Well, the tax code just got longer, but this time the added pages (now about 65,000 and counting) should help out some small businesses, at least in the short-run.
The Small Business and Work Opportunity Tax Act of 2007 was recently passed in conjunction with legislation to continue funding the war in Iraq and to raise the minimum wage. The tax-related provisions are designed in part to provide benefits to small businesses likely to be hit hard by the minimum wage increase.
Here is a summary of the provisions that have an impact on small business as published by the accounting firm KraftCPAs (used with permission):
The Section 179 election to expense property in its initial year (rather than depreciate it) is extended through 2010 and increased from $100,000 to $125,000, effective for years beginning after 2006. The expense deduction begins to phase out if more than $500,000 of eligible property is placed in service during the year (up from $400,000). These amounts will be adjusted for inflation annually.The Work Opportunity tax credit, which had been set to expire Dec. 31, 2007, is extended until September 30, 2011. This credit is available to businesses that hire employees from targeted groups of individuals, such as veterans, ex-felons, high-risk youth, and food stamp and supplemental security income recipients. The new law expands this list to include disabled veterans and individuals in counties that have suffered significant population losses. If you hire a target employee, your business can receive a 40% tax credit for the first $6,000 paid to that worker.
The individual and corporate alternative minimum tax (AMT) limits on the use of certain credits are waived, effective for years after 2006 as well as for carryback of these credits. This applies to the Work Opportunity credit and the credit for taxes paid on employee tips. Employers are also now eligible for the full tip credit despite the increase in the minimum wage.
[The act] includes certain S corporation and pension provisions, but they are generally too obscure and technical to cover in this [summary]. Contact your tax advisor to ascertain whether any of these changes affect your tax planning strategies.
Check with your own tax advisor to determine what, if any, impact these new provisions have on your business.
