Dear friends of RC Jones & Associates
Summertime is here but there's no vacation from tax planning. Here are five tax moves small business owners might make now to reduce tax liability for 2009.
1. Cut back quarterly installment payments. Self-employed taxpayers must pay federal income tax and self-employment tax in quarterly installments to avoid an "estimated tax" penalty. Normally, no penalty will be assessed if annual payments equal at least 90% of the taxpayer's current tax liability or 100% of last year's liability (110% if the AGI for the prior year exceeded $150,000). But the new economic stimulus law allows certain small business owners to base payments on 90% of 2008 tax liability.
2. Put your child on the payroll. Is your teenage child looking for a summer job? Have the child work in the plant or the office. Besides gaining valuable experience, the teenager can earn up to $5,700 tax-free in 2009. For the business, the wages are tax deductible like wages paid to any other employee so long as the child is paid a reasonable amount for the services actually rendered.
3. Combine business with pleasure. When you travel away from home on business, you can deduct the travel expenses—including air fare, meals and lodging—so long as the primary purpose of the trip is business-related. So you may tack on a few days of sightseeing or relaxation as long as you spend more time on business than pleasure. Of course, no deduction is allowed for personal side trips or activities or meals and lodging for non-business days.
4. Hire a crew of summer workers. If your business employs workers from disadvantaged groups, it is entitled to the Work Opportunity Tax Credit (WOTC). The regular credit is 40% of the first $6,000 of wages paid to a qualified worker during the year. But you can also claim a special summertime credit for hiring certain youths age 16 or 17 who work between May 1 and Sept. 15. The WOTC for these workers is 40% of the first $3,000 of wages.
5. Switch to the actual expense method. The standard mileage rate for business driving is 55 cents per business mile (plus tolls and parking fees) for 2009 (down from 58.5 cents per mile for the last six months of 2008). If you started using the standard mileage rate this year, it may not be too late to switch to the actual expense method. Hunt down records for gasoline, oil and repairs. Even if you can’t substantiate all costs from earlier in the year, a midyear switch still can increase deductions.
Don't wait until the end of the year to address tax planning for your business. One of our experienced tax practitioners can assist you right now.
Very truly yours,
Robert C. Jones
www.RCJonesInc.com
Tuesday, May 26, 2009
GENERATE ENERGY TAX BREAKS!
Dear friends of RC Jones & Associates
Several clients have asked us about the tax incentives for energy savings contained in the new economic stimulus law (the American Recovery and Reinvestment Act of 2009). The new law changes may benefit both individual and business taxpayers. Following is a brief overview.
For individuals: The new law triples the residential energy credit to 30% of qualified expenditures (up from 10%). Furthermore, the lifetime $500 dollar cap is eliminated. It's been replaced by an overall limit of $1,500 for 2009 and 2010 combined. The changes are effective for energy-saving installations made after 2008 and before 2011.
The enhanced residential energy credit covers a wide range of improvements, including insulation materials; exterior windows (including skylights); exterior doors and central air conditioners.
The new law also removes the dollar caps for the separate 30% credit for expenditures on qualified solar hot water property, geothermal heat pumps and wind energy property. Caveat: A $500 cap per .5 kilowatt hour of capacity applies to qualified fuel cell property costs.
For businesses: A business building owner may claim a tax deduction equal to $1.80 per square foot of new or existing commercial buildings that meet certain conditions. Alternatively, partial deductions of up to $.60 per square foot are available for eco-friendly improvements affecting the building envelope, lighting systems or heating and cooling systems.
Under last year’s Emergency Economic Stabilization Act, deductions may be claimed for property placed in service after 2006 and before 2014 if certain conditions are met.
Finally, the 2009 Stimulus Act includes numerous other technical modifications. For instance, it extends the credit for electricity produced from renewable sources through 2013 (through 2012 for wind facilities).
This is only a brief summary of the key rules. It is important to understand these tax breaks before you make any energy-saving installations. Contact us at (816) 792-9966 to obtain an assessment.
Very truly yours,
Robert C. Jones
www.RCJonesInc.com
Several clients have asked us about the tax incentives for energy savings contained in the new economic stimulus law (the American Recovery and Reinvestment Act of 2009). The new law changes may benefit both individual and business taxpayers. Following is a brief overview.
For individuals: The new law triples the residential energy credit to 30% of qualified expenditures (up from 10%). Furthermore, the lifetime $500 dollar cap is eliminated. It's been replaced by an overall limit of $1,500 for 2009 and 2010 combined. The changes are effective for energy-saving installations made after 2008 and before 2011.
