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In my last
article I briefly discussed the in/outs of different business
forms ( Sole Prop; C-corp;
S-corp; Partnerships; etc.). As you may recall from that
article I believe that S-corp’s are still the most
beneficial form of doing business (even though the Attorneys
are all pushing L.L.C.’s). For those of you who have
not sought professional advice from your local C.P.A. I
urge you to do so ASAP. In order to establish/file with
the I.R.S. as an S-Corp. you have limited time constraints
dictating which year the “S” election will be
valid for.
It is a one time, revocable election, that must be made
by the 15th day of the third month of the corporation’s
tax year to be effective beginning with that year or the
election will not take affect until the following year.
File form 2553 by this due date to make the election. Please
note my CPA site is currently down. However you can always
reach me at my Luthier’s site www.siestakeyguitars.com
.
Jobs and Growth Tax Relief Reconciliation
Act of 2003
There are three main areas or provisions that are affected
by the Act. They are:
· Provisions relating to individuals
· Provisions relating to Investments
· Provisions relating to Businesses
I will discuss
the first two briefly and the Third in more detail in this
article.
Provisions Relating to Individuals:
*
Income Tax Bracket – under the new tax law
the 10% bracket has been expanded to apply as follows: Single
up to $6,000.; Head of Household up to $10,000.; Married
Joint up to $12,000. and Married Separate up to $6,000.
each.
*
Increase in Standard Deduction - Married taxpayers
get twice Single payers for a whopping total of $9500 in
2003.
* Child Tax Credit – If you are eligible
the credit increases from $600 per child to $1000.
* Advance payment of Child Tax Credit –
under prior law there was no such provision. Now, based
on 2002 income tax returns, taxpayers who were eligible
for credit in 2002 are presumed eligible for 2003. These
taxpayers will receive a check in 2003, in advance, for
the difference between the two years. This is important
information for filing your 2003 returns as this advance
payment will reduce the benefit on the 2003 return if received
in 2003. Likewise if eligible for advance payment and you
did Not receive the payment you will be allowed to take
the full credit.
Provisions
Relating to Investments:
·
Losses on Stock Sales – Regardless of the
holding period, capital gain losses will be treated as long
term. This is effective for stock sales which also had extraordinary
dividends which are taxed at new lower capital gains rates
and is effective prior to May 6, 2003 .
·
Capital Gains Tax Rates – the 20% bracket
gains are reduced to 15% and the 10% bracket gains are reduced
to 5%. These rates apply to capital gains recognized after
May 5, 2003 .
·
Dividend Tax Rates – The new law allows dividend
income to be taxed at the lower, more favorable capital
gains tax rates. This is effective after 2002. Taxpayers
in the 10% or 15 % brackets will pay only 5% on dividends
received. Taxpayers in the remaining higher brackets will
still save at by paying only 15% tax on dividends received.
·
Qualified Dividends can be treated as Investment Income
– taxpayers can now elect to treat qualified dividend
income as investment income. This means that investment
expenses that would Not otherwise be deductible can now
be offset/deducted against these dividends.
Provisions Relating to Businesses:
· Depreciation – the new law
increases the amount (section 179) that can be immediately
expensed from $25,000 to $100,000. This is a great opportunity
for those of you who are considering expanding your facilities/equipment
upgrades and need to get a nice deduction THIS YEAR. This
is true whether you are a Sole Proprietor or a Corporation
so make sure you tell your CPA about all those large purchases
you made through out the year.
·
Additional First Year Depreciation – The
2002 act had a provision which generously allowed a 30%
allowance of depreciation for first year property. This
same deduction has been increased to 50% for 2003.
·
Auto/Truck Depreciation – under new law auto/light
truck additional first year depreciation has been increased
from $4600 to $7650.This amount is in addition to the regular
first year depreciation that is allowable. So this is a
good time to replace that beat up pickup or other business
vehicle and receive a nice deduction THIS YEAR.
·
Corporate Tax Payments – Normally due 4/15,
6/15, 9/15, 12/15 (quarterly installments) the new law modifies
the amount due 9/15/03 to be equal to 75% of the total otherwise
due and the remaining 25% of estimated tax due 10/01/03
instead. So if you are charged late pay penalties apply
for a refund of those amounts if it the penalty was assessed
for the 9/15 quarter.
You now have a condensed/abridged version of most of the
2003 Tax Law changes. These are not complete changes; there
are many that were not discussed here. Contact your local
CPA as soon as possible. Timing is very important when it
comes to taking advantage of these laws. Year end and Beginning
year tax planning is also very important. Don’t miss
out on the new tax laws that may save you thousands of tax
dollars. In the mean time …
HAPPY LUTHERIE!
David
S Bland, CPA, Luthier, Musician and other things...
Contact me:
cpa@siestakeyguitars.com
snail mail to:
David S Bland, CPA, Luthier
2100 Constitution Blvd. Suite 118
Sarasota, Fl. 34231 |
