New Tax Laws For Small Businesses
Written by Tim Morral
Several new tax laws are impacting small business tax returns this season and providing substantial savings for entrepreneurs.
Tax season. It's estimated that individuals and businesses spend approximately 6.1 billion hours per year complying with IRS filing requirements -- time that most small business owners would rather spend on activities that actually grow their companies.
But even though the majority of small business owners (70%) farm out the job to a professional tax preparer, it's important for every business owner to remain engaged with the tax preparations process. In many cases, the direct involvement of the business owner results in reductions in tax liability and a direct improvement to the company's bottom line.
According to Barbara Weltman, tax expert and author of J.K. Lasser's Small Business Taxes 2012, there are several new or irregular tax laws that will impact business owners' total liability during the 2012 tax season.
- Form 1099-K. A new IRS rule requires credit card processors and electronic payment companies (e.g. PayPal) to report gross merchant transactions to the IRS and special reporting rules may apply on your 2011 return.
- SE Tax Reduction. The employee portion of Social Security tax continues to be reduced by 2%, which is also reflected in lower self-employment tax. However, the 2010 reduction for health insurance premiums in not available in 2011.
- Mileage Rates. Standard IRS mileage once again increased in 2011. From January 1 through June 30, the standard IRS mileage rate was 51 cents per mile; from July 1 through December 31, it was raised to 55.5 cents per mile.
- Deductions for Equipment Purchases. Increased first year-expensing and the 100% bonus depreciation continues to apply to certain equipment purchases in 2011, despite the fact that these allowances may not apply at the state tax level.
- Veteran Employment Credit. A new credit passed late in the year allows small business owners to take a tax credit for hiring unemployed veterans after November 21, 2011. Special rules and restrictions may apply.
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