The enhanced residential energy credit covers a wide range of improvements, including insulation materials; exterior windows (including skylights); exterior doors and central air conditioners.
The new law also removes the dollar caps for the separate 30% credit for expenditures on qualified solar hot water property, geothermal heat pumps and wind energy property. Caveat: A $500 cap per .5 kilowatt hour of capacity applies to qualified fuel cell property costs.
For businesses: A business building owner may claim a tax deduction equal to $1.80 per square foot of new or existing commercial buildings that meet certain conditions. Alternatively, partial deductions of up to $.60 per square foot are available for eco-friendly improvements affecting the building envelope, lighting systems or heating and cooling systems.
Under last year’s Emergency Economic Stabilization Act, deductions may be claimed for property placed in service after 2006 and before 2014 if certain conditions are met.
Finally, the 2009 Stimulus Act includes numerous other technical modifications. For instance, it extends the credit for electricity produced from renewable sources through 2013 (through 2012 for wind facilities).
This is only a brief summary of the key rules. It is important to understand these tax breaks before you make any energy-saving installations. Contact us at (816) 792-9966 to obtain an assessment.
Very truly yours,
Robert C. Jones
www.RCJonesInc.com
Monday, May 11, 2009
RELIEF FOR COBRA OBLIGATIONS
Dear friends of RC Jones & Associates
The new economic stimulus law -- the American Recovery and Reinvestment Act of 2009 -- subsidizes the cost of continuing COBRA medical coverage for some employees who have lost, or will lose, their jobs. But the burden of paying the rest of the premiums is shifting to employers.
Fortunately, if your firm is required to pick up the slack for premium payments, it can claim a special tax credit on the quarterly employment tax return (Form 941). Alternatively, you can reduce employment tax deposits by the amount of the subsidiary payments. The IRS recently released additional guidance on these points.
The long-standing law known as COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) allows an employee who is terminated from employment to continue employer-provided health insurance coverage for up to 18 months. The maximum continuation period is extended to 29 months for an employee who suffers a disability; 36 months for a spouse or dependent facing loss of coverage due to death, divorce or legal separation.
Now the new law offers beleaguered taxpayers a discount. An employee who is "involuntarily terminated" from the job between Sept. 1, 2008 and Dec. 31, 2009, may elect to pay only 35% of the required premiums for a nine-month stretch. It's up to the employer to pick up the remaining 65% of the tab.
However, if an employer is forced to make COBRA subsidiary payments for employees who have been laid off or fired, the business is eligible for the new COBRA premium assistance credit. The new IRS guidance clarifies that a company can't claim the payroll tax credit until it has received the 35% payment from the former employee.
Another option for your firm is to reduce regular employment tax deposits. For this purpose, the COBRA premiums will be treated as having been made on the first day of the quarter and will be applied against the usual deposit requirements for the employment taxes. Note: This does not otherwise affect an employer's obligation to pay employment taxes in a timely fashion.
It makes sense to recoup your firm's COBRA payments as soon as possible; if you have any questions regarding the new COBRA rules; Call us at (816) 792-9966 to examine your options.
Very truly yours,
Robert C. Jones
www.RCJonesInc.Com
The new economic stimulus law -- the American Recovery and Reinvestment Act of 2009 -- subsidizes the cost of continuing COBRA medical coverage for some employees who have lost, or will lose, their jobs. But the burden of paying the rest of the premiums is shifting to employers.
Fortunately, if your firm is required to pick up the slack for premium payments, it can claim a special tax credit on the quarterly employment tax return (Form 941). Alternatively, you can reduce employment tax deposits by the amount of the subsidiary payments. The IRS recently released additional guidance on these points.
The long-standing law known as COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) allows an employee who is terminated from employment to continue employer-provided health insurance coverage for up to 18 months. The maximum continuation period is extended to 29 months for an employee who suffers a disability; 36 months for a spouse or dependent facing loss of coverage due to death, divorce or legal separation.
Now the new law offers beleaguered taxpayers a discount. An employee who is "involuntarily terminated" from the job between Sept. 1, 2008 and Dec. 31, 2009, may elect to pay only 35% of the required premiums for a nine-month stretch. It's up to the employer to pick up the remaining 65% of the tab.
However, if an employer is forced to make COBRA subsidiary payments for employees who have been laid off or fired, the business is eligible for the new COBRA premium assistance credit. The new IRS guidance clarifies that a company can't claim the payroll tax credit until it has received the 35% payment from the former employee.
