Winter Update 2008 - Special Tax Edition

It's time once again to dig out your old receipts and start crunching numbers to square things up with Uncle Sam. While we can't promise that we can make tax time less tedious, we have put together some resources to help make it more rewarding - from NOLO.com's list of top business deductions to recent changes in the tax law you should know for 2008.

** Remember to always check with a certified tax professional or CPA to answer any specific tax questions.

Small Business Tax Deductions Explained
How to Find and Hire a Reputable Tax Professional
Tax Amnesty Program for Illinois Businesses
Tax Change Makes 2008 A Good Year to Invest in Your Business
Small Business Tax Incentives

Small Business Tax Deductions Explained

Tax deductions lower your tax bill by reducing your taxable income, so the more you can (legitimately) take, the less you will owe. But how do you know if you can take something as a deduction or not? And how can you be sure you aren't missing any?

First of all, there are some no-brainer deductions that many small businesses qualify for, such as:

  • office equipment,
  • home office,
  • vehicle expenses,
  • health care premiums, etc.

Beyond these the IRS states that for an expense to be deductible it must be "neccessary and ordinary" or if you still aren't sure consider using the "laugh test" - can you write off an item without laughing first?

On its website, NOLO.com, offers guidance on Understanding Small Business Tax Deductions and also offers a list with explanations for the Top Small Business Tax Deductions so that you can be sure you are maximizing your tax savings!

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How to Find and Hire a Reputable Tax Professional

If the last article made you feel like you are in over your head, it may be time to consider hiring a CPA to help with this year's taxes. Before you start your search for a tax professional, however, make sure to read The Washington State Attorney General's tips for finding a reputable tax preparer.

  • Ask your friends and coworkers to recommend a preparer they know and trust and choose someone local, so that you can easily find the person later. Ask questions related to the person's credentials and experience.
  • Choose a preparer who will assist you if the IRS audits your return. Only attorneys, Certified Public Accountants and IRS enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals. Also, know how the preparer checks returns for accuracy.
  • Find out if the preparer is affiliated with a professional organization that provides or requires its members to pursue continuing education and holds them accountable to a code of ethics.
  • Search the [Illinois Board of Examiners Web site] to determine whether a CPA is licensed and call to inquire if a CPA has a history of violations. You can check out attorneys through the [Illinois] Bar Association and enrolled agents through the IRS Office of Professional Responsibility. The Better Business Bureau is also a good resource for determining whether a tax preparer has a history of complaints.
  • Ask who will prepare your return. Avoid firms where your work may be delegated down to someone with less training or an unknown worker.
  • Inquire about costs. Be skeptical of preparers who claim they can obtain larger refunds than other preparers, or who guarantee results or base fees on a percentage of the amount of the refund.
  • Once you’ve hired a preparer, be sure to review the return carefully before you sign it in ink; never sign a blank or partially completed form. The preparer must also sign the return and include an identifying number. Retain copies of all documents.

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Tax Amnesty Program for Illinois Businesses

The Illinois Secretary of State's Office has just announced an amnesty program for Illiniois businesses that have fallen behind on state franchise taxes and licensing fees. The amnesty is through March 17 for businesses that are delinquent on annual corporate filing fees and franchise taxes. Amnesty includes taxes, fees, interest and penalties, as well as immunity from civil or criminal prosecution by the Secretary of State's office.  After March 17, the interest rate on delinquent payments doubles from 1 to 2 percent.

This is the first time amnesty has been offered for corporate filing fees and franchise taxes. If your company has fallen behind, now is the time to act. Contact the Illinois Secretary of State's Office at (800) 252-8980 for more information.

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Tax Change Makes 2008 A Good Year to Invest in Your Business

The Economic Stimulus payments the government will soon be sending to individual tax payers has been making headlines, but an overlooked part of the stimulus package is a one-time change to Section 179 for businesses.

Previously under Section 179, businesses were able to treat the cost of property/equipment as an expense and deduct up to $125,000 for equipment placed into service in a given tax year. This year, the limits on purchases has doubled to $250,000 and businesses can take a bonus 50% depreciation on amounts above the limit. Without the change to Section 179 businesses could only have expected the deduction limit to increase to $128,000.

Let's do the math. If a company purchases or leases equipment for $500,000, it could deduct $250,000 up front and an additional $125,000 for the amount over the limit. It also qualifies for a regular first year depreciation deduction of $25,000 making the total deduction for 2008 equal to $400,000. Presuming the business is in the 35% tax bracket, the business could expect to save $140,000 on the overall price of the equipment.

If you have been considering buying equipment for your business 2008 is the year to do it. The change to Section 179 is temporary and the deduction limits are expected to decrease in 2009.

You can read more about the change to Section 179 on the IRS' website or consult your accountant.

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Small Business Tax Incentives

The Govermental Partnership for Economic Development recently released its first Business Incentive Resource Guide to help companies in and around Cook County identify tax incentives at all levels of government - city, county, state and federal. This guide summarizes the various incentives to make it easy for companies to know if they qualify and provides links and contact numbers for parties looking for more information. You can read the Incentives Guide on CCV's website at http://chiventures.org/docs/BusinessIncentives.pdf.

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Board of Directors   Staff
President
   Co-Presidents
Derrick Collins Kellogg School of Management   Susan Alnaqib & Anita Hollins
Vice-President   Gail Bell
Steve Lawrence Attorney-at-Law   Hussain Bhanpuri
Secretary & Treasurer
   Hans Bonner
Torrence Moore LaSalle Bank Manjima Bose
Vachon Harper-Young Harris Bank   Doug Cannon
Leon Jackson Bill's Shade & Blind Service   Aarti Gopal
Joseph Kennedy Harris Bank   Kate Jones-Smith
Nissa Kochmer NLK Consulting   Wil Martin
Kimberly Magazine Magazine Professional Services   Joshua Punchur
Kenneth McGhee City of Chicago, Department of Children and Youth Services   Diane Rodak-Salinas
Clifford Perry Fifth Third Bank   Bryan Stubbs
Kimberly Richardson Westside Business Improvement Assoc   Duane Wadlington
Jeffery Roberts JB Roberts Insurance/Allstate    

Funding Partners

Minority Business Development Agency, U.S. Department of Commerce
CDFI Fund, US Treasury Department Jacob G. Schmidlapp Trusts, Fifth Third Bank Trustee
Drinker Biddle Gardner Carton The Private Bank and Trust Company University of Chicago, Graduate School of Business CNA Foundation