Small Business
Tax Saving Strategies
for the 2011 Filing Season
Current as of February 1, 2011
PCPS Private Companies Practice Section
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
2
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
3
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
4
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
5
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
6
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
7
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
8
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
9
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
10
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
11
Other Business Tax Credits
> Wide range of business tax credits
> Effective through December 31, 2011
12
Key Takeaways
> CPA advice
> CPA-small business
owner partnership
> Year-round tax planning
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Thank you.
Copyright © 2011 American Institute of CPAs
PCPS Private Companies Practice Section