Do You Know How to Calculate Section 179, Bonus Depreciation, and MACRS Under the Small Business Jobs Act of 2010?
by William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor
The Small Business Jobs Act of 2010 has increased and extended two very important provisions of the tax code dealing with depreciation of purchases of business assets. The Section 179 limitation has been increased to $500,000 for the years 2010 and 2011. It was scheduled to decrease to merely $25,000 in 2011.
In addition, the phase-out threshold of the deduction has been increased to $2,000,000 of annual purchases of qualifying business assets.
Moreover, 50% bonus depreciation has been allowed for the year 2010. Its allowance had expired at the end of 2009.
Does your QuickBooks Online data file require a clean up? May it require hours and hours of your time to enter transactions and make adjustments?
If so, save time and minimize risk of loss of data by exporting your QuickBooks Online data file to a desktop version of QuickBooks, undertake the work there, and then upon complete import the adjusted data file back into your QuickBooks version online.
A while back, I wrote a blog entry asking “Why Not a CPA for President“. Perhaps Ron Johnson read it, and decided to use the campaign approach I advocated in that entry: that is, run a campaign on the merit of not being a lawyer by occupation but an accountant!
As we all know, lawyers know little–if anything–about finances, except submitting big bills to clients. They excell at that! But we accountants know how to balance a checkbook, making us better qualified to control spending and balance our national budget. LOL!
Personally I am so tired of hearing these attorney Senators arguing, debating, and nit-picking on the Senate floor. Our country is going down the toilet and all I observe in Congress is gridlock: endless legal bombast and pontification, attorneys equivocating, and beating bills to death. What do you expect when you have 100 blowhards in one room?
Why don’t we elect someone who knows something about the most important issue in our country: i.e., our wallets. What better watchdogs could American citizens have than certified public accountants protecting their wallets from government? We deal with dollars and cents everyday, ensuring that our books balance, that all is accounted for, that benefits justify costs, that we are solvent. And we already perform this stewardship function to a certain extent, representing our citizens in relation to the IRS. Consequently, electing CPAs as senators would be merely extending our scope of function in the government. Moreover, because budgets, controlling expenditures, and taxes is what we do for a living, we are more qualified than attorneys to write and pass laws on appropriations and taxes. We can always hire attorneys to be our assistants, to translate our laws into acceptable legal jargon. Since attorneys as Congressional leaders have been unable to balance budgets, control spending, and issue equitable tax laws, they should be replaced by others who can. And who is better suited and qualified than certified public accountants?
But we should also have an accountant as President, too. We have had too many lawyers as President. Why have a lawyer as President? Because they supposedly know the law better than others? LOL! Did that behoove Richard Nixon? Bill Clinton? Slick Willie didn’t even know the meaning of “is”, remember? And how many Presidents have involved us in “wars” without a formal declaration, a violation of our Constitution. A primary responsibility of the President is to present a balanced budget to Congress every year. Do you remember the last time a President presented a creditable balanced budget to Congress?
I thought of various accountants as suitable candidates for President, and one name jumped out at me: Francine McKenna. Francine McKenna is smart, beautiful, eloquent, savvy, honest, and forthright. She would make a very attractive candidate on the campaign trail. Furthermore, she is a certified public accountant with more than twenty-five years of professional experience, having worked for Big Four firms as well as operating her own litigation consulting firm specializing in auditing. Finally, she has demonstrated an ability to lead through her many publications, bringing to the forefront of accounting awareness an ethical scrutiny of our auditing profession. If Francine were President, she would not let corporate management swindle investors and run our financial institutions into insolvency. She would monitor and prevent the Big 4 Mafioso from running and ruining our country’s financial realm. In my opinion, she has become the conscience of our accounting profession, a position once held by individuals like Abraham Briloff, Arthur Andersen, et al.
Have you read her article, “The Button-Down Mafia: How the Public Accounting Firms Run a Racket on Investors and Thrive While Their Clients Fail“? In this article, Francine McKenna presents a compelling argument that our financial system is controlled and corrupt, involving our highest governmental officials. Francine, virtually single-handedly, has been leading a Joan of Arc crusade, making all aware of what has been transpiring in Corporate America and the Big 4 Mafooch. From her efforts she has demonstrated that she is the Ralph Nader—if not the Eliot Ness—of today, competent and ethical and vigilant to make things right in America’s financial world. This is truly the stuff of Presidential material.
