A very busy tax year!

2010 was an active year for federal legislation with tax effects. The rapid succession of this legislation left taxpayers and tax professionals justifiably confused. The list below highlights some of the business tax effects of recent legislation. There are many, many details attached to each of the highlights below.

HIRING INCENTIVES TO RESTORE EMPLOYMENT ACT (HIRE Act, March 18, 2010)

• 6.2% employer contribution to Social Security is waived on the wages of new hires of qualified employees who were unemployed for at least 60 days.
• Retained Worker Tax Credit available in 2011 to employers who hired qualified employees, above, and retained them for 52 consecutive weeks.
• Section 179 limitations were increased, but increased again by the JOBS Act.
• Information reporting on foreign activities and investments is expanded.

PATIENT PROTECTION AND AFFORDABLE CARE ACT (March 23, 2010 and HEALTH CARE AND EDUCATION RECONCILIATION ACT (March 30, 2010) (collectively, HEALTH CARE LAW)

• Small employer health insurance tax credit available beginning in 2010.
• Judicial economic substance doctrine is codified.
• Expansion of Form 1099 reporting to include payments for goods and payments to corporations beginning in 2012.
• Employer cost of health care coverage to be included on Form W-2 beginning in 2011.
• Additional taxes on wages of high wage earners and unearned income.
• Penalties imposed on uninsured individuals beginning in 2014.
• Health-care cost subsidies beginning in 2014.
• Penalties on large employers for not provide employee health insurance begin in 2014.
• Excise tax on “Cadillac” plans begins in 2018.

SMALL BUSINESS JOBS ACT (JOBS Act, September 27, 2010)

• The 50% bonus depreciation expense was extended through 2010 but increased by the TAX RELIEF ACT.
• The maximum Section 179 deduction is increased to $500,000 and the investment limit to $2 million for 2010 and 2011.
• The holding period of assets subject to the built-in gain tax on S corporations is reduced to 5 years.
• Cell phones and other communication devices are no longer subject to the listed property use substantiation rules.
•  The carryback period of eligible small business credits is extended to 5 years.
•  The exclusion of gain on the sale of qualified small business stock is increased to 100% for stock acquired after January 17, 2009 through December 31, 2010.
•  The start-up expense deduction is increased to $10,000 for 2010.
• Rental of real property is classified as a trade or business subject to Form 1099 reporting of payments to their vendors.

TAX RELIEF, UNEMPLOYMENT INSURANCE REAUTHORIZATION AND JOB CREATION ACT (TAX RELIEF ACT, December 17, 2010)

• The bonus depreciation expense is increased to 100% for purchases of new qualifying property.
• The research tax credit is extended for two years through 2011.
•  The 100% gain exclusion on the sale of small business stock is extended to stock acquired before January 1, 2012.
•  The Work Opportunity Tax Credit for wages paid to qualified employees is extended through 2011.

These highlights represent a very top level review of the tax effects of 2010 legislation.  How they affect you and your business will depend on your circumstance.  If you have any questions or concerns, please contact me or any Kaufman, Rossin professional.

This information is not intended or written to be used for the purpose of avoiding tax penalties and it cannot be used for that purpose. Further, this information is a general description of current tax law and is not presented as a tax opinion on any general or specific tax issue or situation. This information may not be used to promote or market any transactions stated herein. Readers are advised to seek advice from their own tax advisors if they have questions.