new tax incentives for parents & small businesses

With the new Small Business and Work Opportunity Tax Act of 2007 officially signed into law in May 2007, new tax incentives are in place which may affect you.

A variety of small business incentives have been enacted to help businesses pay for the new higher minimum wage.  One of those incentives comes in the form of help with small business expensing.  The tax laws allow you to deduct some business expenses that would otherwise have to be depreciated.  Generally, you can deduct up to $112,000 in qualifying expenditures for property placed in service in 2007.  There is a $450,000 investment limitation.  The new law raises the dollar limitation from $112,000 to $125,000 and the income limitation from $450,000 to $500,000, retroactive to the start of 2007.  The amounts are also indexed for inflation. 

If you’ve been debating whether to make a business expenditure, the increased expensing rules could make that purchase much more attractive.  Give us a call before you make that purchase – we can help you maximize your tax advantages.

The “kiddie tax” rules have prevented most children under the age of 18 from using their low tax bracket to shelter significant amounts of investment income.  Under those rules, investment income over a small amount is taxed at their parent’s marginal tax rate, as if earned by the parent.  The child is not allowed a personal exemption if he or she can be claimed as a dependent on his or her parents’ return.  However, the child can use up to $850 for 2007, of his or her standard deduction to offset unearned income.  As a result, only unearned income in excess of $1,700 for 2007 is taxed at the parents’ top marginal rate. 

Until last year, the kiddie tax applied to children under the age of 14 with unearned income.  In 2006, Congress raised the age to under 18.  The new law raises it to under age 19 (under age 24 for full-time students).

When Congress raised the age in 2006, it did so retroactively to January 1, 2006.  This time, Congress makes the change prospective – it kicks in for 2008.  The difference is critical.  Unlike in 2006, you have time to adjust your tax planning.  This is especially important if you have a child starting college next year and you were planning to use appreciated investment assets to pay for tuition.  Fortunately, we have between now and the end of the year to revise your tax plans.  Call us today if you have any questions about these important changes.

Source:  CCH Federal Tax Weekly:  May 31, 2007

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Please note that our office will be closed on Wednesday, July 4th, 2007 in observance of the holiday.  We will re-open on Thursday, July 5th, 2007 at 8:00 AM.

2nd quarter payroll taxes due

Attention payroll clients:  Please remember to submit 2nd quarter 2007 payroll information to our office no later than Friday, July 20th, 2007.  Information received after that date will be subject to a $100 surcharge.  If you have any questions, feel free to contact us.

minimum wage increase

July 1, 2007 marks another increase in the state minimum wage.  For information on this topic, log onto http://www.dli.state.pa.us/landi/cwp/view.asp?a=142&Q=234846#1.

what version of quickbooks or peachtree are you using?

All computer software makers maintain an obsolescence policy.  This policy details the versions that are available for support.  Software support is essential and necessary for the maintenance of your data.  You may think that software support is just telephone support via a customer service representative, but that’s not all it includes - it's also annual tax updates and other add-on products such as direct deposit or online banking.

In order to provide the best product and keep current with technology, software makers are constantly improving on their product.  In most cases, this means they will only support the most current version plus the two prior versions.  What does this mean to you?  You should evaluate your use of the software.  Do you subscribe to an annual plan?  Are you having technical issues?  Will you benefit from a new feature the current release offers?  If you answered yes to any of these questions, then you should upgrade your software.

Both QuickBooks and Peachtree’s most recent release is 2007.  If you are on a release older than 2005, you may not have support available when you need it.  Remember, without support from the software maker, you are putting your accounting data at risk.  We can help evaluate your situation.  Call us for a consultation.

independent contractors vs. employees