The Senate Finance Committee and the House Ways and Means Committee have come to an agreement on the tax package that would give relief to the many small businesses in the country. This bill will provide nearly 5 billion in tax relief for small businesses if passed. The major portion of the bill is a 3 ½ year extension of the Work Opportunity Tax Credit which accounts for more than 2.5 billion of the tax relief. The bill also proposes:
Tax preparer penalties for understating liabilities on income tax returns would also be raised
a new penalty on claims for refunds that are filed without any reasonable basis would raise an estimated $100 million
increase the expensing limits of Section 179 of the tax code -- which allows businesses to deduct the cost of certain types of property on their taxes as an expense -- by $17,000, to a total of $125,000, through 2008
Extending the enhanced credit for low-income housing and treating certain qualified Gulf Opportunity Zone repairs or reconstruction as “qualified rehabilitation” for purposes of bond rules;
Allowing an unincorporated business owned jointly by a married couple to file as a sole proprietorship, instead of a partnership;
Modifying the “kiddie tax” -- the point at which a child's unearned income is taxed at the parent's rate -- to increase the age from under-18 to under-19, or under-24 for students (intended to prevent parents from shifting income to children to take advantage of lower tax rates); and,
Doubling the period before which the Internal Revenue Service must stop imposing fees and penalties on taxpayers who have not been notified of a deficiency, from 18 months, to 36 months.
These changes can make a big difference in your tax planning strategy for 2007 and beyond if signed into law. Be sure to speak with your trusted advisor to ensure that your tax strategy is in line with these potential changes.
Keeping your Business N Synergy as always :-)
Brian N. Stovall