Schutte & Hilgendorf – Prescott CPAs

The Small Business Jobs Act of 2010, which passed Congress, Senate, and was signed by the President on September 27th, 2010, offers a variety of small business tax breaks, some revenue raisers, expands small business loan programs, strengthens small business preference programs for federal government projects, and provides incentives for exporters.

Small Business Tax Relief

• Section 179 depreciation has been increased to a maximum of $500,000 and the phaseout threshold has been increased to $2 million for 2010 and 2011.
• The first year 50% bonus depreciation has been extended to apply to property acquired and placed in service in 2010.
• Self employed individuals can deduct the cost of health insurance for themselves, spouses, and dependents when calculating self employment tax.
• The exclusion from gross income of gain from the sale or exchange of qualified small business stock acquired after the date of enactment and before January 1, 2011 has been increased to 100%.
• The carryback period for eligible small business credits under IRC § 38 is extended from one to five years. The bill also allows taxpayers to use eligible small business credits to offset both regular and alternative minimum tax liability.
• The deduction for trade or business startup expenses has been increased from $5,000 to $10,000 for tax years beginning in 2010 and 2011.
• The penalty for failure to disclose a reportable transaction has been limited to 75% of the decrease in tax resulting from the transaction.
• Cell phones have been removed from the definition of listed property.

Revenue Raisers

• Recipients of rental income from real estate are now generally subject to the same information reporting requirements as taxpayers engaged in a trade or business. In particular, rental income recipients making payments of $600 or more to a service provider (such as a plumber, painter or accountant) in the course of earning rental income are required to provide an information return (typically Form 1099-MISC) to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010.
• The penalties for failure to file a correct information return has also been increased.
• Rollovers from elective deferral plans are allowed to Roth-designated accounts.
• Participants in government section 457 plans are allowed to treat elective deferrals as Roth contributions, effective for tax years beginning after 2010.

Small Business Loans

• The bill creates a Small Business Lending Fund to address ongoing effects of the financial crisis on small businesses by allowing the Treasury Department to make capital investments in eligible financial institutions to increase credit available for small businesses. Independent community banks may participate in a new $30 billion lending fund on the condition they make loans to small businesses and meet other requirements. Financial institutions (bank and savings and loan holding companies, depository institutions, and community development loan funds) with $10 billion or less in total assets may apply for capital investments of up to 3% of risk-weighted assets.

Small Business Federal Contracts

• Federal agencies are called on to solicit bids from small businesses and federal contracting requirements are amended to encourage small businesses to bid for federal contracts.
• Federal agencies are required to solicit bids from any responsible source, including small business concerns, teams and joint ventures, for multiple award contracts above the substantial bundling threshold of the agency.

Small Business Exports

• The bill contains measures designed to encourage small businesses to become exporters or to increase their export activities. The SBA will create a pilot three-year trade and export promotion program that will make grants to states to carry out export programs that assist eligible small businesses.

(From Journal of Accountancy article Small Business Stimulus Passes Congress, September 23, 2010)

Should you have questions regarding this post or any other tax needs, contact us at Schutte & Hilgendorf, PLLC, Prescott accountants serving the greater Yavapai County with tax, accounting, auditing, and QuickBooks consulting expertise.