The Small Business Jobs Act of 2010: will it help Small businesses in 2010 and beyond?

 

This blog is the Forth of a five part series commenting on the practical value, if any, of this legislation enacted on September 27th, 2010.

The Sixth Provision of note relates to the recognition of a so called”built-in gain” when a regular corporation converts to an S corporation.  This so-called “built-in gain would subject a Sub S corporation to taxation at a 35% Corporate  rate on the built-in gain beginning in the year of Sub S election over a seven year period.  The new legislation has reduced the period of recognition of this built-in gain from seven to five years.  This provision is in effect for tax years beginning after December 31, 2010. For those business owners that are beginning to plan on selling their business in the future , you should consider converting your regular corporation to a Sub S corporation since the Sub S corporation will only be subject to tax at one level.  Regarding any built-in gain, the shorter 5 year period is manageable with future planning by pursuing a sale at least five years after the Sub S election is in effect.

The Seventh provision of note involves temporary deduction for health care costs in computing self-employment income.  In general, active partners, independent contractors and sole proprietors are subject to self-employment tax on their earnings.  Under present law these individuals are entitled to a health care deduction in calculating their taxable income but not for purposes of calculating their self-employment income.  The new provision will permit health care costs to reduce the self-employment income for tax years beginning after December 31, 2009.  The amount of health care costs that may be included against the self-employment income includes the costs of health care for the self-employed and their spouses and children less than 27 years of age.

Written By: Michael Janicki

www.janconsultinggroup.com

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The Small Business Jobs Act of 2010: will it help Small businesses in 2010 and beyond?

 This blog is the Third of a five part series commenting on the practical value, if any, of this legislation enacted on September 27th, 2010.

The Fourth Provision of note relates to boosting the current deduction for so called “startup Expenses”.  Beginning in the year 2010, the tax legislation increases the amount of deductible start-up expenses from $5,000 to $10,000. While this amount is relatively modest, it does provide a new business venture an additional $5,000 of current deduction which will provide some immediate additional cash flow which is generally desperately needed by new ventures.  This would be beneficial in the year you start your business and are able to deduct these amounts from income earned in the same year.

The Fifth provision of note involves the removal of cell phones and other similar telecommunications equipment from being classified as “listed Property”.  This is an important distinction since costs for “listed properties” cannot be deducted without the use of this property being substantiated by detailed evidence and records.  Before this change for the employer to qualify for the business deduction and employees to avoid income on all of the cell phones and other mobile communications equipment treated as “listed property”, employees technically were required to track each outgoing and incoming call as business or personal.  This was obviously not practical, and few companies had a policy to satisfy those requirements.

Written By: Michael Janicki

www.janconsultinggroup.com

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The Small Business Jobs Act of 2010: will it help Small businesses in 2010 and beyond?

 This blog is the second of a five part series commenting on the practical value, if any, of this legislation enacted on September 27th, 2010. 

The Second Provision of note relates to an expansion of the carry back period for unused general business credits.  Prior to this extension of time, if a business generated unused general business credits it was able to carry them back 1 year and forward 20 years.  Under the new law any unused general business credits can be carried back 5 years and forward 20 years. While the extension of unused general business credits sounds like a favorable benefit, the fact is that unless a business has made extensive investments in 2010 this potential benefit will have little, if any, effect.

The third provision of note involves the expansion of the section 179 expensing provisions.  Under this provision a business may write-off up to 100% of the cost of an acquired asset. In general, a business was able to write-off up to $250,000 of otherwise depreciable property acquired during 2008 and 2009. For 2010 and 2011 the cap has been raised to $500,000.

In addition, the new section 179 rules include leasehold improvement made any time in 2010 as qualifying for immediate deduction up to $250,000.  The benefit of including leasehold improvements under section 179 is that typically any leasehold improvements would be amortized under the lease term which might be very long.  If any business has relocated and/or expanded their facility then this provision would be potentially beneficial in 2010.

Written By: Michael Janicki

http://janconsultinggroup.com

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The Small Business Jobs Act of 2010: will it help Small businesses in 2010 and beyond?

 

This blog is the first of a five part series commenting on the practical value, if any, of this legislation enacted on September 27th, 2010.

With the current economic conditions existing in our country, recession and large deficits,  the president and congress are hopeful that a significantly expanding economy will solve most, if not, all of our economic woes. Their first attempt is the Small Business Jobs Act of 2010. Specifically, I will review with you selected tax provisions of that bill. 

The first Provision of note is the Extension of Bonus depreciation.  Bonus depreciation allows a taxpayer to write-off immediately 50% of otherwise depreciable property that was placed in service in the year.  Even though the tax act was signed into law on September 27th, 2010, it allows a taxpayer to take bonus depreciation on any asset placed in service from January 1, 2010 through December 31, 2010. In general, this benefit would be extended to property having a “recovery Life” of 20 or less and include leasehold Improvements.

For those businesses which have been making or were planning on making investments in 2010 either for depreciable property or have recently moved and have incurred leasehold improvements this provision will generate significant deductions against current net income.

However, if you business, as many others, has seen a drop in sales and has either marginal profit or a loss, this depreciation write-off has no use at all.

Also, remember that the legislation is providing an accelerated deduction into 2010 which means you will have lower depreciation deductions in future years.  The point being that if you incurred 10,000 of investments in 2010 you can deduct $5,000 immediately and $5, 000 over the remaining period.   Without the bonus depreciation you would deduct the 10,000 investment over a longer period.  If we assume the tax rates are going to stay the same over the next 5 or 10 years then it seems beneficial.  If the tax rates begin to rise over the next few years then the benefit of receiving more deductions in 2010 may be a poor strategy.

Written By: Michael Janicki

www.janconsultinggroup.com

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What are you doing to keep your clients into 2011 and beyond?

 

As business owner’s, clients and customers are our lifeblood.  When we think of clients or customers we acknowledge them in a possessive manner. Our clients, my client, my firm’s clients!!!  While we take pride and ownership of these relationships, we often times take these relationships for granted.

Our perception regarding our clients and customers is generally a myopic point of view.  The reality is that every one of our clients and customers is a very definitive target of our competitors.  Additionally, our own clients like everyone else are continually looking for excellent service at value pricing. The loyalty of our clients and customers is built on the assumption that we can continue to provide products and services that meet their perception of excellence and value.  I hope you noticed that I emphasized their perception not ours.  Since clients and customers exercise complete autonomy in the decision making process understanding their value proposition is critical to meet their expectations. 

With the end of the year approaching, it’s an excellent time to reflect on all of our client relationships and try to review the strength or weakness in these relationships with each one of them. We should have a clear understanding of the type of services we provide, how much communication and feedback we have received is key in assessing  the nature of the relationship and the whether the client is buying the same, less or more products or services than we anticipated when they became a client or customer.

With this information we should analyze the type of client relationship and satisfaction they have with our company and commit ourselves to further strengthening these relationships. Try to remind yourself that each client relationship either moves forward or backward.  Using this philosophy, commit yourself to better understand your client value proposition, increased activity, if possible, and creating a mechanism for feedback to provide you the opportunity to align your services or products with the client before they become someone elses client.

Written By: Michael Janicki

www.janconsultinggroup.com

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