cell phones However, personal use of an employer- provided cell phone may still result in taxable income to the employee 20
BONUS DEPRECIATION „Qualified‟ property eligible for 100% depreciation Qualified Property Includes New original use property 20 yr or less class life Leasehold improvements to non res buildings > 3 yrs old Qualified retail and restaurant property eligible for 15-yr class life, thereby, eligible for 100% bonus Highlights No AMT adjustment entire recovery period Not limited to taxable income Watch-out for Passenger auto limits – generally $11,060
SECTION 179 EXPENSING Applies to new or used property Includes 15-yr property: Qualified leasehold improvement Qualified restaurant property Qualified retail improvement property Note: The 179 property expensing for 15-yr property is only for 2011 and does not extend to 2012
SECTION 179 EXPENSING Amounts Max $500,000 (2011) and $139,000 (2012) If qualified real property Maximum $250,000 (part of $500,000 above) Phase-out of deduction when qualifying property placed in service exceeds $2,000,000 Limited to amount of taxable income for entity
TAX TIP S Corp owners can add back W-2 wages in determining taxable income for purposes of Section 179 deduction. MFJ return – business income(loss) from both spouses is aggregated even though Sec. 179 relates to the activity of only one spouse Overall taxable income of ALL trades or businesses is combined for the income limitation. Taxpayers with multiple pass-thru entities could exceed limits
LEGISLATIVE HIGHLIGHTS CORPORATE INCOME TAX Qualifying small businesses may deduct 100% of the amount the pay as health insurance premiums on behalf of qualifying employees (HB 61, 4/21/11). APPORTIONMENT The sales factor in the apportionment formula for business income is double-weighted and provides rules for sourcing income other than personal property (HB 434, 6/9/11).26
LEGISLATIVE HIGHLIGHTS FULL EMPLOYMENT ACT OF 2011 $1,000 credit against income or financial institution excise tax liability Small employer < 50 employees New hire post June 9, 2011 Hourly wage > $10 per hour 12 consecutive months of employment Must have net increase in employment Available to corporations, pass-through entities and self- employed business owners Repeals deduction for hiring individuals drawing unemployment
PERSONAL INCOME TAX INCOME TAX DEDUCTION FOR RETROFITTING HOMES AGAINST CATASTROPHIC WINDSTORM EVENTS Individuals who retrofit their homes to be more resistant against hurricanes, tornado or other catastrophic windstorm events are entitled to a personal income tax deduction, regardless of whether the taxpayer itemizes income tax deductions in calculating his income tax, that is equal to 50% of the retrofitting cost incurred, up to $3,000 (SB 395, 6/9/11).
PERSONAL INCOME TAX TORNADO RECOVERY TAX INCENTATIVE PROTECTION ACT OF 2011 Protects the granting and extension of economic benefits impacted by the April tornado outbreaks Wage and employee requirements of the capital credit shall be tolled for a period of two years HOMEOWNERS and STORM VICTIMS PROTECTION Act expands definition of residential property to include single-family dwellings and related lots under construction for a period up to 2 years (HB 179, 9/1/11)
TAX TIP Casualty Losses Alabama does not conform with Federal Must claim loss in same year
PERSONAL INCOME TAX HEALTH INSURANCE PREMIUM DEDUCTION Qualifying employees may deduct 100% of the amount the pay as health insurance premiums as part of an employer provided health insurance plan (HB 61, 4/21/11). SMALL BUSINESS JOBS CREDIT Self-employed business owners can take advantage of this incentive for job creation (HB 230, 6/9/11) VOLUNTARY TAX ASSESSMENT Are you crazy?
SALES TAX The Alabama Streamlined Sales and Use Tax Commission is created to identify and develop the programs necessary for Alabama to come into compliance with the Streamlined Sales and use Tax Agreement (SSUTA) in the event that Alabama becomes a participating member of the SSUTA (HB 355, 6/9/2011).32
ITEMS OF INTEREST Segregated reporting of merchant card gross receipts IRS issues regulations requiring efiling Controversial 1099 reporting requirement repealed on 4/4/11 when President Obama signed H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.” IRS aggressively challenging charitable contributions and documentation
RECORDKEEPING TIPS Records that support deductions 3 years Tax returns and tax form packages 7 years Records for large purchases including homes, cars, stocks, etc. and business or rental property records Indefinitely
PITFALLS Estimated tax payments Not paying or not paying timely Employee v. Independent contractor Choice of entity No internal controls/theft/fraud
OTHER BUSINESS CONSIDERATIONS Above the line deduction for health insurance premiums Pay children without withholding Retirement Plans SEP Simple IRA Traditional IRA Mileage Rate
2011 RATES Business Miles 51 cents/mile Jan-June 55.5 cents/mile June-December Personal Exemption $3,700 Kiddie Tax Threshold $1,900 Standard Deduction Single $5,80038 MFJ $11,600
WHERE DO WE GO FROM HERE? Never easy – 29 new tax laws since 2001 Take advantage of Bonus and Section 179 depreciation Credits Available – R & D, DPAD, Hiring Veteran‟s and Worker‟s Retention Credit Considering likely return of higher tax rates means deferring deductions and accelerating income is a good idea
YEAR-END PLANNING Selling appreciated property Exercising stock options Pay dividends from C Corps Holding loss-stocks to 2013 Cash basis taxpayers defer expenses
CONTACT USMark Przybysz, CPAmarkprzybysz@decosimo.comBecky Murphy, CPAbeckymurphy@decosimo.com423-756-7100 The contents and opinions contained in this presentation are for informational purposes only. The information is not intended to be a substitute for professional accounting counsel. Always seek the advice of your accountant or other financial planner with any questions you may have regarding your financial goals.