Jobs bill includes tax changes
Business write-offs were extended through 2010, and foreign accounts will face more scrutiny.
The $18 billion job creation package, the Hiring Incentives to Restore Employment (HIRE) Act, officially known as H.R. 2847, was signed into law March 18. The measure was approved by the Senate, 68-29, and by the House, 217-201.
The bill's primary provisions encourage businesses to hire and keep workers. But there are a couple tax provisions of note.
Business write-offs continued: First, the previously expanded Section 179 expensing rules that expired on Dec. 31, 2009, have been extended retroactively through 2010.
Section 179 gives businesses the option to write off some expenditures in one tax year rather than depreciate them over several.
The enhanced expensing rules had been in effect since 2008. If Congress had not continued them, this year (and beyond) businesses would have faced a $125,000 limit with with a $500,000 cap.
But under the now-continued provision, small businesses will be able to use the $250,000 limit and the increased phase-out threshold of $800,000.
Foreign accounts targeted: To help pay for HIRE costs, folks who have money in non-U.S. accounts will face more scrutiny and tax requirements.
International finance reporting provisions that were originally introduced as the Foreign Account Tax Compliance Act of 2009 (FACTA) were added to the jobs bill.
This includes a 30 percent withholding tax on income from U.S. financial assets held by foreign financial institutions unless the institutions have agreed to disclose certain American account holders. The foreign banks also must provide an annual report of the account balance, gross receipts and gross withdrawals of the U.S. account holders.
Owners of such accounts have to report on their tax returns such assets worth over $50,000. The IRS also can now impose a 40 percent penalty for understatements of income in an undisclosed foreign financial asset.
And if a taxpayer fails to report an amount that exceeds 25 percent of income from a foreign account, tax investigators now have six years to investigate.
Related reading from Don't Mess With Taxes:
- Congress to IRS: Halt small biz penalties
- Offshore tax amnesties are international
- Tax carrot + stick nab 14,700 scofflaws
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