Special Tax Incentives for Small Businesses to Provide Health Care, Hire New Workers

In their newest press release the IRS explains recent legislation that will provide incentives to small business owners wanting to provide health care, and hire new workers.

A variety of business tax deductions and credits were created, extended and expanded by the American Recovery and Reinvestment Act of 2009 (ARRA), this year’s Hiring Incentives to Restore Employment (HIRE) Act and the Affordable Care Act. Because some of these changes are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a rundown of some of the key provisions.

New Health Care Tax Credit Helps Small Employers

The small business health care tax credit, created under the Affordable Care Act, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

The credit takes effect this year and is generally available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small employers that primarily employ low- and moderate-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers. The maximum credit goes to smaller employers ­­–– those with 10 or fewer full-time equivalent (FTE) employees ––­­ paying annual average wages of $25,000 or less. The credit is completely phased out for employers with more than 25 FTEs or with average wages of more than $50,000.

Getting A Homebuyer Tax-Credit Through The IRS Can Be Taxing

The homebuyer credit has the IRS busy processing over 1.8 million claims for the credit. As this article from the Wall Street Journal explains, $12.6 billion has already been given out to taxpayers. Check out a snippet of their article on the story below.

Let's get this processing volume into perspective. IRS started processing claims for the first-time home-buyer credit when taxpayers started filing their 2008 tax returns in early 2009. That means IRS employees have processed about 150,000 claims a month.

It's a monumental task. Since discovering millions of dollars of fraudulent claims, the IRS has been reviewing a substantial portion of the claims instead of letting the computer process and pay.

That's where the delays start.

Steve B. said he feels he's being lied to about his tax-credit claim. He filed for his home-buyer credit in January, certain that everything the IRS requested was attached. It's now been more than four months and the IRS simply tells him "it is in the errors department" and they have no further information. Steve has tried calling the IRS "a million times," he said. He's even tried the Taxpayers Advocate Service, but they tell him they don't deal with this issue.

Filmmakers Flock To Forum On State Tax Credits

From LATimes.com:

Question: How do you pack a theater with jaded movie industry professionals?

Answer: Show them the latest hot information on film tax credits. Nearly 200 people crammed into an auditorium at the Landmark Theatre in West Los Angeles recently to learn the latest skinny on the kind of topic that would set an accountant's heart aflutter.

The filmmakers, production executives and bankers were attending the Spring Fling Production Incentives Symposium, hosted by the aptly named Incentives Office, a Los Angeles firm that helps filmmakers and lenders navigate the welter of tax credits and rebates.

Despite the economic downturn that has left many states with staggering deficits, the across-the-country rollback in state tax incentives that some anticipated has yet to occur. Although some states have reduced or even suspended their programs, others, such as Florida, have greatly expanded their programs. More than 40 states still offer some form of financial enticement to filmmakers.

"The fact that these states are continuing their programs is an indication they are working," said Jeff Begun, a partner in the Incentives Office.

2 Years After Tax Law, Michigan's Making Movies

In the two years since the State of Michigan offered the movie industry some of the largest tax incentives in history, over 80 film and television productions have taken place. The Associated Press examined how the state is adjusting to this new popular industry and its economic benefits.

Since the measure became law on April 7, 2008, 89 movie or TV productions have been completed. Hotels, caterers and others getting some spin-off business can't wait for the industry to expand.

But some lawmakers are questioning whether Michigan is getting its money's worth.

The tax credit program is projected to cost the state nearly $69 million for projects completed in 2009, not counting incentives given for permanent infrastructure projects, according to the Michigan Film Office. The potential annual bill is higher — more than $100 million — but some projects weren't finished and won't get the tax credits.

Continue reading at Google News…

Tax Incentives to Adopt a Child

Most Americans know about the tax benefits of having children, but you might be surprised to learn that there are actually decent tax incentives to adopt children. The RDTC Tax Help Blog posted a blog entry last week explaining the tax laws surrounding adoption. You can find a segment of the article below or find the full text at the RDTC Tax Help Blog.

