The president and congress have created a new tax credit aimed at hiring veterans.
The Details:
- A maximum $4,800 credit (40% of the first $12,000 in qualifying wages)for veterans with a service-related disability hired within 12 months of discharge (no change from prior law).
- A maximum credit of $9,600 (40% of the first $24,000 in qualifying wages) for veterans with a service-related disability who have been unemployed for at least six months of the prior 12 months.
- A maximum credit of $5,600 (40% of the first $14,000 in qualifying wages) for non-disabled veterans who have been out of work for at least six months out of the prior 12 months.
- A maximum credit of $2,400 (40% of the first $6,000 in qualifying wages) for veterans who have been unemployed at least four weeks, but less than six months, in the past year.
Be warned that you must file paperwork with state agencies before hiring this individual (or soon thereafter) to ensure they qualify. Just read up on the hoops you have to jump through if you potentially qualify.
Link for more info
Many people, especially small service based professionals, elect to be an S Corporation. An S Corporation can offer liability as well as tax advantages that make it the right choice.
The C Corporation is an entity that may be a better fit for some businesses, and
this article highlights some of the key reasons and pitfalls to consider when considering a C Corporation.
The IRS has revised various figures for 2012 to account for inflation:
- 401(k), 403(b) limits: $17,000 (was $16,500)
- Catch-up contribution for those 50 and older: $5,500 (unchanged)
- Personal exemption increases from $3,700 to $3,800) and standard deduction
- The $13,000 annual gift exclusion is unchanged.
- The estate and gift lifetime exclusion for decedents dying during 2012 goes up from $5 million to $5.12 million.
- The Social Security wage base for 2012 will be $110,100 (up from $106,800 in 2011).
-2012 Tax Brackets
Source 1
Source 2
Some small business owners (sole proprietors filing Sch. C and S Corp officers who actively participate) will be able to deduct the first $50,000 in net business income on their 2012 NC tax returns. This offers a business owner the chance to avoid paying taxes on up to $50,000 to the state of NC. This is a very generous tax benefit being offered to business owners, presumably to help stimulate hiring and business activity in the state. This does not apply to passive rental income or C Corporation income.
If you are a sole proprietor that wants to operate under a separate legal name and avoid the cost of incorporating or setting up a seperate legal entity, you will need to register the name of your business. In NC that means contacting the county Register of Deeds where you will be operating.
This page will give more guidance on who must register and how it can be done.
This page lists the forms available for you to use.
More Info
So maybe you read
this post about home offices and you are hoping you can write off your S Corporation's home office since it is based out of your home. If done correctly then you should be able to take advantage of this deduction.
The way to handle this is to have the S Corporation reimburse the shareholder directly for the actual home office expenses (calculated the same way a sole proprietor would, allocated by square footage). The S Corp. shows the office expense on it's income statement. This expense then flows through to the shareholder through the corporation's K-1. This needs to be done under an accountable plan, so you can't just give yourself a set amount each month. It needs to be based on and supported by documented actual numbers.
Don't be tempted to have the corporation rent the office space from you either. This is an area of the tax law where the IRS will allow the rental deduction on the corporate books, and the shareholder reports the rental income on Schedule E. The deductions allowed on Sch. E are limited because of the employee/employer relationship. Only mortgage interest, real estate taxes, and casualty losses are allowed as deductions under section 280 A (c) (6) of the code. These expenses were already deductible, so the IRS has limited all other operating expenses like depreciation, utilities, HOA dues, repairs, etc. Because of this limitation I do not recommend this scenario. You are just creating extra headache for yourself with no real benefit.
Source 1Source 2
Congress Repealed the New 1099 Law that was going to put such a burden on small business.
It is sad when you are praised like a hero for cleaning up your own mess, but I am very thankful that this was taken care of.
Source
Disclaimer
The content on this blog (www.acollinscpa.blogspot.com) is my personal opinion based on my study and understanding of tax laws, policies and regulations. It’s provided for your private, noncommercial, educational and informational purposes only. It’s not a recommendation or endorsement of any company or product. It should not be relied upon as specific tax advice for your personal situation. I strongly suggest that when it comes to filing your taxes, you get additional, professional guidance from individuals who are familiar with your specific circumstances. Those who choose to rely solely upon the information on this site do so at their own risk and peril, and cannot hold the author liable in any form or fashion.
IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to notify you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed by law.
