ABC Taxes, Tips & Tools

Sorry to have fallen off the Blog Planet for so long.  It was the hol­i­days and we at ABC LLC were liv­ing life instead of writ­ing busi­ness blogs.  We hope you had a good time with your friends and fam­ily as well.  Any­way, it is a Happy New Year with a whole raft of new things to think about in terms of tax­a­tion, busi­ness, employ­ees etc.

First off, the Stan­dard Mileage rate decreased in 2010.

• Busi­ness mileage is now 50 cents per mile.
• Relo­ca­tion and med­ical mileage are now 16.5 cents per mile.
• Char­i­ta­ble mileage remains unchanged at 14 cents per mile.

As always the stan­dard mileage rate can only be used if the tax­payer leases/owns a pas­sen­ger auto, van, pickup truck or panel truck not used for hire, which was not depre­ci­ated under ACRS, MACRS or sec­tion 179 in ear­lier years.

Employee with­hold­ing has risen.  The Mak­ing Work Pay Tax Credit con­tin­ues, but in 2010 it is spread over the entire 12 months of the year unlike 2009. In addi­tion the IRS added two wage brack­ets to the 2010 tax tables:

• Single/Head of House­hold:  0%, 10%, 15%, 25%, 27%, 30%, 28%, 33%, 35%
• Mar­ried: 0%, 10%, 15%, 25%, 27% 25%, 28%, 33%, 35%

Wage brack­ets are not tax brack­ets, wage brack­ets are used to fig­ure fed­eral with­hold­ing tax. There are still only 6 tax brack­ets which dif­fer for Mar­ried, Sin­gle and Head of House­hold; they are slightly wider than 2009, but the tax per­cent­age for each bracket remains the same as 2009.

Even as you are prepar­ing to put 2009 behind you, you should know that Con­gress did not reau­tho­rize dozens of tax breaks for indi­vid­u­als and busi­nesses before the mem­bers went home for the home the hol­i­days; how­ever sev­eral mem­bers of con­gress have vowed to restore them and make them retroac­tive to Jan­u­ary 1, 2010-but as of today that has not hap­pened.  By allow­ing these tax breaks to lapse, Con­gress has essen­tially enacted tax increases.  Some of the 50 Tax Breaks That Expired:

