Tree Farmer - January/February 2011 - (Page 24)

By Wang LINdA Stay Current on Income Tax Law Changes This article provides tax tips for woodland owners and their tax advisors in preparation of the 2010 individual tax return. please be aware that the information presented here is not legal or accounting advice. Consult your legal and tax advisors for more complete information. taxing issues 24 The health care reform legislation that was passed in March 2010 includes a new tax reporting requirement for businesses. Starting in 2012, a Form 1099 will be due to the IRS by any business that makes a payment of more than $600 in a calendar year to a single payee, including corporate payees (Sec. 6041). For a hypothetical example, if timber business owner Steve pays $650 to Home Depot for his Tree Farm supplies, Steve will be required to file a 1099 report on the payment to the IRS and the payee. Prior to this new change, Steve would not have had to file the report as the payee, Home Depot, is a corporation, which is exempt from reporting. The new law eliminated the reporting exemption for corporate payees (unless the payees are tax-exempt) and requires 1099 reporting for payments to corporations by all businesses. Businesses must collect a taxpayer identification number from payees. Failure to comply with the International Year of Forests, 2011 1099 reporting is subject to penalties. The new law is effective for payments made after December 31, 2011. 50 percent bonus Depreciation extended A 50 percent bonus depreciation refers to the additional depreciation of 50 percent of the costs of qualifying property a taxpayer may claim in addition to the regular depreciation and the Sec. 179 expensing. The Small Business Jobs Act of 2010 extended this to 2010 only. expensing Limit Increased The Small Business Jobs Act of 2010 enacted in late September 2010 contains two tax changes on property depreciation deductions: Sec. 179 and bonus depreciation. Generally, Sec. 179 allows business taxpayers, with set limits, to expense the costs of property in the year of purchase, rather than taking an annual depreciation deduction over the property’s useful life. Qualified 179 properties include depreciable tangible personal property purchased for use in the taxpayer’s trade or business (Code Sec. 179(d)(1)). Sec. 179 limits the maximum amount of expensing allowed and the total amount of qualifying property before the expensing amount is reduced. • The maximum amount of Sec. 179 expensing is increased by the Small Business Jobs Act of 2010 to be $500,000 for 2010 and 2011. The previous limits were $250,000 and $125,000 for 2010 and 2011, respectively (Code Sec. 179(b)(7)). • The act also raised the threshold that starts to reduce the Sec. 179 expensing to $2,000,000. Previously this limit was set to be $800,000 and $200,000, for 2010 and 2011, respectively. 2013: new Taxes of 3.8 percent Starting in 2013, a new tax of 3.8 percent is imposed on the lesser of: (1) an individual’s net investment income, or (2) any excess amount of adjusted gross income (AGI) over the threshold amount (Sec. 1411). The threshold amount is: • $250,000 for joint filers and surviving spouses • $125,000 for couples filing separately • $200,000 for any other cases So the investment income is taxed under this new 3.8 percent law when the taxpayer’s AGI is below the threshold amount. For example, Susan and Mark have an AGI of $100,000 in 2013 and $4,000 in investment income Linda Wang is a national timber tax specialist with the U.S. Department of Agriculture’s Forest Service, based in Washington, D.C. Tree Farmer JANUARY/FEBRUARY 2011

Table of Contents for the Digital Edition of Tree Farmer - January/February 2011

Tree Farmer - January/February 2011
Contents
Cover Story
2010 Northeast Regional Outstanding Tree Farmer of the Year Sponsored by STIHL, Inc.
Managing Risk in Agritourism
Taxing Issues
Woodland Security
Wildlife Matters

Tree Farmer - January/February 2011

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