subject: Tax Changes For Businesses 2010 [print this page] Federal Tax Laws have become more complex and confusing each year and 2010 is no different. The cause of this confusion for 2010 is primarily due to Congress making habit of enacting tax cuts along with other tax changes on a temporary basis. When the expiration of these changes is reached, the law will automatically revert back to what it was unless Congress decides to created a extension. This year has already seen both sides of the coin which was the extension of important tax provisions along with the death of others that had been enacted by Congress in '08 and '09.
WHAT EXPIRED AT THE END OF 2009 -
1. Bonus depreciation
In 2008 and 2009, a special law allowed businesses that purchased new equipment and other business property to take 50% of their total depreciation the first year -- that is, they could write off half the cost of the property the first year it was owned.
2. Bonus depreciation for vehicles
The bonus depreciation law permitted purchasers of business vehicles in 2009 to depreciate an extra $8,000 of the vehicle's cost the first year it was owned. This, too, expired at the end of 2009. First-year depreciation for vehicles is now limited to $2,960.
3. Charitable deductions of business property
Temporary tax laws provided enhanced charitable deductions to businesses that donated food, inventory, or computer equipment during 2008 and 2009.
4. Other expired tax breaks
A) Special credit for construction of new energy efficient homes
B) Provision allowing improvements to commercial leased property, restaurant buildings and improvements, and retail property improvements to be depreciated over 15 years (instead of the normal 39 years), and
C) Credit for certain research and experimentation costs.
That was a look at the EXPIRED for 2010 but in December 2009, the House of Representatives passed a Tax Extenders Act that extended some of these breaks through 2010. The bill has yet to be enacted into law. Most tax experts expect additional action from Congress extending more of these tax breaks retroactively to January 1, 2010. Now, let us take a look into what will be new for 2010...
NEW FOR 2010 -
1. Section 179 $250,000 deduction amount extended
A provision of the tax code called Section 179 allows small businesses to deduct 100% of the cost of new business property up to an annual ceiling amount. In 2008 and 2009, the annual ceiling was enormous: $250,000. The $250,000 deduction amount was extended for the 2010 tax year under the Hiring Incentives to Restore Employment (HIRE) Act. It is scheduled to go down to $25,000 in 2011.
2. Two new tax breaks for small businesses created under the HIRE Act
A) Payroll tax credit. Under the Act, businesses do not have to pay their share of Social Security taxes (6.2%) on wages paid to qualifying new hires. Qualifying new hires include anyone hired to a new position after February 2, 2010 and before January 1, 2011 who has been unemployed for at least 60 days or only working part-time. Workers hired to fill existing positions qualify only if the worker they are replacing left voluntarily or for cause.
B) Business tax credit. For qualifying new hires, small businesses can also claim an additional general business tax credit of up to $1,000 per worker on their 2011 tax returns provided the worker stays employed for at least a year.
OTHER CHANGES FOR 2010
1. New filing requirements for non-profits
If you run a smaller non-profit organization, you may need to file a Form 990-N "e-Postcard," or your business could be at risk of losing its tax-exempt status.
2. Deducting losses
Businesses that incur losses in 2010 will not be treated as favorably as those that took a financial hit in 2008 and 2009. Small businesses were permitted to deduct losses incurred during 2008 and 2009 from the taxes they paid in the prior three to five years. Starting in 2010, such losses can be carried back only two years, thus reducing the amount that can be obtained in a quick tax refund.
3. Mileage rate for business driving
For 2010, the standard mileage rate for business driving is reduced to 50 cents per mile, down from 55 cents during 2009.
4. Estimated taxes for self-employed
Self-employed taxpayers who pay estimated taxes for 2010 must pay at least 100% of their prior year's tax to avoid a penalty. In 2009, this amount was temporarily reduced to 90%.
by: Freelance Article Writer
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