Many integrators in the electronic systems industry fall under the definition of a small business and often deal with a variety of issues associated with small business including labor, taxes, training, classification, and business opportunities. NSCA monitors federal legislation that affects your business in both negative and positive ways, many times creating cost-saving measures through tax incentives or increasing fines and penalties through regulatory initiatives. Click on the bills below to find out what issues are affecting your company today.
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
Small Business Jobs Act
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
During the week of December 6, 2010, President Obama worked with Republicans to create a bill that would extend the tax cuts offered in the 2001 "Economic Growth and Tax Relief Reconciliation Act." Originally introduced earlier this year as HR 4853, the "Middle Class Tax Relief Act of 2010," the U.S. Senate introduced introduced an amendment to the bill on December 9, offering the compromise established by President Obama.
This amended version of the bill, now often referred to as the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010" would be extended through December 31, 2012, and save taxpayers $1,400 - $3,000/year if it is passed before December 31, 2010, when the tax cuts are set to expire.
Many business owners are concerned by the delay this bill is having on their ability to complet year-end tasks, such as preparation of W-2 forms that employees need to file their taxes. If this bill is delayed beyond December 31, the time to get your W-2s and file would certainly be cut much shorter.
However, it is important that this legislation passes for other reasons besides a potential tax increase and less money in your pocket. The bill also extends unemployment insurance benefits, an important factor for overall passage of this legislation.
Several key issues important to your business include the extension of the bonus depreciation, extending the small business expensing component, and employee pay roll tax cut.
For more information, please click here and make sure always to check with your tax professional when dealing with taxes, incentives and opportunities to help your bottom line.
Small Business Jobs Act
H.R. 5297 was signed into law on September 27, 2010. While many provisions will be very beneficial to small businesses, the most controversial component is the $30 billion lending fund designed to help community banks make loans to small businesses, as well as the additional requirement to provide 1099 forms for anyone receiving rental income that pays their service providers more than $600. Drafted based on discussions with the small business community, the revised H.R. 5297 provides $12 billion in tax cuts, allowing small businesses to access more private capital and finance expansion efforts, among other key points.
Important provisions of the bill relevant to NSCA members are related specifically to sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average gross receipts for the previous three years. It is important to discuss these temporary relief provision with a tax professional to ensure a complete benefit prior to making business decisions based on these relief provisions for small businesses.
Resources on Small Business Jobs Act:
Small Business Administration
Joint Committee on Taxation (JCX-47-10)
H.R. 5297
Key provisions include:
Providing Access to Capital:
- Temporary exclusion of 100 percent of gain on certain small business stock
- Encouraging small business investment, this provision allows investors to exclude 100% of the gains from the sale of certain small business stocks acquired after September 27, 2010, and before January 1, 2011.
- Five-year carryback of general business credit of eligible small business
- Current law stipulates that unused general business credits can be carried back only one year; this provision would extend the carryback to five years, effective for the first taxable year beginning after December 31, 2009.
- Repeal of the Alternative Minimum Tax (AMT) Limitation on General Business Credits
- In the past, small businesses haven’t been able to take general business credits if business owners were subject to AMT. This bill would repeal this restriction, effective for the first taxable year beginning after December 31, 2009.
- Temporary reduction in recognition period for S corporation built-in gains tax
- This provision defines the computing of built-in gains tax for the “recognition period” is the five-year period beginning with the first day of the first taxable year for which the corporation was an S corporation, effective for taxable years beginning after December 31, 2010.
Encourage Investment:
- Increase and expand expensing of certain depreciable business assets
- Under Section 179, business owners will be able to expense up to $500,000 in investments to the cost of qualifying property that they put into service during the taxable year. This begins to phase out when property purchases hit $2 million for the 2010 and 2011 tax years. Extend the additional first-year depreciation allowance
- "Bonus" depreciation, for 2010 and 2011, allows immediate write-offs for up to half of the remaining cost of qualified new (but not used) equipment. Bonus depreciation may also be used to claim a refund if a firm is losing money, whereas Section 179 deductions only help to reduce taxable income.
- Disregard bonus depreciation in computing percentage completion.
Promote Entrepreneurship:
- Increase amount allowed as deduction for start-up expenditures
- Increases the tax deduction for trade or business start-up expenditures from $5,000 to $10,000 in 2010 and 2011
- Authorization of appropriations to the Office of the United State Trade Representative
- The provision authorizes additional appropriations in the amount of $5,230,000 for USTR to (1) analyze and develop opportunities for U.S. businesses to access foreign markets; and (2) enforce trade agreements to which the United States is a party.
Promote Small Business Fairness
- Limitation on penalty for failure to disclose certain information
- Temporary deduction for health insurance costs in computing self-employment income
- Self-employed individuals can fully deduct the cost of their health insurance from their self-employment taxes for 2010. Currently, self-employed individuals are prohibited from fully deducting the cost of their health insurance from their self-employment taxes, resulting in an additional tax that no other worker or business owner is forced to pay.
- Remove cellular phones and similar telecommunication equipment from the definition of listed property
- Eliminate a requirement in current tax law that employees pay taxes on the value of certain transmissions they send on employer-provided cell phones
Revenue Provisions
Additional key provisions helpful to both employers/employees include:
Promoting Retirement Preparation
- Allow rollovers from elective deferral plans to Roth designated accounts
- Participants eligible for a 401(k) plan distribution could roll over part or all of their account balance into a Roth 401(k) plan offered by their employers. If the rollover is made this year, the participant could elect to pay the tax on the money in equal parts in 2011 and 2012.
Reducing the Tax Gap
- Information reporting for rental property expense payments
- Beginning next year, most recipients of rental income must prepare IRS 1099 information returns if they pay a service provider $600 or more a year.