As we often tell our clients "tax season does not end on April 15" That is true for a lot of reasons. This year, it is appropriate because Congress has passed a new package of tax incentives. Many of the tax breaks are targeted to small business to help offset an increase in the federal minimum wage. On the other hand, the legislation also contains a number of provisions meant to raise federal revenue to pay for the tax cuts. These primarily affect individual taxpayers. We can help you craft a tax strategy that maximizes the benefits and minimizes the potential hazards of the new law.
BUSINESS TAX INCENTIVES AND CHANGES
Federal minimum wage goes from $5.15 to $7.25 an hour over the next two years.
Small business expensing allows some items to be expensed that would have been otherwise depreciated. As of January 1, 2007 $125,000 in qulaifying expenditures for property placed in service can be deducted in the year of acquisition, subject to some limitations.
The work opportunity tax credit is available (WOTC) to encourage employers to hire challenged employees with physical disabilities. It also covers employees challenged economically. The new law extends the credit to cover more veterans and some other targeted groups.
To help pay for tax cuts a significant change was made to the "kiddie tax" The kiddie tax rules prevent most children under the age of 18 and children under age 24 who are full time students from using their low tax bracket to shelter significant amounts of investment income. Using a complicated formula the children get taxes on their unearned income at the parents tax rate.