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In the often unpredictable world of business, there’s one constant every business owner can count on-taxes. Whether you own a small company, work out of your home or are self-employed, knowing what changes were made in 1999 to the tax laws affecting businesses will make things much smoother come April 15.
One key change addresses the amount of money companies are required to deposit with their banks for employee withholding taxes. The IRS now allows a threshold of $1,000 before payments must be made. In the past, it was $500.
“The IRS has also changed the rule to say that if the amount is $1,000 or less, you can send the check right to the IRS,” says Leon Walker, a tax partner with Bert, Smith & Co. in Washington, D.C.
Under the new laws, the maximum amount of 1999 wages subject to the Social Security tax (6.2%) has increased to $72,600. Wages that exceed that amount aren’t taxable. All wages, however, are still subject to the Medicare tax.
Using personal automobiles for business has become just as commonplace as using them for pleasure. Drivers should be aware that the optional Standard Mileage Rate has decreased to 31 cents for each business mile. For miles driven prior to April 1, 1999, you can deduct at the old rate of 321/2 cents. The good news is that this law for deducting business miles has been extended to leased cars. Previously, if you didn’t own the car, you could only deduct expenses related to running it, such as gas.
Do you work out of your home?
Now it’s a little easier to qualify your residence as a principal place of business. Under the old laws, doing management or administrative activities such as billing, setting up appointments or faxing from a home office didn’t qualify. Your home office will now qualify as a deduction if you use it exclusively and regularly for those activities.
The IRS is also lending a helping hand to the self-employed. The health insurance deduction has increased from 40% to 60% of the amount paid for yourself and your family. “This is only if the individual is not eligible to participate in another company-sponsored health program through their spouse or a second job,” says Walker.
Walker suggests holding on to business receipts for at least six years. If you don’t have the receipt to prove the expense, it’s okay to take the deduction. Just make sure to document it in your personal file.
For more information about 1999 changes to the tax laws, contact the IRS at 800-829-1040 or www.IRS.gov. “You should also seek the help of a competent tax professional such as a CPA or other individual who is knowledgeable in the industry,” advises Walker.
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