PCPS Private Companies Practice Section Small Business Tax Saving Strategies for the 2011 Filing...

PCPS Private Companies Practice Section

Small Business Tax Saving Strategies for the 2011 Filing Season

Current as of February 1, 2011

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Advice for Small Businesses from CPAs

> Tax-law changes for small businesses in 2010:

- Section 179 expense deduction

- Bonus depreciation

- Health-insurance deduction

- Business tax credits

- And others

> Year-round tax management

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Section 179 Expense Deduction

> Expensing provision for certain business property

> Decreased new-equipment costs, improved cash flow and additional investment capital

> Maximum $500,000 first-year write-off

> Wide range of eligible property

> $250,000 for qualified restaurant, leasehold and retail properties

> $2 million+ phaseout

> Limits and exceptions

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Bonus Depreciation

> First-year bonus depreciation allowance for eligible property

> 50% or 100% deduction

> Property eligibility requirements

> Allowance/date property placed in service

> More affordable property, improved cash flow and additional reinvestment capital

Corporation Built-in Gains

> No net built-in gains tax on certain property

> Different rules for 2010 (7th tax year) and 2011 (5th tax year)

> Reduced taxes and additional investment capital

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Employer-provided Cell Phones

> No detailed records reporting requirement for employees

> Employer-provided and business-use (primarily) requirement

> Listed property classification

> Employer policy documenting business need and use

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Small Business Health Insurance Credit

> Up to 35% credit for employee health-insurance contributions

> Factors determining credit:

- Number of full-time employees

- Average annual full-time wages

- Premium amounts paid

- Average premiums by state (certain coverage)

- Effective 2010-2013 tax years

- Allowable each qualifying tax year

- Alternative Minimum Tax (AMT) offset

- Employee health-insurance assistance and reduced tax liability

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Start-up and Organizational Costs

> Start-up Costs

- Deduction in year business starts/succeeding years

- Full range of investigatory costs

- First $10,000 in expenses and 180-month amortization period

- $60,000+ dollar-for-dollar phaseout

> Organizational Costs 

- Deduction for certain costs in creating C or S corporation or partnership

- $5,000 maximum

- $50,000+ dollar-for-dollar phaseout

- Same rules as business start-up costs

- Certain legal and accounting fees

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Deduction for Health Insurance When Computing Self-employment Tax

> Health-insurance cost deduction if self-employed

> Deduction for business owner, spouse and dependents (and children under age 27 in certain circumstances)

> Lowered taxable income and less taxes owed

1099 Reporting Requirement

> Form 1099-MISC for payments totaling $600 or more

> Exceptions for certain types of payments

> Rule change after December 31, 2011

> Information return for rental income from real estate of $600 or more (unless authorized exception) effective for 2011

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Worker Retention Credit

> Tax credit for each formerly unemployed worker

> Minimum one-year employment period

> $1,000 or percentage of wages paid

> Qualification requirements:

- Employment start date

- Period of unemployment

- Position/type of services

- Length of employment

- Wages paid

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Other Business Tax Credits

> Wide range of business tax credits

> Effective through December 31, 2011

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Key Takeaways

> CPA advice

> CPA-small business owner partnership

> Year-round tax planning

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Copyright © 2011 American Institute of CPAs PCPS Private Companies Practice Section

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