W-2 reporting of health costs optional for 2011
The IRS and the Treasury are giving employers additional time to adjust payroll systems and procedures to meet the requirement to include the cost of employer-sponsored health coverage on employees' W-2 forms. This reporting requirement was mandated in the 2010 health care reform legislation and was scheduled to take effect with the issuance of W-2 forms for 2011.
Reporting the cost of coverage will be optional for Forms W-2 issued for 2011. Employers who fail to report the cost of health coverage for their employees will not be subject to penalties. The IRS notice included a reminder that the reporting requirement is for informational purposes only. The amount reported on an employee's W-2 is not taxable income to the employee.
It's time for year-end business tax planning
You've guided your business through a tough economic climate and kept it profitable. Now it's time to turn your attention to tax planning so you can keep those profits in your pocket.
Here are three 2010 tax-cutting moves to consider.
* Section 179 deduction. If you purchased business equipment or vehicles - or intend to before year end - increased Section 179 expensing can help your cash flow.
Section 179 provides a write-off of up to $500,000 of the cost of new or used assets placed in service during your 2010 tax year. The amount you can deduct is limited when annual asset purchases exceed $2 million.
* Bonus depreciation. In addition to Section 179, you can claim bonus depreciation, which gives you a deduction of up to 50% of the cost of new assets. Used assets don't qualify.
When you buy equipment eligible for both tax breaks, you first reduce the initial basis by the amount of Section 179 deduction claimed, then apply the bonus percentage to the balance. Any remaining cost is expensed over the asset's life.
Bonus depreciation is scheduled to expire December 31, 2010.
* Health insurance. To establish your deduction, have your S corporation reimburse you for medical, dental, and certain long-term care insurance premiums that you paid out-of-pocket. Be sure your S corporation issues a 2010 Form W-2 "Wage and Tax Statement" that includes the premiums.
Other year-end planning includes taking advantage of credits for energy-efficient building improvements, making sure you qualify for the home office deduction, and scheduling corporate distributions. Please contact our office for guidance soon in order to maximize your tax savings for 2010.
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