• Bonus 50% Depre­ci­a­tion for busi­ness equip­ment purchases
• Increased limit on sec­tion 179 expens­ing of busi­ness equip­ment goes from $250K to $125K and the increased annual limit on pur­chase eli­gi­ble for sec­tion 179 goes from $800K to $500K
• Above the line deduc­tion for qual­i­fied tuition and related expenses $4,000
• Above the line deduc­tion for the qual­i­fied expenses of ele­men­tary and sec­ondary school teach­ers $250
• 15-year straight-line recov­ery period for qual­i­fied lease­hold improve­ments, qual­i­fied restau­rant improve­ments, and cer­tain improve­ments to retail space.
• Cor­po­rate char­i­ta­ble con­tri­bu­tions for com­puter tech­nol­ogy, food inven­tory and books
• Con­tri­bu­tions of cap­i­tal gain real prop­erty for con­ser­va­tion purposes
• Tax-free treat­ment of qual­i­fied char­i­ta­ble dis­tri­b­u­tions made from IRAs for those over age 70 ½
• Waiver of 2009 min­i­mum required dis­tri­b­u­tion rules for IRAs and defined con­tri­bu­tion plans
• Basis adjust­ment to stock when S-corporation makes char­i­ta­ble con­tri­bu­tions of property
• Deduc­tion of state and local gen­eral sales taxes
• Addi­tional stan­dard deduc­tion, up to $500 for indi­vid­u­als and $1,000 for cou­ples, for state and local prop­erty taxes
• For 2010 Repeal of over­all lim­i­ta­tion of item­ized deduc­tions. In 2009, the lim­i­ta­tion was reduced to 1/3 of what it would oth­er­wise have been.
• The Work oppor­tu­nity credit for hir­ing qual­i­fied vet­er­ans and youth
• Research tax credit and alter­na­tive sim­pli­fied credit
• New mar­kets tax credit
• Empow­er­ment zone incentives
• Renewal com­mu­nity tax incentives
• Dis­trict of Colum­bia Invest­ment Incentives
• Alter­na­tive fuel mix­ture tax credit
• Net dis­as­ter loss des­ig­na­tion and $500 limit per casu­alty for per­sonal casu­alty losses attrib­uted to fed­er­ally declared nat­ural disasters
• Expens­ing for qual­i­fied dis­as­ter expenses
• Biodiesel and renew­able diesel incentives
• Alter­na­tive motor vehi­cle credit for heavy hybrids
• Increased exemp­tion lev­els for the indi­vid­ual alter­na­tive min­i­mum tax and per­sonal tax cred­its allowed against the AMT
• Exclu­sion of unem­ploy­ment com­pen­sa­tion ben­e­fits from gross income
• Reduced esti­mated tax pay­ments for small businesses
• Sub­part F rules for multi­na­tion­als affects how U.S. share­hold­ers can be taxed on cer­tain income that a com­pany earns abroad.
• Look-through rules for multi­na­tion­als pro­vi­sion exempts some of that income, includ­ing div­i­dends paid to share­hold­ers, from being taxed in the U.S.
• 7-year straight line cost recov­ery period for motor­sports enter­tain­ment complexes
• Railroad-track main­te­nance credit,
• Spe­cial expens­ing rules for U.S. film and tele­vi­sion productions
• tax laws that help Puerto Rican and U.S. Vir­gin Islands distillers
• Expens­ing of brown­fields (sites con­t­a­m­i­nated by haz­ardous waste) envi­ron­men­tal reme­di­a­tion costs.  Also exclu­sion of gain on the sale or exchange of cer­tain brown­field sites from unre­lated busi­ness tax­able income.
• Mine res­cue team train­ing credit and elec­tion to expense advanced mine safety equipment.
• Employer wage credit for acti­vated mil­i­tary reservists.
• Five-year depre­ci­a­tion for farm­ing busi­ness machin­ery and equipment.
• Spe­cial rules for for­eign share­hold­ers of reg­u­lated invest­ment companies.
• Spe­cial rule for per­cent­age deple­tion for mar­ginal wells.
• Exten­sion of spe­cial tax treat­ment of cer­tain pay­ments (inter­est, rents, roy­al­ties and annu­ities) to con­trol­ling exempt organizations.
• Indian employ­ment credit.
• Accel­er­ated depre­ci­a­tion for busi­ness prop­erty on an Indian reservation
• Amer­i­can Samoa eco­nomic devel­op­ment credit.
• Spe­cial rule for sales of elec­tric trans­mis­sion property.

We attempted to find the com­plete list of the 50 Tax Breaks That Expired, but were unable to.  Sev­eral of the breaks listed above refer to more than one part of the tax code so they may encom­pass more than one tax break. Sources vary so it is pos­si­ble one or more of the items on this list have been addressed by Con­gress since the source was writ­ten (the old­est record used was Decem­ber 8^th).  Although Con­gress is likely to reau­tho­rize many of these tax breaks before the end of 2010, they may take a while to do it-recall it took Con­gress until Octo­ber in 2008. The expired tax breaks incon­ve­nience tax­pay­ers who will have to decide whether to plan for their tax sit­u­a­tion as it exists now, or risk a tax bill or other unplanned expenses while they roll the dice in hopes that Con­gress will retroac­tively reau­tho­rize their favorite tax break provision.

This list does not include of sev­eral items set to expire at the end of 2010, which have their own tax impli­ca­tions.  Most notable among the breaks set to expire at the end of 2010 are the repeal of the estate tax in 2010, as well as reduced cap­i­tal gains and div­i­dends rates.  Of course you can’t plan to die this year, but you may want to look at your invest­ments with an eye toward pos­si­ble tax increases in 2011.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.