Bell and Company attends Women and Childrens First Event

Bell and Company recently attended a benefit for Women and Childrens First. As you can tell the CPA's hit the town in style to benefit a great cause.

Small Business Jobs Act of 2010

The recently enacted 2010 Small Business Jobs Act includes many tax breaks and incentives for small businesses. Here’s an overview of some of the tax changes in the Act that might affect you and your business. The following provisions apply to all of 2010:

Increased limits on section 179 expensing – Taxpayers can now expense up to $500,000 in asset purchases for 2010 and 2011. Section 179 begins phasing when asset purchases exceed $2,000,000. Up to $250,000 of leasehold improvement property, restaurant property and retail improvement property can be deducted as part of the $500,000 limit.

Extension of 50% bonus depreciation – For new assets purchased in 2010, taxpayers can deduct 50% of the cost of those assets.

Increased deduction for start-up expenditures – Up to $10,000 in start up costs are immediately deductible when taxpayers start a new business. Once the start up costs exceed $60,000, the expense deduction begins phasing out.

Increased first year cap for automobile depreciation – The maximum amount allowed for depreciation (including bonus and section 179) for an automobile or light truck or van is $11,060.

Cell phones are no longer subject to listed property treatment – Cell phones were previously treated as listed property, where personal and business use was to be kept in a log. The new bill repeals this requirement and allows regular asset treatment of a cell phone.

Health insurance is now deductible for the purpose of calculating self employment income - For 2010, self employment tax will be calculated on self employment income after deduction for health insurance. Previously the deduction for health insurance was taken on the taxpayer’s 1040 as an income adjustment, but was not deducted from business income to calculate self employment tax.

For rental property, new requirements for 1099 reporting go in to effect in 2011 – Taxpayers who receive rental income will be required to file 1099’s with the IRS to report payments of $600 or more to service providers. This provision does not go into effect until January 1, 2011. With few exceptions, landlords will now have to request W-9’s from contract labor and other service providers in order to send 1099’s to lawn care, maintenance and repair, and utility providers if the landlord pays the service provider over $600 during 2011.

If you have any questions about the Small Business Jobs Act and how it might apply to your business, please contact Kelly Phillips at (501) 753-9700 for further information.

Tax Tip of the Day

“When will the new 1099-B reporting requirements that require that brokerage and financial institutions include the cost as well as the proceeds from a stock transaction become mandatory?” The new reporting requirement will take effect in 2011 for stocks purchased in 2011, then in 2012, mutual funds and fixed income securities will be included in the reporting requirement. Comment: Over time, the requirement to report cost basis, will increase CPA job security, as the CPA will keep up with the basis of assets to be sold. With the complex issues of computing and tracking basis and tracking the basis, it could extend over generations, if asset are held that long.

Tax Topic of Today

“What is the small business tax credit designed to help me pay for employee health insurance premiums in 2010?” The credit is available for employers with 10 or fewer employees, with average wages of $25,000 or less, and is calculated by formula, also excludes owners. You must pay 50% or more of the employee health coverage to take the credit! The credit is equal to 35% of the amount paid. For employers with greater than 10 but less than 25 equivalent full time employees, partial credits apply. Comment: I calculated the payment for our company, and it did not apply due to wage limitations.

Tax Topic of the Day

“When will the current individual tax rates expire, and what will the new rates be?” Unless Congress changes the tax rate groupings, rates will revert back to their 2000 rate structure in 2011. Expect to pay 3 to 5% more per tax bracket, using the graduated tax rate schedules of 15, 28, 31, 36, and 39.6%. Comment: Multiply your taxable income by 5% and that will give you a rule of thumb of what your increase will be. For instance, if a husband and wife have taxable income of $200,000 multiply by 5%, you will now pay an additional $10,000.

1099s for Goods and Services

When will the new IRS reporting that requirement for 1099s miscellaneous for goods and services be required for payments over $600? 2012 is the magic year, unless Congress changes its mind. There is alot of flak in the marketplace over this one. An example I read: obtaining a federal identification number from the local starbucks outlet if your company buys more than $600 of coffee and breakfast pastries by sending over the boy Friday to pick up each morning for the working staff. We are suggesting to our clients that they start obtaining W-9 forms (request for taxpayer ID number) from anyone they pay a check to in 2011, so they will be ready for 2012. Can you imagine preparing a tax return with all the 1099’s to be reconciled and listed as gross income on a corporate or partnership tax return? This will be a job security for CPA’s.

Employer-provided Health Coverage

Employer-provided Health Coverage: According to information posted to the IRS website at www.irs.gov/newsroom/article/0,,id=220809,00.html?portlet=6, starting in calendar-year 2011 , the Affordable Care Act requires employers to report the value of the health insurance coverage provided to employees on each employee's Form W-2. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect the employee's tax liability, since the value of the employer contribution to health coverage continues to be excludible from an employee's income.