The South Bay Tax Report
September 30 2010
The Small Business Jobs Act of 2010
As the year winds down, Congress often turns to tax legislation and recently, they passed (and the President signed) the Small Business Jobs Act of 2010. There are few provisions in the law that relate to many of us - most of the items in the bill are directed to business (Hence, the name "Small Business Jobs Act.")
For those of you with a small - and growing - business, note that the bill -
Increases the thresholds for expensing certain purchasses of equipment to $500,000 for 2010 and 2011;
Temporarily increases the amount of business start-up expenses that may be deducted to $10,000 for 2010;
Expands the Small Business Administration ("SBA") loan limits and
Raises tax revenue by increasing penalties for not filing information returns (like Forrm 1099) on a timely basis.
Where will tax rates go in 2011?
While Congress WAS able to pass the Small Business Jobs Act, they have NOT been able to agree where tax rates will be headed in 2011 and beyond.
As you have likely heard, unless Congress acts, provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 that provided for lower income tax rates will no longer be in effect beginning in 2011. Income tax brackets would change as follows:
The current 10% bracket would disappear as the lowest tax rate would be 15%;
The top four tax brackets would rise from 25%, 28%, 33% and 35% to 28%, 31%, 36% and 39.6%;
Tax rates on capital gains and certain dividends would increase
Predicting Congressional action on tax laws gives us more gray hair than we already have - watch the news over the next few months to see where rates may be headed
It's almost October 15th!
Many of you file your personal tax returns by April 15th - the original due date for filing, but many of you take advantage of the IRS automatic extension provisions; if you're one of those people, remember that your extension is up on
October 15th - it may be time to lock yourself in the office and get those receipts organized!
2011 Tax Reporting Changes
Congress passed the Emergency Economic Stabilization Act on October 3 2008 which requires your broker to report adjusted cost basis of securities sold for taxable accounts to the IRS via Form 1099-B beginning in 2011. Today, your broker only reports the gross proceeds on sales for taxable accounts - next year, your broker must report the gross proceeds on sales AND the cost basis of the security sold.
Take the opportunity between now and year end to review your brokerage accounts to make sure that your broker is reporting the correct cost basis for the stock and mutual fund positions you maintain.
Nanny Taxes
During these last few days, California has heard much about employment tax and immigration issues on the household employee of a statewide candidate - the IRS calls this the "Nanny tax" rules, and in general, the IRS requires payroll tax filings by a domestic employer who pays a household employee more than $1,700 in cash wages in a calendar year. These "nanny" taxes include social security and medicare taxes, federal unemployment tax, and state unemployment tax. If you have a nanny, a baby sitter, a housekeeper, a cleaning person, a maid, a cook, a personal assistant (I've always wanted a personal assistant), a household manager, a caretaker, a butler (does anyone have a butler any more?) or a driver, you may be required to file payroll tax returns and withhold taxes on your employee.
Your Social Security Benefits
The Social Security Administration is expected to announce this week that no inflaton adjustment will be made to SSA benefits for 2011; it marks only the seocnd year without an increase since automatic adjustments for inflation were adopted in 1975 - last year ws the first year.
Currently, there are over 53.5 million who receive benefits; the average benefit is $1,072. Full retirement age is now 66, rising to 67 for people born after 1959.
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