Category Archives: Accounting

Changes to the 504 and 7(a) SBA Loan Programs

SBAThe Small Business Administration announced proposed changes to the 504 and 7(a) SBA loan programs this week, saying the tweaks would help streamline the application process and expand access to the programs.

The two SBA loan programs that would be affected by the proposed changes are the 504 and 7(a) programs. The 504 SBA loan program provides long-term fixed asset financing to small businesses, to be used for buying or improving land, buildings or equipment. The 7(a) SBA loan program aims to assist eligible small businesses in accessing credit when they are unable to do so elsewhere.

Both programs’ ultimate aims include facilitating job creation.

“Streamlining and simplifying has been a key focus of our agency over the last few years,” the SBA’s Karen Mills wrote in a press release. “The changes are the latest steps to reduce paperwork burden, with our eye on the larger goal of expanding access to capital and giving entrepreneurs and small business owners the financial resources to grow and create jobs.”

The proposed changes announced by the SBA include eliminating the personal resource test, which requires potential borrowers to “obtain a maximum level of personal finance resources.” Additionally, the SBA is proposing a revision to the rule on affiliation, which currently blocks potential applicants from obtaining loans under size standards, due to affiliations with other companies.

The proposed changes would also reduce the paperwork requirements for both loan programs and eliminate the “nine-month rule” for the 504 program, which limits businesses to including in their 504 project application expenses that have occurred only in the nine-month period prior to the date of application.

Lastly, the SBA is suggesting an increased accountability for the Certified Development Companies (CDCs), which are the “community-based partners for providing 504 loans,” as described on the SBA’s website.

10 Tips for Small Business Owners to Close 2012 and Get Organized for 2013

It’s that time of the year again when it’s out with the old and in with the new. This month is the ideal time to clean out business files to get a fresh start for the new year and get paperwork organized. Here are some tips to help small business owners get ready to file their 2012 taxes and get ready for 2013:

Family Businesses Should Plan Now for Rising Gift Tax

The 2010 law governing gift and estate taxes is set to expire at the end of this year. For 2013, assuming Congress does not act, the lifetime limits on gift tax will fall from $5.12 million to $1 million. That means an individual can gift, over his lifetime, no more than $1 million tax-free starting in 2013. The top gift tax rate on amounts of more than that $1 million threshold is also scheduled to rise from 35 percent to 55 percent starting next year.

Read more

How Form 1099-K Affects Americans With Overseas Businesses

If you are living outside the U.S. and using a foreign address on your credit-card and electronic payment accounts, you will probably not be issued the new 1099-K tax form, says Barbara Weltman, a New York-based tax attorney and author of J.K. Lasser’s Small Business Taxes 2012. In the instructions governing 1099-K reporting, the IRS specifically exempts payment processors from having to report transactions made to payees with foreign addresses. (I took a look at what the new rule means for businesses in the U.S. in a previous column.)

Of course, if your accounts are set up under a U.S. address, you will get the form. And either way, if you are a U.S. citizen you must file a Form 1040 and pay federal taxes on your income, regardless of where it comes from, says Wonsun Willey, a tax partner in the Morgan Hill (Calif.) office of CPA firm Sensiba San Filippo. Depending on whether you own property or have business interests in specific states, you may also be required to file state tax forms, Willey says.

Read more

Look Out, Here Comes the 1099-K

Starting in January 2012, business owners will begin getting new tax forms issued by their credit-card and online-payment processors and intended to keep businesses from hiding income. The form, called 1099-K, will document all 2011 transactions processed for sellers with more than 200 transactions and $20,000 in annual gross receipts. The IRS estimates that 53 million forms will be issued by such processors as eBay, PayPal, and Amazon as well as credit-card companies, says Steven Aldrich, chief executive officer of Outright.com, which makes online bookkeeping applications for self-employed people and small business owners. Aldrich spoke with Smart Answers columnist Karen E. Klein about how small business owners should handle the new forms.

The new 1099-K requirement was signed into law by President George W. Bush in 2008 but is just now taking effect. Why is the government mandating this?

Read more

Who Should Take a Home-Office Tax Deduction?

According to data compiled in tax year 2009, more than 4 million Americans claimed the home-office deduction on their tax returns. That’s about 3 percent of the total 140 million returns filed in 2010. The number is likely to increase this year, with business startup rates having increased substantially in 2011.

Kathy Pickering, executive director of the Tax Institute, research and analysis division of tax-services provider H&R Block (HRB), says the average home-office deduction is valued at more than $2,600. Yet many taxpayers are unclear about how to claim the deduction, or they worry that if they do, they’ll face an IRS audit. Pickering says that although the home-office deduction is scrutinized closely, it should be used by those who are eligible.

Read more

When a tax audit isn’t an audit, and why you should care

In 2010, the IRS audited 1.0% of taxpayers. For middle-income taxpayers, the percentage was even lower. Only 0.6% with adjusted gross income of $25,000 to $75,000 were audited, according to the IRS.

But traditional audits are just one way the IRS enforces the tax laws. Increasingly, the IRS is relying on what IRS Taxpayer Advocate Nina Olson calls “unreal” audits. These typically come in the form of a letter alerting you to errors or omissions on your return. While these audits are less intrusive than full-scale audits, they can still cost you real money.

Read more

More Tax-Law Changes for 2012

Here are a few more:

  • Federal income tax-bracket  For a married couple filing a joint return, the taxable-income threshold separating the 15% bracket from the 25% bracket is $70,700 for this year, up from $69,000 for 2011.
  • The standard deduction is up slightly. For singles, the basic deduction amount for this year is $5,950, up from $5,800 last year. For married couples, it’s $11,900, up from $11,600 in 2011. There are additional amounts for those who are 65 or over, blind or both.
  • The  dependent exemption is $3,800 for 2012, up by $100 from 2011.
  • The maximum  earned income tax credit for low- and moderate-income workers and working families rose to $5,891 for 2012, from $5,751 in 2011. The maximum income limit for the EITC rose to $50,270 from $49,078 in 2011.
  • The foreign earned income exclusion  rose to $95,100 from $92,900 for 2011.
  • The IRS’s optional standard mileage rate for using your car for business remain unchanged at 55.5 cents for 2012.  Drivers have a choice of using this rate or deducting the business portion of actual expenses.

New year will bring new laws and regulations for small businesses

In California, the new rules include limits on the ability of businesses to check the credit reports of workers and job seekers. Nationwide, tax deductions for equipment purchases will be sharply reduced.

Small-business owners will be greeted Jan. 1 with dozens of new laws and regulations.

In California, they will include new mandates concerning employees, including a partial ban on checking the credit reports of workers and job applicants.

And it’s no surprise that there are changes at the federal level too.

Here’s a guide to some of the new laws and regulations set to go into effect in 2012.

  • Federal Taxes changes
  • New federal accessibility  rules
  • New California laws

Read more