Another option for your firm is to reduce regular employment tax deposits. For this purpose, the COBRA premiums will be treated as having been made on the first day of the quarter and will be applied against the usual deposit requirements for the employment taxes. Note: This does not otherwise affect an employer's obligation to pay employment taxes in a timely fashion.
It makes sense to recoup your firm's COBRA payments as soon as possible; if you have any questions regarding the new COBRA rules; Call us at (816) 792-9966 to examine your options.
Very truly yours,
Robert C. Jones
www.RCJonesInc.Com
TAX DEDUCTIONS FOR NEW VEHILCES
Dear friends of RC Jones & Associates
Under the new economic stimulus law, you can deduct state and local taxes paid to purchase a new vehicle. The deduction or adjustment to income applies to sales made after Feb. 16, 2009 and before Jan. 1, 2010. At first glance, the rules seem straightforward, but there are a few interesting twists and turns you should know about.
For starters, the new law allows you to write off sales and excise taxes attributable to the first $49,500 of the price of a new (not used) vehicle. This deduction is claimed "above the line" so it can also reduce taxes for other purposes.
Note that the new deduction isn't limited to passenger automobiles. It also covers motorcycles, light trucks and SUVs as long as you're the original buyer and the vehicle doesn't weigh more than 8,500 gross pounds. Motor homes also qualify.
However, like several other tax breaks, the write-off phases out for an AGI between $125,000 and $135,000 for single filers and an AGI of $250,000 and $260,000 for joint filers.
Be aware of a few caveats when comparing deductions: For purposes of the optional sales tax deduction, if the rate of tax on vehicles exceeds the general sales tax rate, the deduction is limited to the general rate and there's no purchase price limit or separate income limit. For instance, if a vehicle costs much more than $49,500, you're probably better off claiming the optional sales tax deduction. If you live in a state with a high income tax rate, you might opt to write off state income tax and tack on the new vehicle deduction.
Also, the new deduction is allowed for the alternative minimum tax (AMT), but the optional sales tax deduction is not. Thus, if you will be subject to the AMT before taking into account a deduction for state or local taxes, the decision is a no-brainer: There is no tax benefit if the optional sales tax deduction is elected instead of deducting state income tax, plus you forfeit any new vehicle deduction.
Can you claim the new deduction for more than vehicle? The law isn't clear on this point, but it stands to reason that deductions would be allowed on multiple purchases up to a $49,500 limit per taxpayer.
This new deduction may affect your decision to buy a vehicle. Contact us at (816) 792-9966 to assess your situation.
Very truly yours,
Robert C. Jones
RCJonesInc.Com
Under the new economic stimulus law, you can deduct state and local taxes paid to purchase a new vehicle. The deduction or adjustment to income applies to sales made after Feb. 16, 2009 and before Jan. 1, 2010. At first glance, the rules seem straightforward, but there are a few interesting twists and turns you should know about.
For starters, the new law allows you to write off sales and excise taxes attributable to the first $49,500 of the price of a new (not used) vehicle. This deduction is claimed "above the line" so it can also reduce taxes for other purposes.
Note that the new deduction isn't limited to passenger automobiles. It also covers motorcycles, light trucks and SUVs as long as you're the original buyer and the vehicle doesn't weigh more than 8,500 gross pounds. Motor homes also qualify.
However, like several other tax breaks, the write-off phases out for an AGI between $125,000 and $135,000 for single filers and an AGI of $250,000 and $260,000 for joint filers.
Be aware of a few caveats when comparing deductions: For purposes of the optional sales tax deduction, if the rate of tax on vehicles exceeds the general sales tax rate, the deduction is limited to the general rate and there's no purchase price limit or separate income limit. For instance, if a vehicle costs much more than $49,500, you're probably better off claiming the optional sales tax deduction. If you live in a state with a high income tax rate, you might opt to write off state income tax and tack on the new vehicle deduction.
Also, the new deduction is allowed for the alternative minimum tax (AMT), but the optional sales tax deduction is not. Thus, if you will be subject to the AMT before taking into account a deduction for state or local taxes, the decision is a no-brainer: There is no tax benefit if the optional sales tax deduction is elected instead of deducting state income tax, plus you forfeit any new vehicle deduction.
Can you claim the new deduction for more than vehicle? The law isn't clear on this point, but it stands to reason that deductions would be allowed on multiple purchases up to a $49,500 limit per taxpayer.
This new deduction may affect your decision to buy a vehicle. Contact us at (816) 792-9966 to assess your situation.
Very truly yours,
Robert C. Jones
RCJonesInc.Com
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