What the New Tax Bill Means for Your Clients

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Many Sch. C individuals will have Reduced Estimated Taxes for the remainder of TY 2009. Ordinarily, estimated quarterly payments are 25% of the whole of last year’s tax burden or underpayment. For 2009, these payments will be adjusted to 25% of 90% of last year’s return. It is not a credit, since any underpayment will still be due when filing, but no fees will be assessed for the 10% shortage. The reduced payments are available only to individuals with under $500k adjusted gross income, and who realized more than 50% of their total gross income from a small business.

The Work Opportunity Tax Credit (a.k.a. the “new-hire credit”) has been expanded, giving businesses credits of up to $9,000 for new hires from specific groups, including recipients of family assistance and disabled veterans. New groups have been added at a $2,400 credit, including unemployed non-disabled veterans and “disconnected youth.” These credits are currently in effect through 2010.

A new Business Capital Gains Relief provision lets small business owners to exclude 75% of the gain from the sale of certain Qualified Small Business Stock (QSBS). Businesses must have been held for five years or longer, and be active with $50 million or less in assets.

Businesses shouldn’t fear the New COBRA Continuation provisions, which have a former employer paying 65% of the COBRA coverage, since employers can receive a credit, through withholding and payroll taxes, equal to the actual cost increase.

The tax-free limit on transportation and Transit Fringe Benefits (mass transit, carpools, etc) that employers offer their employees is now increased to $230 per month and will be pegged to inflation.

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Once again, don’t panic. Most of these tax law changes have no effect on business or individual filers for tax year 2008. So, there’s plenty of time to sign up for a CPE-eligible course somewhere near a beach. Now, stop daydreaming and get back to those 1040s.