On September 14, 2010, the U.S. Senate voted to advance the Small Business Jobs Act (HR 5297). The Small Business Jobs Act includes a $30 billion small business lending pool and $12 billion in small business tax breaks. The Senate may send its final jobs bill back to the House later this week.
Senate Democrats defeated two amendments proposed to the Jobs Act that would have repealed the Form 1099 reporting requirements for business passed in the new Health Care legislation. The Form 1099 requirements will require all businesses to begin reporting, in 2012, all payments made to vendors that exceed $600. These new requirements will place an undue burden on small businesses. It should be noted, however, that repeal of the 1099 reporting requirements is not completely dead. The defeat of the specific amendments was based primarily on lack of support for the revenue offsets proposed to pay for the repeal. Senator John Kyl (R-Ariz.) indicated that the 1099 issue would likely be revisited with offsets that are more acceptable to Democrats. (It is rumored that Vice President Biden said that the 1099 legislation shouldn’t be looked at as a burden to small business, but as the Administration’s ability to save or create 4,000,000 jobs! - Just kidding!).
The major tax benefits contained in the proposed Jobs Bill are:
• Increases Section 179 expensing to $500,000.
• Extends Bonus Depreciation – Allowing taxpayers to immediately write off 50 percent of the cost of new equipment.
• Provides 100% exclusion from capital gains taxes on small business stock.
• Allows carry back of general business tax credits to the previous five years.
• Allows small businesses to take general business credits against the Alternative Minimum Tax (AMT).
• Increases to $10,000 the tax deduction for start-up expenditures.
• Allows self-employed individuals to deduct health insurance costs for self-employment tax purposes.
We will keep you informed as to the progress of both the Jobs Act and the Form 1099 repeal as they progress through Congress over the next several days.
Schneider Downs provides accounting, tax, wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.