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Small Business Jobs Bill of 2010 (HR-5297)
The Senate passed the Small Business Jobs Act of 2010. The House is set to vote on the bill where its expected to pass.
The following provision is included in the Bill…
1. One-year extension of the 50-percent bonus depreciation provision for qualified property placed in service during 2010.
2. Increase Section 179 expense deduction for 2010 and 2011 to $500,000, combined with an increase in the phase out threshold to $2 million.
Will keep you posted on the developments….
Late filing Penalty for S Corp
Time is running out and the tax returns for S Corporation are due soon.
The final deadline to file S Corp tax returns (Form 1120S) is September 15th, 2010 if an extension was requested.
S Corporation’s no longer enjoy the luxury to file late and not pay the penalty. One of the recent changes by the IRS is charging penalty on late filing of the S Corporation tax returns.
For tax years beginning after 2009, the late filing penalty for an S corporation return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation’s tax year
So for a S Corp with two or more stockholders this penalty could add up to an exhorbitant amount.
Relief from penalty is available only if the S Corp shows that the late filing was due to reasonable cause.
Late Filing Penalty for Partnership
Time is running out and the tax returns for partnership are due soon.
The final deadline to file partnership tax returns (Form 1065) is September 15th, 2010 if an extension was requested.
Partnership no longer enjoy the luxury to file late and not pay the penalty.
For tax years beginning in 2009, the late filing penalty for a partnership return is $89 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership’s tax year.
For tax years beginning after 2009, the late filing penalty for a partnership return is $195 for each month or part of a month (up to 12 months) the return is late (or does not contain the required information) multiplied by the total number of persons who were partners in the partnership during any part of the partnership’s tax year.
So for a partnership with two or more partnership this penalty could add up to an exhorbitant amount.
Relief from penalty is available only if the partnership shows that the late filing was due to reasonable cause.
Early Distribution from Retirement Plan & Taxes
Considering the current economic conditions, most of us are turning to our retirement funds for financial needs. However, we need to be aware of the tax consequences that may follow with such distributions.
Since the contributions to these plans are made from our before tax dollars (I have excluded Roth contributions/plans from the discussion here), the distributions when taken out will be fully taxable. In addition,the law imposes a 10{eb914d8c00d6b744d02a9a8064b0bfd5c559be7136358887c29ad495da2b8d17} additional tax on early distributions from a qualified retirement plan or deferred annuity contract before reaching age 59 1/2. Whereas you cannot get out of the resulting tax liability, you may be able to save the early withdrawal penalty.
There are certain exceptions to 10{eb914d8c00d6b744d02a9a8064b0bfd5c559be7136358887c29ad495da2b8d17} early withdrawal penalty.
The following six exceptions apply to distributions from any qualified retirement plan:
1. Distributions made to your beneficiary or estate on or after your death.
2. Distributions made if you are are totally and permanently disabled.
3. Distributions made as part of a series of substantially equal periodic payments over the life expectancy of the owner or life expectancies of the owner and the beneficiary. If these distributions are from a qualified plan other than an IRA, you must separate from service with this employer before the payments begin for this exception to apply.
4. Distributions that are equal to or less than your deductible medical expenses, that is, the amount of your medical expenses that is more than 7.5{eb914d8c00d6b744d02a9a8064b0bfd5c559be7136358887c29ad495da2b8d17} of your adjusted gross income.
5. Distributions made due to an IRS levy of the plan.
6. Distributions to qualified reservists.
The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:
1. Distributions made to you after you separated from service with your employer (State or local government), if the separation occurred in or after the year you reached age 55 or distributions from qualified governmental defined benefit plans if you were a qualified public safety employee who separated from service on or after you reached age 50,
2. Distributions made to an alternate payee under a qualified domestic relations order(QDRO), and
3. Distributions of dividends from employee stock ownership plans.
2010 Estate tax & Step up in Basis
Generally if a person dies, his estate is subject to estate tax if it is over the exemption amount. The heirs, who inherit the estate, get a step up in basis in the assets inherited from the estate. Step up in basis is that the value of the assets