In addition to the budget proposal released by the President on February 1st, there are a number of other bills that are keeping lawmakers on Capital Hill busy. With all the changes being proposed, do you know if and how you will be affected? The FY 2011 Budget Proposal
In summary, President Obama’s 10-year, $3.8 trillion budget proposal would provide: tax breaks for middle-income families and small businesses, tax increases for upper-income individuals and corporations, international tax rules reform, an end to tax preferences for large oil and gas companies and closing of corporate loopholes.
For lower- and middle-income individuals, the president proposes to make permanent the Bush-era tax cuts that are scheduled to expire at the end of this year. He’s also proposed to, among other things, extend the Making Work Pay Credit, increase the Child and Dependent Care Tax Credit, increase the child care tax credit, and extend the Savers Credit.
For individuals earning over $200,000 per year and families earning over $250,000 per year the budget would reinstate the 39.6 percent tax rate for ordinary income, and 20 percent for capital gains and qualified dividends, limit the itemized deductions, allow the 2001 and 2003 tax cuts to expire and modify the estate and gift tax valuation discount rules.
To ease the tax burden on small businesses, the administration would extend the increased section 179 expensing limit on qualified property and eliminate the capital gains tax on investment in small business stock. Other proposals include making permanent the research credit, extending temporary bonus depreciation and extending and modifying the New Markets Tax Credit. The administration would also extend for two years a number of temporary business tax incentives such as the subpart F exception for active financing income and the lookthrough exception for controlled foreign corporations and 15-year depreciation for qualified leasehold improvements and qualified restaurant property.
Senate Approves Bill to Fix Small Business Tax Penalty
The Senate recently passed the Small Business Penalty Fairness Act of 2009. This measure prevents small businesses from incurring tax penalties aimed at large corporations and wealthy individuals investing in tax shelters. The bill requires the IRS to assess penalties for failure to disclose such investments in proportion to the benefits received and ensure small businesses do not suffer excessive fines. The measure revises Code Sec. 6707A to set the penalty for failure to disclose reportable transactions to the IRS at 75 percent of the tax benefit received.
The Senate Jobs Bill
A scaled-down jobs creation package, The Hiring Incentives to Restore Employment (HIRE) Act, was proposed on February 11. A quick summary of some of the tax incentives for employers follows.
Employers who hire displaced workers would be exempt from paying payroll tax on wages for new hires beginning after the date of enactment and ending on December 31, 2010.
Increase for employers the current-year general business credit (section 38(b)).
Extension of the increased small-business expensing limits under section 179 to 2010.
Check back for more on the Jobs Bill as it makes it way through Senate in the coming weeks.