Peter B. Diaz, CPA - Tax Consulting

The Small Business Jobs Act - Just in Time for 2010 Returns

2010-12-30T08:40:00.000-08:00

The Small Business Jobs Act offers businesses some great ways to save.

Super-Sized Depreciation Write-Offs
Businesses can now write off purchases of up to $500,000 in new or used equipment and software – a hefty increase over previous Section 179 limits. For the first time, you can also depreciate certain real property costs, including improvements to interior nonresidential, restaurant, and retail buildings that have been held greater than three years. These Section 179 deductions begin to phase-out when new additions exceed $2 million in any one year.

The Small Business Jobs Act also reinstated the 50% bonus depreciation for new purchased property, which had expired at the end of 2009. The bonus depreciation deduction extends to new heavy SUVs, and there’s an even bigger write-off for luxury cars. This means that qualifying taxpayers can take the Section 179 deduction, then bonus depreciation, and finally – on top of all that – regular depreciation.

For example, let’s say Tiger Company buys $1,000,000 of new seven-year MACRS equipment. Tiger can claim $785,750 of depreciation in the first year, computed as follows:

Section 179 deduction	50% of $1,000,000	$500,000
Bonus depreciation	50% of $500,000	250,000
MACRS depreciation	14.3% of $250,000	38,750
Total depreciation		$785,750

A 79% depreciation deduction in the first year is one whopping write-off!

Domestic Production Activities Deduction – Section 199
This deduction – for firms engaged in qualified activities such as manufacturing, processing, leasing, construction, engineering, or software development in the United States – has risen to 9 percent for tax years starting after 2009.

You compute the Section 199 deduction by subtracting expenses from qualified production activities. Your business needs to have a taxable profit in order to take advantage of it. But if eligible, you can reap a 3.15 percent reduction in their effective tax rate – without doing anything differently than what you’re currently doing. It doesn’t get any easier than that.

Expanded Use of General Business Credits
Here’s more helpful fallout from the Small Business Jobs Act: Qualifying taxpayers can now use General Business Credits to offset their Alternative Minimum Tax (AMT) liability.

General Business Credits are a group of approximately 30 credits, including the Investment Credit, Credit for increasing research activities, Low-income housing credit, Orphan drug credit, and Small Business Health Care Credit (discussed below).

Previously, companies could only use these credits to the extent that their regular tax liability exceeded their AMT liability. But the SBJA now lets you treat your AMT as zero – greatly expanding your ability to use 2010 credits. Your 2010 credits may also be carried back up to five years to offset prior AMT liability, and forward 20 years to offset future liability. (However, a second limitation remains in place that prevents you from using credits to reduce taxes below 25 percent of the difference between your company’s regular tax liability and its AMT liability.)

In order to qualify, companies must have average gross receipts of $50 million or less per year over the prior 3 year period. Owners of pass-through entities (such as LLCs and LLPs) also qualify for the expanded utilization if the owner’s average gross receipts meet the same $50 million test.

The upshot? Pay special attention to capturing all available credits for 2010. And weigh the cost of additional expenditures that could generate credits, against the benefits you could reap by offsetting prior, current, and future years AMT.

Note: As of early December, the federal credit for increasing research activities has not been extended past 2009, but may be extended at a later date and applied retroactively to 2010.

A New Federal Credit for Small Business Health Care...
If you’ve got fewer than 25 full-time-equivalent employees and average annual wages of less than $50,000, you could qualify for the new Small Business Health Care Credit.

For the 2010 through 2013 tax years, the maximum credit is 35 percent of the employer’s health insurance premium expenses. The biggest credit goes to employers with 10 or fewer full-time-equivalent employees and averages wages of $25,000 or less, and phases out as company size and wages increase. The credit is non-refundable and therefore can only offset existing tax liability. However, any unused credit can carry forward 20 years.

To qualify, companies need to pay a uniform percentage (not less than 50%) of the health care premiums for each enrolled employee.

...And Another New Federal Credit for Hiring Unemployed Workers
You could be eligible for this double-pronged credit if you hired previously unemployed workers between Feb. 3, 2010 and Dec 31, 2010.

