Location, Location, Location
October 6, 2010 | 
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Businesses located in a certain distressed areas in Maryland (or relocating or expanding there) may be entitled to two significant tax credits, the “Enterprise Zone Tax Credit” and the “One Maryland Economic Development Credit.”
To find out if you are in an enterprise zone, check out this map.
If your business is located in an enterprise zone, to qualify for the Enterprise Zone Credit for wages paid to employees, the business must hire one employee who:
- is a new employee or an employee rehired after being laid off for more than one year;
- worked for the business for at least 35 hours per week for six months or more;
- earns at least 150% of the federal minimum wage;
- spends at least 50% of the workday either in the enterprise zone or on activities of the business resulting from its location in the enterprise zone or focus area;
- is hired after the date the enterprise zone was created or the date the business located in the enterprise zone or focus area, whichever is later; and
- is not hired to replace an individual employed by the business within the last four years.
If the employee is certified economically disadvantaged, the credit can be worth even more to your business.
The One Maryland Economic Development Tax Credit applies to businesses that establish or expand a business facility in a priority funding area and that are located in a “distressed” Maryland county.
A distressed county has, for the last 24 month period, an average rate of employment that is 150% higher than the statewide average or an average per-capita personal income that is equal to or less than 67% of the statewide average (the county, including Baltimore City, either currently meets these criteria or did so at some point in the last 12 months).
To qualify for the Credit, business must:
- spend at least $500,000 in project costs on the project;
- create at least 25 positions at the new or expanded facility.
Questions:
steve.albert@glassjacobson.com
neil.stulman@glassjacobson.com
New Bill Means More Small Business Tax Incentives
October 1, 2010 | Subscribe to our RSS Feed
President Obama signed a small business bill on Sept. 27 that enables small businesses to take advantage of new and extended tax incentives, including an extension of 50 percent bonus depreciation and an increase in the tax code Section 179 expensing limitations.
Investors in small businesses also will be allowed a 100 percent exclusion for capital gains from the sale of certain small business stock. In addition, the bill provides for an increase in the allowable deduction for start-up business expenses.
The bill also will allow business owners to deduct the cost of health insurance for the purpose of computing 2010 self-employment taxes and permit general business credits of small businesses to be carried back for five years. Those credits would not be subject to the alternative minimum tax.
Firms also will get relief from the often-criticized tax code Section 280F requirement that they account for how much of their employees’ company-issued cell phone use is for personal calls in order to deduct the full cost of the phones.
To offset the cost of the tax cuts in the bill, lawmakers agreed to allow individuals with tax code Section 401(k), 403(b), and governmental 457(b) plans to roll their pretax account balances into Roth individual retirement accounts. The change would make the amount of the rollover taxable as income, except in the case of money that is a return of after-tax contributions.
The new law also will require individuals who receive rental income from real property to file Form 1099 information returns to the Internal Revenue Service and to service providers if payments have totaled $600 or more during the year for rental property expenses. Lawmakers also added a provision to prohibit companies from claiming the $1.01-per-gallon biofuel production credit on crude tall oil, a waste byproduct of the paper manufacturing process.
Questions?
2010 Strategy- Pay Dividends to C Corp Shareholders This Year
September 20, 2010 | Subscribe to our RSS Feed
Congress has a lot of tax issues to resolve in these four short pre-election weeks, including the fate of the expired and reappearing estate tax and the expiring Bush tax cuts.
While there has been no formal legislation passed, it seems that tax rates for wealthy taxpayers (those earning $250,000 or more, $200,000 or more if single) will increase sooner rather than later- in all likelihood, sometime next year. The wild cards, of course, are the economy and the November elections. A continued lackluster economy could give Congress cause to extend the Bush tax cuts even for the wealthy, at least temporarily, as could a turnover of the Senate or House—only time will tell.
If you believe that tax rates for wealthy taxpayers will be going north, it may be time to consider throwing out some traditional strategies and doing just the opposite. For example, instead of deferring income and accelerating deduction, this year wealthy taxpayers may well want to accelerate income to take advantage of the current low rates and defer deductions to offset future income that will be taxed at higher rates. C corporations may want to consider making nondeductible dividend distributions this year.
Dividends paid from C corporations to shareholders during 2010 will be taxed under today’s favorable federal rate structure. In contrast, distributions received in 2011 or later are currently scheduled (absent a law change) to be taxed at much higher rates—up to 39.6% in 2011 when the Bush tax cuts are set to expire and up to 43.4% in 2013 when the 3.8% net investment income surtax under the Health Care Act is set to kick in.
Bottom-line: high-income individuals who own closely held companies should consult with their CPA to decide if the potential tax savings from declaring and paying dividends before the end of 2010 make sense in the long run.
Questions?
IRS Requires Electronic Tax Deposits
September 7, 2010 | Subscribe to our RSS Feed
IRS will eliminate use of federal tax deposit coupons after 2010.
Thus, firms will have to wire deposits of all taxes to IRS…payroll taxes, corporate income taxes and estimates, excise taxes and the like. Currently, employers can use paper coupons if their annual deposits don’t exceed $200,000.
Only very small firms will be exempted from depositing electronically… employers with $2,500 or less in quarterly employment taxes that pay their liability when filing their returns. All other coupon users must switch to making deposits by wire using Treasury’s Electronic Federal Tax Payment System. For information on enrolling for electronic deposits, go to www.eftps.gov or call 800-555-4477.
Questions?
or
bart.scheffel@glassjacobson.com
More Health Care Reporting Requirements…
August 31, 2010 | Subscribe to our RSS Feed
Employers- the new health care reform package requires you to report the value of the health insurance coverage you provide employees on each employee’s annual Form W-2 after 2010.
The Patient Protection and Affordable Care Act ( PPACA) imposes a number of new reporting requirements, although the IRS emphasized that the reporting is only for informational purposes only and does not affect an employee’s tax liability.
Applicable employer-sponsored coverage is coverage under any group health plan made available to the employee by the employer which is excluded from the employee’s gross income under Code Sec. 106 or would be excluded if it was considered employer-provided coverage under Code Sec. 106. Applicable employer-sponsored coverage also includes coverage under a federal, state or local government group health plan.
Some items are excluded, such as coverage for long-term care, accident or disability income.
Employers must report the aggregate or total cost of employer-sponsored health insurance coverage. Employers need not provide a specific breakdown of the various types of medical coverage, the IRS explained.
Here is a complete list of the Reporting Requirements for the Form W-2.
Questions?