Advanced Earned Income Eliminated
Starting in tax year 2011, the form W-5 and the option for advance EIC payments will be eliminated. Earned income credit will be received upon filing tax return.
10% Tax Bracket
The lowest tax bracket of 10% has been extended through 2012 instead of increasing to 15% as planned.
Energy Saving Home Improvement Credits
Congress increased the credit from 10 to 30% for 2009 & 2010. They raised the maximum credit limit to $1,500 and eliminated the $500 lifetime cap.
2010 Business per diem is 50 cents per mile. Moving and medical is 19 cents per mile and charity travel is 14 cents per mile. 2011 Business per diem is increased to 51cents per mile. Moving, medical and charity is unchanged.
Maximum Social Security tax
2011 Earnings subject to tax is $106,800 (same as 2010) Employee social security tax reduced by 2% to 4.2%. Self-employed rate is also reduced by 2%.
Retirement Contributions Limits for 2010 & 2011
IRA is $5000 and $6000 for age 50+. 401(k) and 403(b) plans is $16,500, $22,000 for age 50+. SIMPLE plan is $11,500, $14,000 for age 50+. Maximum SEP contribution is $49,000.
Annual Gift Tax Exemption for 2010 & 2011
$13,000 maximum giving per year, per person to avoid filing a gift tax information return.
Increased Start-up Expense Deduction Available
The Small Business Jobs Act of 2010 has doubled the first year write off to $10,000 for qualified business start-up expenses for 2010. Costs that exceed this limit may be amortized over 180 months. Additional limits apply if the total costs exceed $60,000.
Section 179 Expense
The maximum limit has been increased to $500,000. There are limitations to the amount of equipment that may be purchased during the year. The phase out is $2,000,000 increased from $800,000 in 2009. The definition of qualifying property has been expanded to include qualified real property, which includes qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property. This qualified property category is limited to a maximum of $250,000 rather than $800,000.
bonus depreciation has been extended until December 31, 2010. Eligible property includes business property with a depreciation period of 20 years or less. This includes passenger automobiles used at least 50 percent for business.
A new option to have your direct deposit refund purchase U.S. Series I Savings Bonds.
High Income Phase-Out
Has been eliminated for 2010 for itemized deductions and personal exemptions. It is scheduled to resume in 2011.
AMT Tax Relief
The extension of alternative minimum tax exemption amount has been extended for 2010.
1099 Reporting Requirements
Effective for payments in 2012, businesses that pay amounts $600 or greater during the year to both corporate and non-corporate taxpayers for either services or product purchases will be required to file Form 1099. This will be a huge burden on small business.