The first part of this new program provides a credit for the employer’s 6.2% share of social security tax on wages paid to qualified employees, up to a $6,622 maximum per employee. This wouldn’t be included on your 2010 tax return, but instead claimed with payroll tax filings. So companies in a loss position could still realize a net cash benefit in the form of reduced payroll tax liability.

The second part allows you to claim a tax credit of 6.2% of the employee’s salary (up to $1,000 per employee) for each qualified employee retained for at least 52 weeks. This is a non-refundable credit similar to the Small Business Health Care Credit, and would be included in your 2010 tax return.

Who counts as a qualifying employee? This must be someone who hasn’t worked more than 40 hours within the 60 days prior to their hire. It can include recent graduates who were in school for some or all of the 60 days before their hire. Companies should coordinate with their payroll departments and/or outsource providers to compile the potential list of qualifying employees and to claim payroll tax reductions. Qualified employees will have to certify by signed affidavit (W-11 forms, available online) that they didn’t work more than 40 hours in the sixty days before their hire.

Net Operating Loss Deductions for Companies with Income Below $300,000
The government giveth, and the government taketh away. One spot where it recently took away was a new state limit on the use of Net Operating Losses (NOLs).

California Senate Bill 858, signed in October, limited the use of NOLs by suspending California NOL deductions for taxable years beginning on or after January 1, 2010 and before January 1, 2012.

There are some ways to work around this suspension, though. Qualifying companies with less than $300,000 of net business income in these years are exempt from the suspension. Meanwhile, companies exceeding the $300,000 taxable income threshold should consider accelerating expenditures into 2010 to reduce taxable income below this amount.

Fixed asset purchases, salaries and bonuses (if paid within 2 ½ months after year end) can be deducted on the 2010 tax return to reduce taxable income and potentially allow a company to qualify for the exemption. Companies that expect to be above the $300,000 figure should prepare a fourth quarter California estimated tax payment (due December 15, 2010 for calendar year-end corporations) to minimize interest on underpayment of estimated taxes.

A 1099 Reporting Mess

2010-11-09T11:00:00.000-08:00

A provision in the Patient Protection and Affordable Care Act enacted in March 2010 requires reporting on Form 1099-MISC Miscellaneous Income by vendors paid over $600 for the purchase of "goods" during the year. Under prior law the Internal Revenue Code requires Form 1099-MISC only for purchases of "services" not "goods" and specifically excludes reporting transaction with corporations. For goods purchased after 2011, Form 1099 will be required if annual purchases of business supplies, materials or other tangible goods exceed $600.

Businesses of all sizes will be required to create new record-keeping protocols. All vendors will need to provide purchasers with the information required on Form 1099: name, address and tax identification number (TIN). The vendor’s TIN must be associated with each purchase, as multiple small purchases throughout the year may reach the annual threshold. Businesses that annually issue more than 250 Forms 1099 are required to electronically file. Sole proprietors who previously used their social security numbers to conduct business should obtain an Employer Identification Number (EIN) to avoid identity theft issues. If a vendor fails to furnish a correct TIN, the business is required by law to impose back-up withholding at the rate of 28% of the purchase price, and also must prepare and file Form 945, Annual Return of Withheld Federal Income Tax.

Find more on Tax Preparation and tax services.

PETER B. DIAZ, CPA – TAX CONSULTING & FINANCIAL PLANNING IS DESIGNATED AS A TOP 10 BUSINESS BY PUBLISHERS OF THE PRIME BUYER’S REPORT

2008-12-25T17:15:00.000-08:00

Press Release
For Immediate Release
Contact: Peter B. Diaz, CPA
Peter.diaz@diazconsulting.com
650-400-2539

PETER B. DIAZ, CPA – TAX CONSULTING & FINANCIAL PLANNING IS DESIGNATED AS A TOP 10 BUSINESS BY PUBLISHERS OF THE PRIME BUYER’S REPORT

Redwood City, CA (December 09, 2008)

Peter B. Diaz, CPA – Tax Consulting & Financial Planning announced today it has been designated as a TOP 10 business by The Prime Buyer’s Report and so is officially designated “Prime Buyer’s Certified – TOP 10”.

