Contact: Gigi Thompson Jarvis
202.822.6232, x119
gjarvis@naea.org
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For Immediate Release
Big Tax News for Small Business Owners
Washington, DC (January 12, 2011)—Tax changes that occurred during 2010 can significantly lower the tax burden of small business owners who are savvy enough to take advantage of them.
“Taking advantage of the new or expanded deductions and credits for small businesses could potentially lower taxes for many self-employed individuals by a substantial amount,” said Gina Jones, EA, president of the National Association of Enrolled Agents (NAEA). “The last few years have been hard ones for small businesses, so it’s important that they not overlook these changes to the tax laws.”
For starters, those who pay for their own health insurance can now subtract those payments from their reported net earnings, thanks to the Small Business Jobs Act of 2010. Records show that 3.8 million taxpayers claimed the self-employed health insurance deduction in 2008. The net earnings reduction offered by the 2010 legislation should result in significant tax savings for this segment of taxpayers.
The good news continues with the new Small Business Health Care Tax Credit, which can be taken by small businesses owners who pay at least half of their employees’ health insurance premiums. Business owners can claim a maximum credit of 35 percent of the premiums for 2010 through 2013 and for any two years after that. Tax-exempt organizations can receive a credit of 25 percent of premiums paid.
Another beneficial change is the higher expensing/depreciation limits on property for 2010 and 2011. Businesses that buy and place into service property such as buildings, machinery, vehicles, furniture and equipment after Sept. 8, 2010 can now claim a depreciation allowance of 100 percent of the cost of the property. More good news for small businesses: they can also depreciate some intangible property, such as patents, copyrights and computer software.
One change that not everyone sees as an advantage is that paper coupons are no longer accepted for federal tax deposits. The Electronic Federal Tax Payment System (EFTPS) is now the required system for paying federal taxes and making deposits. While some taxpayers balk at learning a new method of payment, it’s hard to find a lot of fault with a new system that accepts payments 24/7 from home or work and allows deposits to be made online or by telephone. This kind of flexibility should help to do away with many penalties incurred for errors or lateness.
Taking advantage of every possible tax savings is essential to the success of a small business. With the numerous recent tax changes, NAEA highly recommends consulting an enrolled agent (EA) before filing a business or individual return. EAs are licensed by the Department of the Treasury and every EA has passed competency testing on individual and business taxes and on representation of taxpayers before the IRS. EAs must adhere to a Code of Ethics and fulfill continuing education requirements to keep up-to-date on the constantly changing tax code. To find an EA in your area, go to the searchable “Find an Enrolled Agent” directory at www.naea.org.
About the National Association of Enrolled Agents (NAEA)
NAEA is the professional society that supports its nearly 12,000 members with resources, education and networking and by representing their interests to government, business and the general public. Find out more about NAEA and becoming an enrolled agent at www.naea.org.