Cindy Krischer Goodman | 11/1/2010

For Business

Equipment
Some businesses will be eligible for up to a $50,000 refund of sales taxes paid on equipment used in manufacturing or space port activities. This is an incentive program created through the Florida Office of Tourism, Trade and Economic Development. Joe Moffa, a Fort Lauderdale tax attorney, believes this will entice some companies to upgrade their equipment. He recommends applying early for the refund, which will be awarded on a first-come basis. To spur investment, the new Small Business Jobs Bill extends the deduction for bonus depreciation, allowing businesses to immediately write off 50% of the cost of new equipment investments they make in 2010.

Payroll Forgiveness and Hiring Credit

Companies considering hiring workers have some added incentive. They will get a tax break as part of the Hiring Incentives to Restore Employment Act (HIRE). The tax change effectively exempts employers from their share of Social Security tax for 2010 wages of employees hired after Feb. 3, 2010, and before Jan. 1, 2011. It applies generally to individuals hired who have been unemployed for the previous 60 days and could potentially be taken on employees who were laid off and then rehired. Employers also get a maximum $1,000 tax credit for making new hires after Feb. 3, 2010, and before Jan. 1, 2011. To get the credit, those employees must be retained for at least 52 weeks.

Small-Business Expensing
The new Small Business Jobs and Credit Act grants a tax-saving windfall to taxpayers with eligible property. For 2010 and 2011, the limit will be $500,000, with a dollar-for-dollar phase-out starting when purchases for the year exceed $2 million. It also temporarily expands the definition of eligible property to include qualified leasehold-improvement, restaurant and retail-improvement property. The maximum amount of such property that can be expensed is $250,000.

Small Employer Health Insurance Credit
Under Obamacare, small employers may qualify for a tax credit for a portion of their contribution toward an employee's health insurance premiums. Here's the catch: You must be an employer with a staff of no more than 25 full-time workers who earn average annual wages of no more than $50,000. The credit may be claimed for tax years beginning in 2010. "The credit typically pays for the cost of setting up the plan," Farra says.

S-Corporation Gains Tax

The Small Business Jobs Act temporarily reduces the asset holding period S corporations that have converted from C corporations must meet to avoid built-in gains tax. For assets sold in the tax year beginning in 2011 (not 2010), the holding period will be five years. (It had been reduced to seven years for assets sold in tax years beginning in 2009 and 2010.) This will allow an S corporation to dispose of an asset with built-in gains earlier without paying a penalty tax on built-in gains. S corporations that have been holding on to assets because they didn't meet the seven-year holding period should see if they'll qualify for the five-year holding period next year and, if so, consider whether it would be beneficial to sell assets then.

Information Reporting
As part of President Obama's healthcare law, companies will have to issue 1099 tax forms, not just to contract workers but to any individual or company from which they buy more than $600 in goods or services in a tax year. If an employer buys a computer and printer that costs more than $600 from Costco, for example, it will have to issue a 1099 for that. All businesses, no matter how small, fall under the law. "It may seem like a small change," says Vicki Meyer, a CPA with Thomas Howell Ferguson in Tallahassee. "But it will require millions of additional forms to be sent out." Another new reporting requirement is that beginning in 2011, businesses will need to include the value of the healthcare benefits they provide to employees on W-2s. As in the past, the amount reported will not be considered taxable income.

Cancellation of Debt
Tax advisers say deferral of cancellation of business debt is designed to help businesses affected by today's economy. Many businesses recently have been forced to renegotiate debt, which often results in cancellation of debt income that is subject to tax at ordinary income rates. Certain businesses can choose to delay recognition income from the cancellation of business debt and recognize it during the five years from 2014 to 2018.