The determination of Peter B. Diaz, CPA as a TOP 10 business was made based on a ten-point research process conducted by the independent publishers of The Prime Buyer’s Report. The process involved a thorough interview with Peter B. Diaz, CPA and phone calls to previous customers of Peter B. Diaz, CPA to determine their satisfaction. It also included Peter B. Diaz, CPA’s pledge to maintain the highest ethical standards regarding it’s pricing, customer communications, hiring practices, and more.

“I am proud to be recognized this way for the high quality of service and ethical business practices that have been the hallmark of my company since it was founded”, said Peter B. Diaz.
Peter B. Diaz, CPA is a full service Tax Consulting and Financial Consulting company assisting taxpayers and small businesses throughout the San Francisco Bay Area.

For full details on all research steps passed by Peter B. Diaz, CPA, and the ten-point “Best Business Practices Promise” it has pledged to maintain, visit www.primebuyersreport.com

Peter B. Diaz, CPA’s own website is at www.diazconsulting.com . Those interested in services can call (650) 400-2539 anytime 9am-5pm Monday-Friday.

# # #

Important 2009 Tax Rules to Know

2008-12-25T10:23:00.000-08:00

1. If you are 70½ or older you can skip minimum required payouts from retirement plans and IRAs for 2009 if you want without a penalty.

2. In 2009 the maximum 401(k) contribution increases to $16,500, up by $1,000.Individuals born before 1960 can contribute an extra $5,500, for a total of $22,000.

3. The contribution payin limit for defined contribution plans such as SEP IRA accounts and Keogh plans increases to $49,000.

4. There’s no change in the contribution payin limits for IRAs and Roth IRAs. The limitsremain at $5,000, plus $1,000 more for anyone who was born in 1959 or before.

5. The income caps limiting Roth contributions for high-income earners also rise in 2009. The Roth payin limit phases out for couples with Adjusted Gross Income (AGI) of $166,000 to $176,000. For singles, $105,000 to $120,000.

6. Personal exemptions are $3,650 for each filer and their dependents.

7. The 2009 standard deductions rise. Marrieds can claim $11,400. If one spouseis 65 or older, $12,500. If both are, $13,600. Single taxpayers get $5,700. Those 65 and older can take $7,100. Household heads get $8,350 plus $1,400 once they reach age 65. Taxpayers who are legally blind are allowed to add $1,100 to these amounts. Also, married tax filers who do not itemize can augment their standard deduction by up to $1,000 of property taxes paid. Singles filers can add in up to $500 of taxes paid.

8. The estate tax exemption jumps to $3.5 million, up from $2 millionin 2008.

9. The annual gift tax exclusion rises to $13,000 per donee, up $1,000. The lifetime gift tax exemption doesn’t change. It remains $1 million.

10. The Social Security wage base rises to $106,800 in 2009, a $4,800 increase. The tax rates remain 6.2% for FICA and 1.45% for Medicare. Self-employed taxpayerswill pay 15.3% on the first $106,800 of net earnings and 2.9% on amounts over that.

11. Annual caps on deductible contribution payins to health savings accounts rise in 2009. The maximums increase to $5,950 for account holders with family coverage and as much as $3,000 for single coverage.

12. The limits on deductibility of long-term-care premiums are higher. Taxpayers who are age 71 or older can claim as much as $3,980 per person. Filers age 61 to 70...$3,180. Those who are 51 to 60 can deduct up to $1,190. Individuals age 41 to 50 can take $600. People age 40 and younger can take $320.

13. The standard mileage rate for business driving is 55¢ a mile for 2009...a drop of 3½¢ per mile from the rate in effect for the final six months of 2008. For medical travel and moving its 24¢ per mile. When driving for charity its 14¢ a mile.

14. The 10% tax credit for energy efficient home improvements returns for 2009 and is expanded to cover biomass stoves. The total credit cannot top $500. The tax credit for solar water heating equipment is expanded. In 2009, the credit for 30% of the cost of these systems is no longer limited to $2,000.

15. The exemptions from the minimum tax drop to pre-2001 levels. It is expected that once again Congress will pass legislation in 2009 to reverse this decline.

Visit http://www.diazconsulting.com for more information.