If only I could figure out a way to draft her in nomination for President. In McKenna’s article mentioned above, she quotes a popular Sicilian proverb: Cu è surdu, orbu e taci, campa cent’anni ‘mpaci. “He who is deaf, blind, and silent will live a hundred years in peace.” But Francine, there’s another old Sicilian saying: Pesci fet d’a testa. “The fish stinks from the head”. Our country is rotten, and the rot starts at its head, too: our leaders. Money in the form of political contributions has corrupted our government officials. Frankly, Francine, we need leaders who do not stink. We need leaders who are ethical and incorruptible. We need a leader like you. Francine, it is your responsibility as a patriot to step forward and accept the baton that I am handing you.
Eight New Small Business Tax Cuts – Effective Today, Providing Immediate Incentives to Invest: The President had already signed into law eight small business tax cuts, and on Monday, he is signing into law another eight new tax cuts that go into effect immediately.
It is imperative for the small business owner to be aware of the tax breaks available under the Small Business Jobs Act of 2010 since many of them will only be available this year.
1. Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.
2. Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments:The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible toimmediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year. This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
3. Extension of 50% Bonus Depreciation:The bill extends – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investmentstoday and know they can receive a tax cut for this yearby accelerating the rate at which they deduct capital expenditures.
4. A New Deduction of Health Insurance Costs for Self-Employed: The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
5. Tax Relief and Simplification for Cell Phone Deductions: The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.
6. An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses:The bill temporarily increases the amount of start-up expenditures entrepreneurs can deductfrom their taxesfor this yearfrom $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.
7. A Five-Year Carryback Of General Business Credits:The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year– while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
8. Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business:The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances – to a percentage of the tax benefits from the transaction.
Are you a contractor using the wrong construction tax accounting method? Are you a contractor with annual gross revenues of $10 million or less and you have not chosen the cash method of accounting as your general tax accounting method and the completed-contract method of accounting for the tax accounting of your long-term construction contracts?
If you have not, why not? The cash method of accounting recognizes taxable income upon its receipt, not upon it being earned. Typically there is a time lag between the two, offering you the opportunity for deferral of your taxes.
Similarly, the completed-contract method of accounting allows you to defer recognition of taxable income on any long-term contracts until their completion rather than over the course of their completion.
So if you are not employing both of these methods of tax accounting and you are a small contractor with revenues of less than $10 million per year, ask yourself, why?
It is the mission of Accountants CPA Hartford, LLC to clarify the official pronouncements of authoritative bodies on accounting, audit, and tax policies and regulations to other certified public accountants, financial statement users, taxpayers, and students of accounting.
The IRS has published web pages on its website on the tax treatment of barter transactions, whether conducted privately and directly between two businesses or on a barter exchange.
The host of the show in the stadium says “We are all here today to prove to the world that Accountants are not stupid. Can I have a volunteer?”
One Accountant steps up. The host says to him “What is 15 plus 15?” After 15 or 20 seconds he says “Eighteen.”
Obviously everyone is a little disappointed. Then 80,000 Accountants start cheering “Give him another chance, give him another chance.” The host says “Well since we’ve gone to the trouble of getting 80,000 of you here and the world wide press, I guess we can give him another chance.”
So he says “What is 5 plus 5?” After nearly 30 seconds he eventually says “Ninety?” The host sighs – everyone is crestfallen and the Accountants starts crying and 80,000 accountants start yelling “Give him another chance, give him another chance.”
The host, unsure whether or not he is doing more harm than damage, eventually says “Ok! One more chance. What is 2 plus 2?” The accountant closes his eyes and after a whole minute eventually says “Four.”
Around the stadium 80,000 accountants start yelling “Give him another chance, give him another chance.”
Are you a small business owner in West Hartford, Connecticut, who is tired of the poor service you are receiving from your present certified public accountant or exasperated with your CPA’s fees? If so, we want your business! We offer quality and timely accounting, QuickBooks and tax services at very affordable fees.
Have you selected the most appropriate tax accounting methods for your contracting company, maximizing the deferrral of income taxes? During these austere economic times, electing the right tax methods may make all the difference in the chances of your survival in these days of tight money.
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Do You Know How to Calculate Section 179, Bonus Depreciation, and MACRS Under the Small Business Jobs Act of 2010?
Accountants CPA Hartford, LLC