The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law on December 17, 2010. This new tax law will affect your business in several ways, starting January 1, 2011. Here are details on the provisions that will affect you, and some suggestions on what you will need to do:
Employee payroll taxes will be cut in 2011, but not future years. Specifically, the Social Security portion of payroll taxes (OASDI) will be reduced from 6.2% to 4.2%.
This reduction affects only the employee portion, not the employer portion, which remains at 6.2%.
What to Do: You will need to change your payroll deductions for 2011 to take less from employee paychecks. Check with your payroll processor about how to make this change. The IRS says the change should be made as soon as possible, but no later than January 31, 2011.
2 New federal income tax withholding tables will be used in 2011.
What to Do Download IRS Notice 1036, which provides more details on the percentage method for income tax withholding. These changes should also be made as soon as possible, but no later than January 31, 2011. For any Social Security tax over withheld during January, you will need to make an offsetting adjustment in workers' pay as soon as possible but not later than March 31, 2011.
The self-employment tax rate will also be reduced for self-employed individuals, by 2%. If you pay self-employment (Social Security and Medicare) taxes, your rate will be reduced from 12.4% to 10.4% of your net business income.
This change doesn't apply if you are an employee of your company; in that case, you would pay the employee rate in item #1 above.
What to do: If you pay estimated taxes, your tax may be lower. If you don't pay estimated taxes, you will pay less on your 2011 income tax return. Check with your tax advisor to see if you can reduce your estimated tax payment.
Two provisions of the recent have been updated and extended in the new Tax Relief Act:
Increased Bonus Depreciation for 2011The bonus depreciation amount for business assets purchased in 2011 has increased to 100%. This means you can fully depreciate (take as an expense) the cost of any business asset purchased next year. The bonus depreciation amount for business assets purchased in 2010 is 50%.
Section 179 Depreciation Provisions have been extended through 2011. These provisions, which were set to expire at the end of 2010, increase the Section 179 depreciation limit to $500,000 (with limits on the amount purchased).
What to do Check with your tax advisor if you are considering buying business assets in 2010, to see if your should wait on that purchase until 2011. Each tax situation and each yea is different; don't assume you will be better off to wait until 2011 to buy that piece of equipment or vehicle.
Employee payroll taxes will be cut in 2011, but not future years. Specifically, the Social Security portion of payroll taxes (OASDI) will be reduced from 6.2% to 4.2%.
This reduction affects only the employee portion, not the employer portion, which remains at 6.2%.
What to Do: You will need to change your payroll deductions for 2011 to take less from employee paychecks. Check with your payroll processor about how to make this change. The IRS says the change should be made as soon as possible, but no later than January 31, 2011.
2 New federal income tax withholding tables will be used in 2011.
What to Do Download IRS Notice 1036, which provides more details on the percentage method for income tax withholding. These changes should also be made as soon as possible, but no later than January 31, 2011. For any Social Security tax over withheld during January, you will need to make an offsetting adjustment in workers' pay as soon as possible but not later than March 31, 2011.
The self-employment tax rate will also be reduced for self-employed individuals, by 2%. If you pay self-employment (Social Security and Medicare) taxes, your rate will be reduced from 12.4% to 10.4% of your net business income.
This change doesn't apply if you are an employee of your company; in that case, you would pay the employee rate in item #1 above.
What to do: If you pay estimated taxes, your tax may be lower. If you don't pay estimated taxes, you will pay less on your 2011 income tax return. Check with your tax advisor to see if you can reduce your estimated tax payment.
Two provisions of the recent have been updated and extended in the new Tax Relief Act:
Increased Bonus Depreciation for 2011The bonus depreciation amount for business assets purchased in 2011 has increased to 100%. This means you can fully depreciate (take as an expense) the cost of any business asset purchased next year. The bonus depreciation amount for business assets purchased in 2010 is 50%.
Section 179 Depreciation Provisions have been extended through 2011. These provisions, which were set to expire at the end of 2010, increase the Section 179 depreciation limit to $500,000 (with limits on the amount purchased).
What to do Check with your tax advisor if you are considering buying business assets in 2010, to see if your should wait on that purchase until 2011. Each tax situation and each yea is different; don't assume you will be better off to wait until 2011 to buy that piece of equipment or vehicle.
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