PRESIDENT BUSH SIGNS ECONOMIC STABILIZATION ACT OF 2008

2008-10-21T10:38:00.001-07:00

On October 3, 2008, President Bush signed the "Emergency Economic Stabilization Act," which included an AMT"patch" and extension of a number of popular tax breaks, most of which had expired at the end of 2007. Here's aquick summary of provisions extended through 2009.

* For 2008, the AMT exemption amounts are increased to $46,200 for singles and to $69,950 for joint filers.

* Deduction for state and local sales taxes in lieu of deducting state and local income taxes.

* Above-the-line deduction for up to $250 for classroom supplies paid for by teachers.

* $2,000 / $4,000 above-the-line deduction for higher education tuition and fees.

* Business tax credit for research and development expenditures.

* 15-year recovery period for certain leasehold and restaurant improvements.

* Tax-free contributions from IRAs to charities by taxpayers aged 70½ and older.

* The additional standard deduction for property taxes paid by those who don't itemize.

The law also extended some energy tax credits and deductions and provided additional tax relief for victims of disasters in federally declared disaster areas.

For more information visit http://www.diazconsulting.com or call Peter Diaz CPA at 650-400-2539.

2008-07-17T15:23:00.000-07:00

Free Tax Workshop - Sole Proprietor Tax Issues
On September 11, 2008 Peter B. Diaz, CPA will be presenting a free tax workshop on the tax aspects of running a sole proprietor business. The workshop will cover income and common tax deductions, self-employment tax, estimated tax payments, depreciation, home office deductions, vehicle business use and more. The seminar will be held at the Cisco Entrepreneur Center/Small Business Administration (SBA) Center at 84 W. Santa Clara St. in Downtown San Jose, at 9:30 AM until 12:30 PM. The Workshop is sponsored by the Internal Revenue Service and the SBA. Contact 408-494-0216 or www.ecenteronline.org to make your reservation. Peter can be reached at peter.diaz@diazconsulting.com. Visit his web site at http://www.diazconsulting.com.

Peter B. Diaz, CPA Receives 2008 Best of Redwood City Award

2008-07-17T15:18:00.000-07:00

Press Release
FOR IMMEDIATE RELEASE
Peter B. Diaz, CPA Receives 2008 Best of Redwood City Award
U.S. Local Business Association’s Award Plaque Honors the Achievement
WASHINGTON D.C., July 16, 2008 -- Peter B. Diaz, CPA has been selected for the 2008 Best of Redwood City Award in the Tax Return Preparation & Filing category by the U.S. Local Business Association (USLBA).
The USLBA "Best of Local Business" Award Program recognizes outstanding local businesses throughout the country. Each year, the USLBA identifies companies that they believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and community.
Various sources of information were gathered and analyzed to choose the winners in each category. The 2008 USLBA Award Program focused on quality, not quantity. Winners are determined based on the information gathered both internally by the USLBA and data provided by third parties.
About U.S. Local Business Association (USLBA)
U.S. Local Business Association (USLBA) is a Washington D.C. based organization funded by local businesses operating in towns, large and small, across America. The purpose of USLBA is to promote local business through public relations, marketing and advertising.
The USLBA was established to recognize the best of local businesses in their community. Our organization works exclusively with local business owners, trade groups, professional associations, chambers of commerce and other business advertising and marketing groups. Our mission is to be an advocate for small and medium size businesses and business entrepreneurs across America.
SOURCE: U.S. Local Business AssociationCONTACT:U.S. Local Business AssociationEmail: PublicRelations@USLBA.netURL: http://www.USLBA.net ###

visit http://www.diazconsulting.com to learn more about Peter B. Diaz, CPA

2008-07-08T11:28:00.000-07:00

IRS RAISES STANDARD MILEAGE RATES

With gas prices soaring, the IRS has announced anincrease in the standard mileage rates that taxpayerscan use to deduct the cost of driving for business,medical services, or moving.

BUSINESS. Effective for driving from July 1 throughDecember 31, 2008, the standard mileage rate forbusiness driving has been increased to 58.5¢ per mile.The rate for business miles driven from January 1through June 30, 2008, remains at the previous rate of50.5¢ a mile.

