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BONUS DEPRECIATION – Bonus depreciation
is 100% of new assets acquired and placed into service before January 1,
2012. New assets acquired and placed
into service during 2012 are able to take 50% bonus depreciation. The additional first-year depreciation for
vehicles of $8,000 on which bonus depreciation is claimed remains unchanged and
continues to apply to vehicles placed in service in 2011 and 2012
CREDIT FOR RETAINED WORKERS – For 2011, the New
Hire Retention Credit allows employers a credit equal to the lesser
of $1,000 or 6.2% of the worker’s wages during the 52-consecutive-week
period. Qualifying wages are wages paid
after February 3, 2010. Qualified worker
is an employee that worked for at least 52 weeks, and the worker’s wage during
the last 26 weeks equal at least 80% of the worker’s wage during the first 26
weeks. No carryback is allowed, but
unused credit can be carried forward for 20 years
DOMESTIC PRODUCTION ACTIVITIES DEDUCTION – For 2011, the deduction
is 9% of the lesser of the taxable income (or AGI for individuals) or the
Qualified Production Activities Income. The amount of the deduction cannot be
more than 50% of the amount of wages reported on W-2s which are allocable to the
domestic production income
FORM 1099 RETURNS – The penalties for
failure to file an information return on or before the required filing date,
failure to include all of the information required to be shown on a 1099, or
filing of incorrect information on a 1099 has increased to $100 per
return. The maximum penalty that may be
imposed on a taxpayer is limited to $1,500,000, but a company that fails to
file with the Internal Revenue Service and to provide 1099s to their recipients
could have penalties totaling up to $3 million
FORM 1099-K – Businesses that process credit
card and electronic payments will be receiving Form 1099-K if they had more
than 200 transactions and $20,000 gross income paid to them. In a last minute change, the Internal Revenue
Service decided not to require taxpayer reporting for 2011. Starting in 2013, if the tax identification number (TIN) has not
been provided to third party, a 28% federal withholding will be imposed
HEALTH INSURANCE FOR SELF-EMPLOYMENT DEDUCTION
EXPIRED – The ability to deduct premiums for self-employed health insurance in
computing the net earnings from self-employment has expired and is not available in 2011
HOME OFFICE AND COMMUTING – An independent
contractor in the construction business was disallowed from deducting transportation expenses for travel between his residence and his worksites because commuting expenses are
nondeductible personal expenses. A
taxpayer could deduct expenses from traveling from his home office to a worksite if
the home office qualifies as the principal place of business
SECTION 179 – For 2011 the maximum §179
(immediate expensing of capital assets) deduction available is $500,000 for
assets purchased, with a threshold of total assets placed in service of $2
million. Full phaseout occurs at $2.5 million.
The definition of “qualified property” has been expanded to include
qualified real property which includes qualified leasehold improvement
property, qualified restaurant property, and qualified retail improvement
property. The qualified real property
category is limited to a maximum of $250,000
SMALL EMPLOYER’S HEALTH INSURANCE CREDIT – For
2011, the Health Care Act that provides a credit for health insurance premiums for employers with less than 26 full-time employees with each employee’s average annual wage less than $50,000 per year.
The credit is nonrefundable and may be as high as 50% of premiums paid, but is reduced
if more than 10 full-time employees and the average annual wages exceed $25,000 per employee. If claiming the credit, the deduction of
health insurance premiums paid must be reduced by the credit allowed. Employees treated as owners including sole proprietors,
partners, 2% shareholders in S corporations, and 5% owner of any other business
do not qualify for this credit. Any
unused credit may be carried back one year and carried forward 20 years
START-UP EXPENSES – Immediate expensing of start-up
costs is reduced to $5,000. The first
year deduction is also limited if the total start-up costs exceed $50,000
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