On Monday, September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010. This Act contains a number of tax provisions that are designed to create incentives for both small and mid-sized businesses. Many of the provisions in this Act will be effective retroactively to the beginning of 2010. Some of the more significant tax provisions benefiting taxpayers that this new legislation includes are:
1. Dollar amount for Code Section 179 expensing increased
For tax years 2010 and 2011, Section 179 expensing has been increased to $500,000. In addition the dollar-for-dollar phaseout of Section 179 benefits will begin when the taxpayer has spent over $2,000,000 for qualifying property during the year.
2. Certain qualified real property will be permitted the benefit of Section 179 expensing
For tax years beginning in 2010 and 2011, taxpayers will be permitted to elect to treat up to $250,000 of qualified real property (i.e. qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property) as expensing-eligible property.
3. Extension of bonus depreciation
50% first year bonus depreciation has been extended for one year and will be available for qualifying property acquired and placed in service in 2010.
4. First year business auto depreciation limit increased by $8,000
Under this provision, new business vehicles which are acquired and placed in service in 2010 will be permitted to deduct a maximum of $11,060 of depreciation on the vehicle in 2010.
5. Business credit carrybacks
The Act extends the carryback period for general business credits for small businesses from 1 year to 5 years for eligible small business credits determined in tax years beginning in 2010.
6. Eligible small business credits will no longer be subject to AMT tax
General business credits, including the Research & Experimentation Credit, will no longer be subject to Alternative Minimum Tax for certain eligible small businesses with average annual gross receipts of no more than $50 million.
7. Reduced recognition period for S corp built-in gains tax
Certain S corporations, which have been S corporations for at least five years, will have a reduced built-in gain tax period.
8. Self-employment tax break
For tax years beginning in 2010, self employed taxpayers will be able to deduct health insurance costs in computing any self-employment taxes due.
9. Cell phones
For years beginning after 2009, cell phones will no longer be considered "listed property," subject to the restrictions thereunder.
REVENUE RAISERS
The following select revenue-raising provisions of the Act are some of the more significant provisions affecting small and medium-sized businesses:
1. Issuance of Forms 1099 by landlords
For payments made after December 31, 2010, real property rental income recipients will be required to issue Forms 1099 to service providers (i.e. plumbers, painters, etc.) who are paid $600 or more during the tax year.
2. Information return penalties
Penalties will be increased for failure to file timely information returns, such as Forms 1099, when required.
3. Rollovers will be allowed from certain qualified plans to Roth accounts
For distributions made after enactment of this new law, Section 401(k), 403(b) and 457(b) retirement plans will be able to permit participants to roll over the account balances into a designated Roth IRA account. Such rollover will generally be exempt from the 10% early withdrawal penalty for those under age 59½. Such withdrawals will generally be taxable. However, if the rollover is made during the 2010 tax year, the taxpayer will be permitted to report this taxable income equally in 2011 and 2012.
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