New Year, New Tax Laws

If you are like most small business owners the New Year means that you are beginning preparation for filing your taxes. By February 29^th W-2’s and 1099’s are due to the government, corporate taxes are due by March 15^th and then you have your personal returns due in by that, oh so famous, Tax Day, April 15^th. Here at Professor Tax we wanted to share with you some of the changes for the upcoming 2012 Tax Season. 

1)    Extended - Lower Capital Gains and Dividend Tax Rates

There has been an extension through 2012 on the Capital Gains and Dividend Tax, which starts at 5% and goes to a maximum of 15%. If you purchase an item and sell in less than a year you may end up paying more in taxes. But thanks to this extension if you keep it for more than a year, (1 year and 1 day or more) then sell the item you will not have to pay as much in taxes. So before you sell an item that you have purchased in the last year consider the fact that you can make money and pay fewer taxes if you keep your purchase for more than 1 year. 

2)    Extended - Section 179 Expense Deduction

Another extension, Section 179 Expenses Deduction, will benefit companies who are making new purchases for their business. This tax break encourages small business to grow their business without the burden of heavy taxes. Generally, the expense deduction is $500,000 for section 179 properly placed in service in 2011.

3)    Extended - Payroll Tax Credit

The Payroll Tax Credit, also known as the Payroll Tax Holiday has been extended until February 29^th 2012. This brings the social security tax withholding down from 6.2% to 4.2%, but remember this is only temporary.  

4)    Increased  - Earned Income Tax Credit (EITC)

That’s right “increased” not “extended” through the end of 2012. If you have 3 or more children you can get a temporary increase in your earned income tax credit. 

5)    Missing  - Schedule M on the 1040

Yep, you heard correctly, missing.  “Making Work Pay”, also known as Schedule M located on Form 1040 is no longer available.  Previously, you gained a credit of $800 for married couples and $400 for singles. So when filing your personal returns this year, remember, you can no longer receive this tax credit.

It’s no surprise that there were no major changes to the tax laws in 2012 being as it is an election year, neither republicans or democrats wanted to be responsible for increasing taxes. So take advantage of the Section 179 Expense deduction on things you have already purchased or need to purchase for your company. Remember to look at how long you have owned an item before reselling … it just may pay for you to wait till that 1 year and 1 day mark!

As a small business owner you have many roles and responsibilities and often a lot of employees that depend on you. At, Professor Tax, we understand how important it is to have an accountant that understands your small business. We want to continue to provide bookkeeping and accounting tips for you. Please let us know if you have a question about bookkeeping, accounting or taxes. 

The Professor travels to see all of his clients face to face!  If you live in the continental United States and would like a free, no obligation chance to meet and review your bookkeeping with the Professor, contact us.