Regulatory Changes for 2011 Affecting Taxes for Small Businesses

The New Year initiates tax reform. As such, small businesses will be confronted with several changes to our current tax policies, including a retroactive extension on certain temporary business tax incentives which expired in 2010, ability for small businesses to expense 100 percent of its capital investments, and implementation of a partial payroll tax holiday.

Additionally, new provisions have been enacted to provide small businesses tax credits – in other words, incentives notwithstanding their limitations and requirements – in order to persuade small business employers to purchase health insurance for their employees. Such tax credits are effective for the 2010 tax year carrying forward through to 2011. However, preexisting health insurance plans that were made effective prior to or on March 23, 2010 will be grandfathered. Grandfathered affords small business employers the opportunity to avoid the implementation of many of the new protections under the recent health care reform law. For employers and small businesses to remain grandfathered, employers cannot make any significant alterations to their employees’ health plans.

Furthermore, it is important to note that current economic conditions have led many states to take critical action in addressing budgetary issues. These states have or may contemplate impromptu tax increases or filing changes to taxes to raise state needed revenue.

Similar to state agencies, the Internal Revenue Service (IRS) is improving its enforcement efforts in a variety of areas to help collect more tax revenue during this time as the United States is dealing with budget deficits. In 2010, the IRS initiated an employment-tax audit program that concentrates on executive compensation, adherence to general employment tax filing requirements, fringe benefits, and employee misclassification, which will continue throughout 2011. In addition, it is accelerating its efforts to increase tax compliance for employees who generate an income through the collection of tips.

Tax policies, procedures, and laws are continually evolving andtherefore it is necessary to stay up to date with such changes in order to receive the most advantageous tax credits or deductions available to a particular individual or entity.


Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

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