MEDICAL AND MOVING. The IRS also increased thedeductible rate for medical and moving mileage for thelast six months of 2008 to 27¢ a mile. For the first sixmonths of 2008, the rate remains at 19¢ a mile.

CHARITABLE. Note that the IRS made no change in themileage rate for driving in conjunction with charitableactivities. That rate is set by law and remains at 14¢a mile.

The standard mileage rates provide taxpayers with an IRS-approved recordkeeping shortcut for deductingexpenses for business, medical, and moving driving. Therates are adjusted annually based on operating costsfor vehicles. When costs rise dramatically during theyear, the IRS considers a midyear change. The new mileage rates are available to many - but notall - drivers. www.diazconsulting.com peter.diaz@diazconsulting.com Phone 650-400-2539

2008 Tax Changes

2008-01-15T10:11:00.000-08:00

Here is a brief rundown of 2008 tax changes.

* ADOPTION TAX CREDIT increases to $11,650 for adoption of an eligible child.

* SECTION 179 maximum deduction increases to $128,000. Phase-out threshold increases to $510,000.

* STANDARD MILEAGE RATE for business driving increases to 50.5¢ a mile. Rate for medical and moving mileage decreases to 19¢ a mile. Rate for charitable driving remains at 14¢ a mile.

* ESTATE TAX top rate remains at 45%, and the exemption amount remains at $2 million. The ANNUAL GIFT TAX EXCLUSION remains at $12,000.

* 401(k) maximum salary deferral remains at $15,500 ($20,500 for 50 and older).

* SIMPLE maximum salary deferral remains at $10,500 ($13,000 for 50 and older).

* IRA contribution limit increases to $5,000 ($6,000 for 50 and older).

* KIDDIE TAX threshold increases to $1,800 and now applies up to age 19 (up to age 24 for full-time students).

* NANNY TAX threshold increases to $1,600.

* TRANSPORTATION FRINGE BENEFIT limit increases to $115 for vehicle/transit passes and to $220 for qualified parking.

* SOCIAL SECURITY taxable wage limit increases to $102,000. Retirees under age 65 can earn up to $13,560 without losing benefits.

* HOPE CREDIT maximum increases to $1,800.

* HSA CONTRIBUTION limit increases to $2,900 for individuals and to $5,800 for families. An additional $900 may be contributed by those 55 or older.

*The AMT exemption amounts for 2007 are $66,250 for joint filers, $33,125 for couples filingseparately, and $44,350 for single taxpayers and headsof household.

Visit www.diazconsulting.com

Free Tax Workshop - Business Entity Choice

2007-11-02T08:56:00.001-07:00

On October 9, 2008 Peter B. Diaz, CPA will be presenting a free tax workshop on the tax aspects of common business entities. The workshop will cover Sole proprietors, Partnerships, LLCs, Corporations and S-Corporation. Tax advantages and disadvantages of each will be discussed. The Seminar will be held at the Cisco Entrepreneur Center/Small Business Administration (SBA) Center at 84 W. Santa Clara St. in Downtown San Jose, at 9:30 AM until 12:30 PM. The Workshop is sponsored by the Internal Revenue Service and the SBA. Contact 408-494-0216 or http://www.ecenteronline.org/ to make your reservation. Peter can be reached at peter.diaz@diazconsulting.com. Visit his web site at http://www.diazconsulting.com/

Federal Tax Rules to be Aware of Going into 2008

2007-10-17T10:49:00.000-07:00

Federal Tax Rules to be Aware of Going into 2008
(By Peter B. Diaz, CPA)