The Basics

There are two main tax incentives for families that adopt, an exclusion and a credit. Taxpayers can take advantage of the credit and exclusion for the expenses of adopting an eligible child. Meaning, you may be able to exclude up to $12,170 (or whatever the limit is for the tax year) from your income, and claim a credit for the same amount. However, you cannot claim both the credit and exclusion for the same expenses.

Credit Amounts

The value of the credit for the past few years is listed below. It is important to note that the credit was expanded in 2001 as part of the Economic Growth and Tax Relief Reconciliation Act of 2001, which is due to expire at the end of 2010. Unless Congress extends the package the value of the credit will be reduced by at least 50%.

2011: $6,000 or less

2010: $12,170

2009: $12,150

2008: $11,650

2007: $11,390

2006: $10,960

Income Phase Outs

As with most federal tax credits and deductions, the value of the adoption credit phases out when your income reaches a certain level. The phase out ranges are listed below for the past few tax years. The IRS also provides a worksheet for figuring out your credit value in the Instructions for Form 8839.

2010: $182,520 - $222,520

2009: $182,180 - $222,180

2008: $174,730 - $214,730

2007: $170,820 - $210,820

2006: $164,410 - $204,410

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Post CFC Tax Incentives to Buy a Car

Now that the popular Cash for Clunkers (CFC) program has ended, consumers can no longer take advantage of a $3,500 or $4,500 rebate towards the purchase of a new car. However, the CFC program was just one of the many incentives the government has setup to encourage taxpayers to buy a new vehicle. For those of you debating whether or not you can afford a new car, check out the following list of Federal tax incentives.

New Car Purchase Deduction

To help stimulate the economy, earlier this year the IRS announced a new tax deduction for taxpayers who purchase a car in 2009. The new deduction allows you to deduct “state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle." Therefore, if you pay $2,500 in taxes when you buy that new car, then you can deduct those funds from your taxable income come next tax season. Just be sure to keep all of your sales documents so you have proof of the taxes you paid. Additionally, there is no word yet on whether the deduction will be extended or not. So, if you are planning to buy a car then you might want to do so before the end of 2009.

Hybrid Tax Credits

There are numerous tax credits that are still available for those of you hoping to purchase a hybrid, or alternative fuel vehicle. The highest of which is a $4,000 credit for taxpayers who purchase a Honda Civic GX that runs entirely on compressed natural gas. As opposed to the new car sales tax deduction, the hybrid incentives are tax credits, meaning it will lower your tax bill dollar for dollar. To see a list of all the qualifying vehicles, check out FuelEconomy.gov.

Electric Vehicles

Although somewhat less practical then a hybrid vehicle, electric powered automobiles come with the best set of tax incentives. As part of the Obama administrations American Recovery and Reinvestment Act of 2009, a new credit was created to encourage taxpayers to purchase electric vehicles. The credit is up to 10% of the purchase price, and depending on how much the vehicle costs, it could be a pretty significant tax credit. For those of you who might be hesitant, later in 2010 plug-in electric vehicles are expected to hit the market and will be eligible for a similar credit.

Vehicle Donations

If you decide to purchase a new vehicle, then you may want to consider donating your old car. In addition to knowing you are supporting a good cause, you can also reap certain tax benefits. There are several reputable charities that will take your still-running (sometimes even not running) vehicles. Just make sure that the charity you select has a non-profit status with the IRS, that way you can include the donation as a charitable contribution on your next tax return.

Conversion

If you are a mechanic, or are just handy with cars, then you might be able to take advantage of conversion tax credits. Another section of the American Recovery and Reinvestment Act of 2009 gives taxpayers who purchase a kit to convert their car to an electric vehicle a 10% tax credit, up to $4,000. Additionally, according to the IRS taxpayers may claim this credit even if they have already claimed a hybrid purchase credit.

Business Expense

Finally, if you are self-employed or own a business then you might be able to take advantage of certain business car credits. You could take a mileage deduction based on the amount you drive your car for business reasons. Alternatively, if you lease a vehicle then you could write off a percentage of the monthly payments that corresponds with the amount of time you use the car for work. These credits could save you up to $1,500 per year. However, business related vehicle expenses can be quite tricky, and if you intend to take this route then I highly recommend speaking with a tax professional before making any decisions.