This might be the first time I have seen the IRS show a little humor. Truthfully, when getting married there are numerous decisions that have to be made. Remember to add taxes to the list.
The IRS informs newlyweds what they need to do tax wise after saying “I do” in this YouTube video.
Tuesday, August 9, 2011
New Rule for Innocent Spouse Relief
On July 26, 20110 the Internal Revenue Service announced that it will extend help to more innocent spouses by eliminating the two-year time limit that now applies to certain relief requests. After a thorough review:
• The IRS will no longer apply the two-year limit to new equitable relief requests or requests currently being considered by the agency.
• A taxpayer, whose equitable relief request was previously denied solely due to the two-year limit, may reapply using IRS Form 8857, Request for Innocent Spouse Relief, if the collection statute of limitations for the tax years involved has not expired.
The IRS will not apply the two-year limit in any pending litigation involving equitable relief, and where litigation is final, the agency will suspend collection action under certain circumstances.
The change to the two-year limit is effective immediately, and details are in Notice 2011-70, posted on IRS.gov. This policy change will become operational in the fall and more guidance will be forthcoming
Thursday, July 28, 2011
Helping Small Businesses - Section 179 Deduction
Most people think the Section 179 deduction is some arcane or complicated tax code. It really isn't, as the following will show you. Essentially, Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the FULL PURCHASE PRICE from your gross income. It's an incentive created by the U.S. Government to encourage businesses to buy equipment and invest in themselves.
Section 179 for 2011 at a glance:
2011 Deduction Limit - $500,000 (up from $250k previously). Good on new and used equipment, including new software.
2011 Credit Phase out on equipment purchases - $2 Million Dollars (up from $800k previously).
“Bonus” Depreciation - 100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2 million in capital equipment purchases.
Essentially, Section 179 works like this:
When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.)
Now, while it's true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease less than $2 million in new or used business equipment during tax year 2011 should qualify for the Section 179 Deduction. If a business is unprofitable in 2011, and has no taxable income to use the deduction, that business can carry-forward the deduction to a year when the business is profitable.
What's the difference between Section 179 and Bonus Depreciation?
The most important difference is both new and used equipment qualify for Section 179 Deduction (as long as the used equipment is "new to you"), while Bonus Depreciation covers new equipment only. Bonus Depreciation is useful to very large businesses spending more than $2 million on new capital equipment in 2011.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation - unless the business has no taxable profit in 2011 (the unprofitable business is allowed to carry the loss forward to future years).
The above is an overall, “simplified” view of the Section 179 Deduction for 2011. Please consult your tax adviser prior to implementing any strategies in this article.
Section 179 for 2011 at a glance:
2011 Deduction Limit - $500,000 (up from $250k previously). Good on new and used equipment, including new software.
2011 Credit Phase out on equipment purchases - $2 Million Dollars (up from $800k previously).
“Bonus” Depreciation - 100% (taken after the $500k deduction limit is reached). Note, bonus depreciation is only for new equipment. This can also be taken by businesses that exceed $2 million in capital equipment purchases.
Essentially, Section 179 works like this:
When your business buys certain items of equipment, it typically gets to write them off a little at a time through depreciation. In other words, if your company spends $50,000 on a machine, it gets to write off (say) $10,000 a year for five years (these numbers are only meant to give you an example.)
Now, while it's true that this is better than no write off at all, most business owners would really prefer to write off the entire equipment purchase price for the year they buy it. In fact, if a business could write off the entire amount, they might add more equipment this year instead of waiting.
Who Qualifies for Section 179?
All businesses that purchase, finance, and/or lease less than $2 million in new or used business equipment during tax year 2011 should qualify for the Section 179 Deduction. If a business is unprofitable in 2011, and has no taxable income to use the deduction, that business can carry-forward the deduction to a year when the business is profitable.
What's the difference between Section 179 and Bonus Depreciation?
The most important difference is both new and used equipment qualify for Section 179 Deduction (as long as the used equipment is "new to you"), while Bonus Depreciation covers new equipment only. Bonus Depreciation is useful to very large businesses spending more than $2 million on new capital equipment in 2011.
When applying these provisions, Section 179 is generally taken first, followed by Bonus Depreciation - unless the business has no taxable profit in 2011 (the unprofitable business is allowed to carry the loss forward to future years).
The above is an overall, “simplified” view of the Section 179 Deduction for 2011. Please consult your tax adviser prior to implementing any strategies in this article.
Your State and Local Tax Obligations
In addition to business taxes required by the federal government, you will have to pay some state and local taxes. Each state and locality has its own tax laws. Having knowledge of your state tax requirement can help you avoid problems and your business save money. The most common types of tax requirements for small business include:
Tax Permit
In most states, business owners are required to register their business with a state tax agency and apply for certain tax permits. For example, in order to collect sales tax from customers, many states require businesses to apply for a state sales tax permit.
Income Taxes
Nearly every state levies a business or corporate income tax. Your tax requirement depends on the legal structure of your business. For example, if your business is a Limited Liability Company (LLC), the LLC gets taxed separately from the owners, while sole proprietors report their personal and business income taxes using the same form. Consult the General Tax Information link under your state for specific requirements.
Employment Taxes
In addition to federal employment taxes, business owners with employees are also responsible for paying certain taxes required by the state. All states require payment of state workers' compensation insurance and unemployment insurance taxes.
State of Michigan
Michigan
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