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On May 25, the President signed into law the Iraq
emergency supplemental appropriations bill. The measure carries a minimum wage
increase, the Small Business and Work Opportunity Tax Act of 2007 (the Small
Business Act), and miscellaneous pension-related technical corrections. The
President's signature also operated to set the effective date of various
provisions of the Small Business Act.
Here's an overview of the more widely applicable
provisions of the Small Business Act.
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Effective for tax years beginning after May
25, 2007, the kiddie tax rules are broadened to apply to (1) children age
18, and (2) children over age 18 but under age 24 who are full-time
students, but only if the earned income of these children doesn't exceed
one-half of the amount of their support. For more
information on these rules see our article
Expanded Kiddie Tax.
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Effective for tax years beginning after
December 31, 2006 and before January 1, 2011, the Small Business Act
increases both the maximum annual expensing amount under
Code Section 179 and
the threshold phaseout amount. For tax years beginning in 2007, the
practical impact of these changes is to increase the annual expensing
limitation from $112,000 to $125,000, and to increase the phaseout amount
from $450,000 to $500,000. The Small Business Act also extends for an
additional year (through tax years beginning before January 1, 2011), the
increased annual expensing amount and the increased phaseout threshold
amount (plus the ability to expense off-the-shelf software), and indexes the
increased amounts for inflation in tax years beginning in a calendar year
after 2007 and before 2011.
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Effective for tips received for services
performed after 2006, the FICA tip credit isn't reduced by increases in the
minimum wage.
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The work opportunity tax credit (WOTC) and
FICA tip credit can offset 100% of AMT liability, effective for WOTCs and
FICA tip credits determined in tax years beginning after December 31, 2006
and to carrybacks of those credits.
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The WOTC is extended 44 months to August 31,
2011 for most targeted groups, effective for individuals who begin work for
the employer after May 25, 2007.
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The Small Business Act eases the requirements
for, and renames, the WOTC targeted group called “high-risk youths,”
effective for individuals who begin work for the employer after May 25,
2007.
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The WOTC is expanded to cover “Ticket to
Work” plan participants, effective for individuals who begin work for the
employer after May 25, 2007.
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The WOTC for employing certain disabled
veterans is enhanced, effective for individuals who begin work for the
employer after May 25, 2007.
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The corporate estimated tax payment due in
July, August, and September 2012 for certain very large corporations is
increased from 106.25% to 114.25% of the payment otherwise due. This
provision is effective on May 25, 2007.
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A new rule in Code Sec. 6330 excepts levies
to collect federal employment taxes from the regular, pre-levy collection
due process (CDP) hearing requirement, effective for levies on or after
Sept. 22, 2007 (the date that is 120 days after the enactment date).
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Tax return preparer penalties are broadened
and toughened, effective for returns prepared after May 25, 2007.
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A new penalty for filing erroneous refund
claims applies to any claim filed or submitted after May 25, 2007.
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IRS is given more time (36 months, instead of
18 months) to notify individuals about liability before interest and
penalties are suspended, effective for IRS notices provided after November
25, 2007 (the date which is six months after the date of enactment).
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Effective for tax years beginning after
December 31, 2006, where a qualified joint venture is conducted by a husband
and wife who file a joint return for the tax year, the joint venture is not
treated as a partnership for tax purposes if the spouses elect.
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S corporation capital gains are not treated
as passive income, effective for tax years beginning after May 25, 2007.
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A number of tax rules for the Gulf
Opportunity Zone (GO Zone) are enhanced and/or extended. Examples: expensing
is enhanced and extended for property used in highly damaged GO Zone areas,
effective for tax years beginning after May 25, 2007; tax-exempt qualified
mortgage bond treatment is eased for rehabilitating GO Zone residences,
effective for owner financing provided after May 25, 2007, and the
low-income housing credit rules are eased for certain qualifying buildings,
effective on May 25, 2007.
For more information on how this may affect your tax situation
call me at 713-333-7477
or
email me at jacob@thefinancialfirm.com
Any discussion pertaining to taxes in our
web site (www.thefinancialfirm.com)
may be part of a promotion or marketing effort. As provided for in
circular 230 of the IRS, advice related to federal taxes that is
contained in this communication is not intended or written to be used,
and cannot be used, for the purpose of avoiding penalties under the
Internal Revenue code. Individuals should seek advice based on their own
particular circumstances from an independent tax advisor.
Posted
6/6/07
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