October 2010
Fall is in full swing and and we know that winter cannot be too far off. We also know that the end of the year and tax time are getting closer. In this fall edition of our Newsletter we have some things to consider before the end of 2010 and some information to start 2011.
Business Clients
There are three items for business owners that we want to touch on in this edition. There are expanded 1099 reporting rules, Health care cost reporting on W-2 forms and extension of 50% bonus depreciation.
Expanded 1099 reporting requirements
At this time a law change is
scheduled to take effect in 2011 that expands the 1099 reporting
requirements for businesses. The new requirements include requiring a 1099
for purchases over $600 to any one vendor. The new rules also include owners
of rental properties in the 1099 reporting requirements for payment for
services of over $600. This law change would greatly increase the amount of
paperwork business and rental owners have to process. We will keep any eye
on this situation and give you additional information as it becomes
available.
Health Care cost reporting on W-2 Forms
The Health Care Act added a
requirement for employers to include on their employees W-2 Forms the cost
of health care coverage, for years beginning with 2011. This is a reporting
requirement only, the cost of the health care is not being added to the
employee’s taxable wages. The IRS recently extended the timeframe for this
requirement by one year. Therefore it will not go into effect until 2012.
50% Bonus Depreciation
The 50% bonus depreciation
election for new property had originally expired in 2009. The deduction has
been extended until the end of 2010.
Individual Clients
There are a few things
to be aware of for our individual clients before the end of the year. There
are some issues with Capital Gains and Losses to keep in mind.
Capital Gains/Losses
The federal tax rate on long term Capital Gains was lowered to 0% and 15% for 2009 and 2010. The 0% rate applies if your total taxable income for the year does not exceed to upper limit of the 15% tax bracket. At this time these rates are set to expire at the end of 2010. It appears that the Capital Gains rates beginning in 2011 will go back up to 10% and 20%.
If you sell a security at a loss you have a Capital Loss. You can use a Capital Loss unlimited to off-set any Capital Gains. If your loss exceeds any Capital Gains you can use $3,000 of the loss against other income. Any unused Capital Loss is carried forward until it is totally used.