If you're getting ready to file your tax returns as an independent contractor or small business owner, make sure you're aware of some of the newest tax incentives, regulations, and changes. Some tax relief laws are making it possible for small business owners to enjoy a significant tax cut and continue to grow their business. More deductions and business credits could spell big tax savings for you as you file your business taxes in the weeks ahead.
Here are just five new tax incentives and regulations impacting small business in the upcoming year:
Form 1099-K Reports Sales from Credit and Debit Cards
If you accepted credit or debit cards to make a sale that generated a minimum of 200 transactions and $20,000 or more in sales, your credit card processing company will send you Form 1099-K. I just received a 1099-K from PayPal for all payments made via PayPal for the 2011 tax year. This includes a breakdown of payments received month by month, and could actually make reporting your total sales and income that much easier. The form was created as part of the Housing and Economic Recovery Act of 2008 to ensure compliance when reporting sales income as a merchant. As a small business owner, you need to report all of your sales for the year; Form 1099-K will be one form of proof of sales.
100% Deductions for Investments
The Tax Relief and Job Creation Act allows small business owners to deduct 100 percent of investments made between September 8, 2010 and December 31, 2011. This act has also extended a 50 percent bonus deprecation rate through the 2012 tax year.
$500,000 Small Business Expense Limits
The Recovery Act allows small business owners to expense up to $500,000 of the costs of new equipment purchases in the year of the purchase instead of depreciating the total cost over time. You'll enjoy an immediate tax benefit for any large equipment purchases you made this past year.
Health Care Tax Credits and Deductions
If you're self-employed or are offering health insurance coverage to your employees, you'll enjoy some tax benefits under the Affordable Care Act. Under this act, small business owners can get tax credits for up to 35 percent of employee premium costs; self-employed business owners can deduct health insurance premium expenses for themselves and their families.
Zero Capital Gains Taxes on Key Investments
Under the Small Business Jobs Act, all capital gains from the sale of certain small business investments are excluded from taxes. This can be a significant savings for any small business owner that sold small business stock last year.