In a similar vein there is some speculation that congress will act to repeal the expanded 1099-MISC information reporting it made law with the health care legislation.  Once again, until that actually happens taxpayers must deal with matters as they are now, not as they hope they will be. 

The  Estate tax: short advice is to talk to a professional that specializes in Estate taxes.  GOT that? This is not a DYI activity.  The vast majority of people do not wind up filing the Estate Tax Return, Form 706.  But for those that do, proper advice is essential.  What is different in 2010? Given that in 2010, so far, there is no estate tax, heirs will start with the decedent’s basis for assets (rather than the step up in basis of the assets at the time of death or alternate valuation date). The executor can then increase the value of up to $1.3 Million in assets to the date of death valuation. Up to $3 million extra can be allocated to the surviving spouse.  The basis allocation cannot increase the asset’s basis over its value.  That means for very large estates, heirs will have to pay up, but the capital gains tax is far less than the estate tax would have been AND the heirs control when they pay the tax because it is not due until the heir sell the asset.

Expanded 1099-MISC Reporting: Businesses need to have their accounting systems in place starting 2011-they need to have the ability to track the difference between payment via Debit or Credit Card, verses payment Cash, Check or Barter (to corporations) so they can take advantage of the IRS guidance.  They will need  Form w-9 or equivalent from all businesses with whom they exchange more than $600 per year for goods and/or services in 2011. Realize businesses are supposed to do 28 % backup withholding from businesses that refuse to supply their TIN – businesses should collect the W-9 as soon as they pay a business money in 2011, especially if they know it will add up to more than $600 by year’s end.   

With respect to other tax breaks…

Statement No 1. If your favorite tax break has not been re-enacted, do not plan for it to be.  Set aside some funds to pay the extra tax. 

Statement No.2. Whether before or after the November elections, right now many believe:

• the tax rate cuts for taxpayers with incomes below $200,000 will be extended,
• the 15% capital gains rate will be extended,
• there will be an extension of Section 179,
• extension of Bonus Depreciation,
•  extension of business and individual energy tax credits,
• extension of the state and local property tax standard deduction,
• extension of state and local sales tax in lieu of the state and local income tax deduction,
• extension of tax free distribution from an IRA,
• extension of the research credit for businesses,
• extension of enhanced charitable contributions for food inventory and corporate computer donations for education.

All of these tax cuts are expected to be revived, but see Statement No. 1.  The best advice is for taxpayers must plan around things as they stand now, afterall no one predicted that congress would actually let the Estate Tax expire and yet… it did.

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.  Please note: Our offices will be closed until October 1, 2010.  We may respond to emails and calls in the interrim, but no staff will be available to meet with you in person until October 1, 2010. 

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. The content of this blog generally applies to business and individual taxation in the United States of America.  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, human resource specialist, certified financial planner 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.

 At that point all the expenses associated with equipment: the set-up, shipment, cost of the equipment, sales taxes paid, etc. are all added up to determine its basis for depreciation and other purposes. 

 Section 179 allows for the expensing of new equipment in the tax year it is first placed in service.

 Under a new ruling [Brown v. Commissioner, TC Summ Op. 2009-171] the concept of the date equipment is placed in service is solidified. 

Brown was an employee who was working on starting his own business.  He operated a part-time business as a sole proprietor and he purchased equipment in 2002, 2003 and 2004.  He tested some of the equipment to become familiar with it.  None of the equipment was fully functional until it was interconnected, which happened in 2004.  In 2004 Brown turned the Sole Proprietorship into an LLC and went into business full-time.  He took section 179 and depreciation deductions for all the equipment placed in service in 2004. 

 The IRS denied the deduction for the equipment purchased in 2002 and 2003.  However the Tax Court held for the taxpayer.  Why?  Because the parts of equipment purchased in 2002 and 2003 were functionally interdependent with the property purchased in 2004; the taxpayer showed each piece was necessary for the operation as a whole and no one piece of equipment could support the operation until all were purchased, interconnected and ready to operate. 

 As always, small business services and taxation are our business.  If you need help figuring out when something will become deductible, or if something can be expensed under 179, or advice on what kind of depreciation you should take, 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.