The Small Business Jobs Act – Opportunities for Business Owners – A Common Sense Overview

The Small Business Jobs Act – Opportunities for Business Owners – A Common Sense Overview

Our Thoughts on the Small Business Jobs Act Signed into Law by President Obama on September 27, 2010.

In our capital starved business climate, the bill contains many business friendly provisions that could potentially provide much needed sources of capital from both SBA loans and banks, opportunities for increased expensing and tax deductions, and additional tax cuts and planning opportunities.

The highlights include:

  • If you are a business and buy new equipment, you can immediately write off the first $500,000 of your investments;
  • If you are short on working capital, billions of dollars of new and expanded SBA loan opportunities have been created;
  • If you have maxed out your eligibility for an SBA loan, many loan programs have expanded the total dollar amounts that your business can receive;
  • $30 Billion in lending capital will now be available to small banks with incentives to make loans to small businesses;
  • If you are an eligible business with long-term investments in your business, you will be subject to zero capital gains taxes;
  • As an entrepreneur, you can take a chance on a new idea and deduct the first $10,000 of your start-up costs;
  • A handful of other tax planning opportunities regarding cell phone write offs, limitation on tax penalties, and a 5 year carry back of certain business credits.

We label the the new provisions as potential opportunities because of these concerns:

  • With capital spending at a 35 year low, these measures may stimulate spending for certain businesses, but the bill fails to address concerns regarding increases in health care costs and personal and business income and payroll taxes.  Many businesses are hesitant to make significant purchases or hire new employees until they have more confidence in the economy and a better defined picture of upcoming tax and health care costs.  With these new taxes and costs possibly taking effect in January 2011, there has been an alarming lack of guidance.
  • Many businesses may still not be eligible or attractive to a bank or SBA program.  To qualify for an SBA loan, a business still must meet eligibility requirements and the business owner must provide a personal guaranty.  A business may need the assistance of an outside consulting firm to improve financials, profit, and therefore their potential to secure necessary capital.
  • How much benefit will be created by the new tax planning, increased expensing, and accelerated depreciation opportunities?  How much more complexity can we add to the tax system?  With most businesses not capitalizing on existing planning opportunities, are they really in a position to take advantage of the new tax laws.  We see too many businesses that aren’t capitalizing on Research and Development Credits for improved processes or Cost Segregation for accelerating depreciation on new and existing commercial business property.  Great opportunities for reducing taxes and increasing much needed business cash flow are lost every year by most businesses.

Call us with questions, or to make sure your business realizes the full benefit of new and existing tax planning opportunities.

The Business Wealth Preservation Group is a professional services firm dedicated to providing superior individualized and custom service to individuals and their businesses in the areas of asset protection, tax planning, exit strategies, and wealth building. Simply put – we want to educate you on all relevant opportunities to put more dollars into your pocket, your business and your future.

Small Business Jobs Act – Signed into Law 9/27/10

President Obama signs the Small Business Jobs Act into law on September 27, 2010.

Highlights:

  • Extension and Expansion of a business’ Ability to Immediately Expense Capital Investments -  The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write-off to $500,000 (increased from $250,000 in 2010 and $25,000 in 2011) while increasing to top end at which capital investment write-offs are phased out to $2 million.  So for businesses with the ability, cash, need, and willingness to make capital expenditure investments this year, the bill will enable them to get an increased tax deduction for depreciation on their corporate returns.
  • Extension for 50% Bonus Depreciation – Extends the popular bonus depreciation through 2010 for capital purchases.
  • Funding for Additional SBA Loans – The bill provides funding for loans to 1,400 business totaling $730 million that are waiting in the Recovery Loan Queue.  The bill provides for the ability to support a total additional $14 billion in loans to small businesses.  The SBA Recovery loan provisions have already provided $30 billion to 70,000 small businesses.
  • Increased the Maximum Loan Size for Existing SBA Programs – To provide greater access to working capital businesses can now borrow more from the SBA.  The increases include:

-         SBA Express Loans – increased from $350,000 to $1 million

-         7(a) and 504 Loans – increased from $2 million to $5 million

-         504 Manufacturing Loans – increased from $4 million to $5.5 million

  • A New $30 Billion Small Business Lending Fund – The bill establishes a new $30 billion Small Business Lending Fund which provides capital to small banks with incentives to increase small business lending.

Additionally Eight new Tax Cuts that go into effect Immediately including:

  1. Zero taxes on capital gains from certain small business investment held for 5 years.  (Currently a 10 year holding period)
  2. Extension and expansion of the ability to immediately expense capital investments. (discussed above)
  3. Extension of 50% bonus depreciation. (discussed above)
  4. A 2010 deduction for health insurance costs for self-employed.  (Although more information is needed, some sources have  report this applies only to sole proprietorships)
  5. Tax relief and simplification for cell phone deductions
  6. An increase in the deduction for entrepreneurs starting a new business venture.
  7. A five year carry back of general business credits.
  8. Limitations on penalties for errors in tax reporting that disproportionately affect small businesses

Legislative Update: The Impact of Tax Law Changes for Business Owners – Health Care Tax Increase

Legislative Update:  The Impact of Tax Law Changes for Business Owners – Health Care Tax Increase

Washington’s vision of a new health care plan means many new taxes for businesses, business owners, and employees starting January 1, 2011.

