Tax Law Changes 2006
1.Depreciation and Section 179 Expense
The maximum section 179 deduction you can elect for property you placed in service in 2006 has been increased to $108,000 for qualified section 179 properties. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $430,000.
2. Social Security and Medicare TaxesFor 2006
The employer and employee will pay:
- 6.2% each for social security tax (old-age, survivors, and disability insurance), and
- 1.45% each for Medicare tax (hospital insurance).
Wage limits - For social security tax, the maximum amount of 2006 wages subject to the tax has increased to $94,200. For Medicare tax, all covered 2006 wages are subject to the tax.
3. Self-Employment Tax
The self-employment tax rate on net earnings remains the same for 2006 - 15.3% (12.4% for social security and 2.9% for Medicare).
The maximum amount subject to the social security part for tax years beginning in 2006 has increased to $94,200. All net earnings of at least $400 are subject to the Medicare part.
4. Standard Mileage RateFor 2006
The standard mileage rate for the cost of operating your car, van, pickup, or panel truck for your business is 44.5 cents a mile for all business miles driven.
Tax Calendar for Small Businesses
By February 1 - give annual information statements to recipients of certain payments you made during the previous year. You can use a copy of the appropriate version of Form 1099 or other information return. Payments that are covered include:
1. Compensation for workers who are not considered employees (including fishing boat proceeds to crew members)
2. Dividends and other corporate distributions
4. Payments to attorneys
5. Payments of Indian gaming profits to tribal members
6. Profit-sharing distributions
7. Amounts paid in real estate transactions
9. Prizes and awards
10. Medical and health care payments
12. Amounts paid in broker and barter exchange transactions
13. Retirement plan distributions
14. Original issue discount
15. Debt cancellation (treated as payment to debtor)
16. Cash payments over $10,000. (See instructions for Form 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business)
By March 1, file information returns (Form 1099) for certain payments you made during the previous year. These payments are described under February 1. There are different forms for different types of payments. Use a separate Form 1096 to summarize and transmit the forms for each type of payment. See the current year's Instructions for Forms 1099, 1098, 5498, and W-2G for information on what payments are covered, how much the payment must be before a return is required, what form to use, and extensions of time to file.
File your calendar year income tax return (Form 1120S) and pay any tax due by March 15. Provide each shareholder with a copy of Schedule K-1 (Form 1120S), Shareholder's Share of Income, Credits, Deductions, etc. or a substitute Schedule K-1. If you want an automatic six-month extension of time to file the return, file Form 7004 and deposit what you estimate you owe.
If you were given an automatic six-month extension, file your calendar year income tax return (Form 1120S) and pay any tax due by September 15. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.
To elect S corporation status, file Form 2553, Election by a Small Business Corporation, by March 15 to choose to be treated as an S corporation, beginning with current calendar year. If Form 2553 is filed late, S treatment will begin with the next calendar year.
File your calendar year return (Form 1065) by April 15. Provide each partner with a copy of Schedule K-1 (Form 1065), Partner's Share of Income, Credits, Deductions, etc., or a substitute Schedule K-1. If you want an automatic three month extension of time to file the return and provide Schedule K-1, file Form 8736. Then file Form 1065 by July 15. If you need an additional three month extension, file Form 8800.
If you were given an automatic three-month extension, file your calendar year return (Form 1065) by July 15. Provide each partner with a copy of Schedule K-1 (Form 1065), or a substitute Schedule K-1. If you need an additional three month extension, file Form 8800.
If you were given an additional three-month extension, file your calendar year return (Form 1065) by October 15.
Electing large partnerships
To elect large partnership status, provide each partner with a copy of Schedule K-1 (Form 1065), Partner's Share of Income Credits, Deductions, etc., by March 15 following the close of the partnership's tax year. The due date of March 15 applies even if the partnership requests an extension of time to file the Form 1065-B by filing Form 8736 or Form 8800.CAUTION! As this was being prepared, Congress was considering legislation that would make this requirement effective for partnership tax years beginning after December 31, 1997.
For fiscal year tax payers
If you use a fiscal year (rather than a calendar year) as your tax year, you should change some of the dates in the general tax calendar. Use the following general guidelines to make these changes.
Form 1065 is due on the 15th day of the fourth month after the end of the partnership's tax year. Provide each partner with a copy of Schedule K-1 (Form 1065), or a substitute Schedule K-1.
2. Corporations and S Corporations
Form 1120 and Form 1120S (or Form 7004) are due on the 15th day of the third month after the end of the corporation's tax year. S Corporations must provide each shareholder with a copy of Schedule K-1 (Form 1120S), or a substitute Schedule K-1.
Estimated tax payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.
Form 2553, used to choose S corporation treatment, is due by the 15th day of the third month of the first tax year to which the choice will apply or at any time during the preceding tax year.