2010 Year-End Tax Planning for Business Owners

As another year winds down and the holidays approach, it is time to consider all the latest tax law changes and plan accordingly to minimize any tax liability. While congress continues to work on last minute changes to the tax laws, rest assured that we will be staying abreast of these changes for you. Although we've blogged about these new laws throughout the year, we thought it would be beneficial to highlight some particular areas so that you can begin your year-end planning.

 Health Insurance Credit for Small Employers—If your business has less than 25 employees and pays less than $50,000 in average wages, you may be able to take this credit. There are many restrictions that will exclude many businesses from taking this credit, but it may be worth looking into.

 HIRE Act—If your business hired any previously unemployed employees on or after February 4, 2010, you may not need to pay the employers’ portion of the Social Security tax. This relief could be as high as $6,622 per employee hired. This relief provision is available only in 2010.

 Extension of Section 179 Depreciation—The Small Business Jobs Act of 2010 also extended and increased the amount of Section 179 depreciation that a small business is allowed to expense on its fixed asset purchases. You may want to consider the purchase of fixed assets that you need in your business.

In addition to the new laws above, the following are areas that the IRS has been scrutinizing more closely. Please pay particular attention to these areas.

 Health Insurance Premiums for S Corporation Owners—It is critical to properly report the premiums on your W-2 so it is deductible for the S Corporation as compensation and allows the S Corporation owners to deduct this on their personal tax return. If your business is an S corp and it paid your health insurance premiums, we will work with you and your payroll provider to ensure this is completed properly by the end of the year.

 Personal Auto Usage on W-2—If your business owns an auto that the owner is using, it is very important that the personal usage portion is calculated and added to your W-2. We will work with you and your payroll provider to ensure this is completed properly by the end of the year.

 Detailed Inventory Records—If your business has inventory, the IRS is continuing to place an increased emphasis on actual physical inventory on hand at the end of the year. Therefore, be sure to physically count your inventory, retain the records, and provide us with the accurate total cost of inventory on hand December 31, 2010. Do not include consignments you are holding from other people in this number. In the event of an audit you must be able to provide copies of physical count sheets; therefore, we are placing an increased emphasis upon obtaining correct year end physical inventory amounts.

 Corporate Minutes—We would also like to remind you that your corporate minutes must be maintained on an annual basis. These minutes are maintained by the officers of the corporation. Please keep in mind that only S and C corporations are required to maintain minutes.

If you have questions or would like to schedule a consultation with one of our tax experts, please call Simons Bitzer at (317) 782-3070.