Everyone’s W-2 form will now be increased to show the value of whatever health insurance that your company has provided to you.  The inclusion on your W-2 means you will be paying taxes on the health care benefit as if it were income.  Effectively, you will be paying income taxes on money that you never saw.  Pull out last year’s tax return and add $15,000 to $25,000 of additional income and see what that does for your taxes due.  Don’t forget about the increased tax brackets (ie HIGHER TAX RATES) that we discussed elsewhere in this BLOG!!

Here are just a few other examples of increased taxes:

  1. The “Medicine Cabinet” Tax – Taxpayers will not longer be able to purchase non-prescription, and over-the-counter medicines with PRE-TAX dollars by using health savings accounts (HSA), flexible spending accounts (FSA), or health reimbursement accounts (HRA).  This equates to higher payroll and income taxes for employees, including business owners, and higher payroll taxes for businesses.

  1. The “Health Savings Account” HSA Withdrawal Tax increase – By increasing the penalty / additional tax on withdrawals from HSA from 10% to 20%, Washington has disadvantaged them relative to IRAs and other such accounts.  Effectively discouraging pre-tax health care planning.

  1. The “Special Needs Kids Tax” – Proving that no one is safe, Congress has now imposed a cap on flex spending accounts “FSA” of $2500.  Currently no cap exists.  Flex Spending Accounts are a preferred method for special needs children that require special or additional education.  Instead of setting aside pretax dollars for these expenditures, the majority of the monies spent will be with after tax dollars.  This equates to, in this example, dramatically more expensive special needs educational cost that certainly will put them out of reach for many families.

Call us for help or with questions!

The Business Wealth Preservation Group is a professional services firm dedicated to providing superior individualized and custom service to individuals and their businesses in the areas of asset protection, tax planning, exit strategies, and wealth building. Simply put – we want to educate you on all relevant opportunities to put more dollars into your pocket, your business and your future.

We focus on leading edge, sophisticated, and safe business strategies that will help business owners structure, operate and maintain their business to take advantage of business and tax laws rather than being encumbered by them. We partner with the business, the accountant, and the attorney to ensure the business owners are capturing all available benefits that align with their business and personal goals.

www.BusinessWealthPreservation.com
Call Us Toll Free: (888) 938-2975 (888-WE-TAX PLAN)
Email: tfoster@wetaxplan.com

Legislative Update: The Impact of Tax Law Changes for Business Owners – Income Taxes

Legislative Update:  The Impact of Tax Law Changes for Business Owners – Income Taxes

Unless action is taken by Congress, the tax cuts enacted in 2001 and 2003 meant to help business owners, families, and investors will expire January 1, 2011.  Everyday it seems more likely that Congress’ inaction will result in much higher taxes for business owners, especially S-Corporation and sole proprietorships.  It seems to be an easy way out for the current Congress and administration to raise taxes by “default” or perhaps with a built in excuse to say “It’s not my fault.”

What will change January 1, 2011:

Personal Income Tax Rates:

10%  now becomes  15%

25%  now becomes  28%

28%  now becomes  31%

33%  now becomes  36%

35%  now becomes  39.6%

And with additional phase outs of itemized deductions, personal exemptions, and child credits, the “real” effective tax rate as compared to prior tax years will seem even higher.  Essentially, you as a business owner will have MORE income exposed to HIGHER tax rates!!  Result? Much higher TAXES!!

The time to engage in PROACTIVE, INFORMED, and SAFE tax planning is now.  With these and other “proposed” and “recommended” changes to the taxing structure for businesses, it will become more challenging to put money from your business into your pocket!

Call us for help!

The Business Wealth Preservation Group is a professional services firm dedicated to providing superior individualized and custom service to individuals and their businesses in the areas of asset protection, tax planning, exit strategies, and wealth building. Simply put – we want to educate you on all relevant opportunities to put more dollars into your pocket, your business and your future.

We focus on leading edge, sophisticated, and safe business strategies that will help business owners structure, operate and maintain their business to take advantage of business and tax laws rather than being encumbered by them. We partner with the business, the accountant, and the attorney to ensure the business owners are capturing all available benefits that align with their business and personal goals.

www.BusinessWealthPreservation.com
Call Us Toll Free: (888) 938-2975 (888-WE-TAX PLAN)
Email: tfoster@wetaxplan.com


Copyright 2010 The Business Wealth Preservation Group, LLC.