Small Business Jobs Act - The Tax Breaks

On September. 27, 2010, the Small Business Jobs Act was passed. The new bill extends the SBA loan provisions, tax cuts, and other opportunities in government contracting, exporting, and counseling for small business owners. You can learn about all of the new legislation at http://www.sba.gov/jobsact/.  For the purpose of this article we will focus on the tax breaks for small businesses, since they will affect the most businesses.

The eight tax breaks for small businesses contained in the Small Business Jobs Act are as follows:


1. The expensing limit has been expanded to $500,000 for the years 2010 and 2011. This is a large increase over the $250,000 that would have been eligible for expensing under Section 179 for 2010, and only $25,000 for 2011.

2. There is a carryback of general business credits increase from 1 year to 5 years. This allows most small businesses to offset as many as five years of taxes as well as the Alternative Minimum Tax.

3. The accelerated/bonus depreciation in the Recovery Act has been extended through 2010. Bonus depreciation (the additional depreciation is 50% of the basis of the property placed in service) would have expired after December 31, 2009 if it were not for its extension for 2010 in this bill.

4. There will be zero capital gains taxes for those who invest in small businesses before December 31, 2010, and hold for at least five years.

5. There is a temporary increase in deductions for start-up. Entrepreneurs can deduct $10,000 from their taxes for this year. The limit was previously $5,000. These expenses to open up a new business, incurred while you are setting up or researching the business, may include the cost of advertising, travel, market research or training employees prior to opening the business.

6. The act removes cell phone and similar telecommunications equipment from “listed property” classification, thereby relieving it from the listed property rules, and relaxing the rules on their deductibility. This basically means it will be easier to deduct the use of cell phones.

7. There are deductions for health insurance costs for the self-employed for 2010. All self-employed business owners, members of limited liability companies, 2% S-Corporation shareholders who are employees can deduct health insurance costs for themselves and their families on their tax returns. This means that business owners will be allowed the deduction of health insurance premiums on the business tax returns and schedules of the pass-through entities, rather than as adjustments to gross income on Form 1040.

8. There will be limitations on penalties for errors in tax reporting that disproportionately affect small business. Penalties for errors in tax reporting have been based on a fixed dollar amount and will now be on a percentage basis of the error itself.



Almost all of these new tax breaks are for this year only, so make sure to consult your accountant right away. And by the way, this article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. Again, for further information, please consult appropriate professional tax advice from your accountant. We have several in Sumner and surrounding counties.

More Time Management - Importance versus Urgency

Perhaps one of the simplest, yet most revealing concepts behind time management is importance versus urgency. Important items have a direct impact on your bottom line. They make you money and grow your business. Often, they are not glamorous or even pressing, but will have the most impact on your small business. Urgent items require immediate action, are visible, and often easy to do which gives us a sense of accomplishment. However, they usually have very little impact on our bottom line and can stagnate the growth in a small business.



Let’s take a look at Ava’s Catering Company to see how certain tasks in her business fall into important and urgent categories.

Important, Urgent

• A bid for a very desirable catering event needs to be submitted by the end of this week. This is a quality event and has a quick deadline. There is a tendency to ignore something like this, because the effort needed is heavy and just say “we’ll get it next time”.

Important, not Urgent

• Spending time at food service trade shows and other networking events that can assist in developing relationships with potential clients, other vendors, anyone else that can offer qualified referrals.

Not Important, Urgent

• Ava receives certain phone calls and emails that seem to need immediate reaction. If this is a customer with a specific issue take it, but in usually it is just someone else’s emergency. That call or email can be addressed at the end of the day.

Not Important, Not Urgent

• Facebook – Let me clarify. Facebook is a great marketing tool, it’s free, and becoming increasingly popular. However, just updating the status of your business, can easily send you into a four-hour research session to see “how that guy that was in the office next to yours, at that place you used to work, seven years ago, is doing”. This is fun, but IT IS NOT PRODUCTIVE. Yes, in theory he could become a customer, but be honest, he’s not. You just want to see how many kids he has. Update your business information and go back to work.

Take a look at the previous tasks. Where is most of your time spent? Remember the important ones result in revenue and the others result in stress. Take the time to identify the important tasks and spend your energy on them. The others need to be minimized, delegated, or just plain ignored.

Management Tips for Surviving the Economy

• Analyze the amount of inventory and other assets you have on hand. While you need products and equipment to make sales, you do not need an excess of either.

• Take this opportunity to focus on tasks that may include professional development and training or research and planning. If it is possible, you might even use this slow period for personal development, which will help you maintain the right attitude, while you begin to practice the other tips mentioned previously.

• High employee productivity is essential in poor economic times. You may need to look at your business and identify “that isn’t in MY job description” attitudes and make adjustments. It often cuts across the grain with small business owners, but surviving with a few employees is better than failing with all employees.