With 2007 rapidly coming to a close, below are some miscellaneous tax rules that may affect certain taxpayers in 2008. The list is not all-inclusive but intended to get taxpayers to start thinking about tax planning for 2008 and ways to reduce their tax burden.
Qualified taxpayers may elect to immediately expense, as a business deduction, up to $128,000 of assets placed in service during 2008. This avoids having to claim depreciation expense and a write-off of the cost over a long period of time.
The maximum contribution to Traditional and Roth IRA accounts increases to $5000 in 2008. Taxpayers who are at least age 50 in 2008 may make an additional $1000 contribution for a total of $6000. The maximum contribution to a 401(k) plan for 2008 is $15,500 and the maximum contribution to a defined contribution plan increases from $45,000 in 2007 to $46,000 in 2008. The limitation on SIMPLE retirement plans remains unchaged at $10,500.
Certain college age children may be subject to the “kiddie Tax” if their investment income exceeds certain limits. This will subject the child’s income to the parents tax rate.
Capital gains and qualified dividends continue to be taxed at a maximum rate of 15% through 2010. Capital gains and qualified dividends will be taxed at a Zero percent for individuals in the lowest ordinary income tax brackets (10% & 15%).
The top individual tax rate remains at 35%. Keep an eye on congress going forward.
Personal exemptions against income for yourself and each dependent will be $3500 in 2008. Standard deduction amounts are $10,900 doe married individuals filing joint returns; $8,000 for head-of-household; and, $5,450 for single individuals and married individuals filing separately.
Earnings subject to Social Security and Medicare Tax in 2008 will be based on the first $102,000 of earnings at a total tax rate of 15.3% (self employment tax rate, half that rate for employees). Earnings above the $102,000 base amount are only subject to Medicare Tax at a rate of 2.3% (for self-employed taxpayers; half that rate for employees).
The IRS standard mileage rate for business auto use is 50.5 cents in 2008 (up 2 cents from 2006).
When originally enacted, the Alternative Minimum Tax exemption amounts were not indexed for inflation. For the last few years congress has temporarily increase those amounts. In 2008, the Alternative Minimum Tax exemption remains at the prior lower levels if congress does not act to extend or adjust the increased exemption amounts. Many taxpayers will be subject to the Alternative Minimum Tax and have a higher tax burden.
You may qualify for a 30% Energy Credit if you purchased and installed any residential solar energy equipment in 2008. There are limitations.
Businesses involved in certain US manufacturing, construction and production activities may qualify to deduct 6% of the net income from such activities in 2008. The deduction is subject to certain net income limitations and wage limitations.
For 2008, an individual may make a gift of up to $12,000 to any person without having to file a gift tax return for the taxable year. There is no limit on the number of $12,000 gifts a person can make. Accordingly, an individual can make $12,000 gifts to ten different individuals for a total of $120,000 in gifts. No gift tax return would need to be filed.
Peter Diaz is a Tax Advisor in Redwood City and has been practicing tax consulting for over 23 Years. He can be reached at 650-400-2539 or through email at peter.diaz@diazconsulting.com. Visit his web site at http://www.diazconsulting.com/ .
The information contained herein is not intended as tax advice. To comply with requirements imposed by the IRS, any information contained in this communication cannot be used for the purpose of avoiding penalties under the Internal Revenue Code.

Kids Can Save You Taxes

2007-07-27T17:50:00.000-07:00

YOUR KIDS CAN REDUCE YOUR TAXES AND GET RICH
(By Peter B. Diaz, CPA)

One often-overlooked tax benefit for business owners is putting their kids to work in their business.

If you are self-employed you can take advantage of this by paying your kids $4,000 each for performing services in your business. The business gets a tax deduction for the compensation and that saves taxes on the parent's tax return. Also, there is no Social Security or Medicare Taxes due on the wages you pay to your child.

The next step is to open a Roth IRA for the child and contribute the $4000 to the IRA. The child may not withdraw this money until age 59 1/2. The earnings and the amounts contributed grow tax-free and are generally never subject to tax when withdrawn. On the child’s tax return, the child gets no tax deduction for the IRA but the child may not pay tax on the $4000 if he or she is at a low enough level of income.

If you do this for 10 years, from age 8 to 18, and the IRA earns an 8% return each year, your child should have around $1.5 million at age 60 and that should grow to over $2 million by age 64.

If you plan to do this, consult with a professional tax advisor first and be sure your children are actually performing services for your business. Also, check that the work is not violating any child labor laws.

Peter Diaz is a Tax Advisor in Redwood City and has been practicing tax consulting for 23 Years. He can be reached at 650-400-2539 or through email at peter.diaz@diazconsulting.com. Visit his web site at www.diazconsulting.com .

The information contained herein is not intended as tax advice. To comply with requirements imposed by the IRS, any information contained in this communication cannot be used for the purpose of avoiding penalties under the Internal Revenue Code.