June 2009 BTB Tax News Update

Change In Accounting Methods (SBTW Day 1 Topic)
Depreciation Errors in the Past? (SBTW Day 1 Topic)
Unrecaptured 1250 Gain – LTCG’s (SBTW Day 2 Topic)
Eased Health Insurance Deduction “S” Corporations (SBTW Day 2 Topic)
Other Topics to be Covered in the 2009 Small Business Tax Workshop

Change In Accounting Methods (SBTW Day 1 Topic)
Most changes in accounting methods require IRS approval and fees as much as $3,800. However, if you meet certain requirements there are automatic change procedures which allow you to file Form 3115 without IRS approval and the fees are also waived. If you are changing from a Cash Method to an Accrual Method Rev. Proc. 2008-52, Change Number 123 may apply. If you are changing from an Accrual Method to a Cash method Rev. Proc. 2008-52, Change Number 33 may apply. The specifics of the rules as well as completed forms and calculations will be covered extensively in SBTW Day 1.

Depreciation Errors in the Past? (SBTW Day 1 Topic)
Have you ever picked up a new client and realized depreciation previously claimed used an incorrect method, or missed a few years, or was simply calculated incorrectly? If the error was in an open year, simply go back and amend. What if the depreciation error affected a closed out year? Under Rev. Proc. 2008-52, 2002-9, 2002-19 & 2004-11 there is a catch up provision to correct all errors. When to report the adjustment is dictated by whether a positive or negative adjustment is required, as well as the amount of the adjustment itself. As an automatic change procedure, Form 3115 is exempt from IRS approval and fees. The specific rules, completed forms, and calculations will be covered extensively in SBTW Day 1.

Unrecaptured 1250 Gain – LTCG’s (SBTW Day 2 Topic)
Under current law, if the taxpayer has a LTCG and is in the 15% or lower tax bracket, that gain is taxed at 0%. If the taxpayer has Unrecaptured 1250 Gain is it not a LTCG? If the taxpayer is in a tax bracket greater than 25% the tax rate will be a maximum of 25%. If however, the taxpayer is in a lower than 25% tax bracket the 0% tax does not apply and taxes will be imposed at whatever tax rate the taxpayer is in.
Generally, the sale of a partnership interest will generate a LTCG. In some cases the sale of a partnership interest through a special look-through rule for Unrecaptured Section 1250 Gains applies. This can generally be avoided with redemption of the partnership interest (the seller stays the same the buyer is the partnership itself). This topic will be covered in SBTW Day 2 under partnerships.

Eased Health Insurance Deduction “S” Corporations (SBTW Day 2 Topic)
IRS Notice 2008-1 reverses the previous Headliner 163 in regards to health insurance provided S Corporation shareholder/employees. With the change, a shareholder/employee is now entitled to an above the line deduction even if the health insurance is held in the shareholder/employees name versus the company name.
Yes, that was a year ago so not so recent news! In order for this deduction to apply, specific rules must be complied with. That is where the problem begins. Health insurance is deductible if and ONLY if:
1. S Corporation makes the premium payment for the health insurance directly, or
2. S Corporation reimburses premium payments made by the employee during the current tax year.
Not complying with the rules above is where the deduction falls apart. This is covered in details with multiple examples in SBTW Day 2 under Employee Benefits By The Entity.

Other Topics to Be Covered In The 2009 Small Business Tax Workshop Include:
Cell Phones – Are they deductible for business use?
Business Sale – Allocating buyer and seller expenses Joint Venture or Partnership?
Investment Club Election Not to Be Taxed as a Partnership

Save Money: Register before the day of the seminar and save $25. As always, advance registration is strongly recommended. Walk-in registrations will be allowed only if seminar materials and space are available. However, due to additional charges incurred for seminar set-up, walk-in registrations will now be subject to an additional $25 service fee.

To read past "Tax Updates", visit BTB Income Tax Seminars' Newsletter Archive

Our Instructors:

Thomas Zoeller EA, CFP, MST	James Hockenberry EA	John Geigel JD, CPA	Jaye Tritz EA, CFP, ChFC

Disclaimer
This publication is distributed with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional advice and assume no liability in connection with its use. Tax laws are constantly changing; are subject to differing interpretation; and the facts and circumstances in your particular situation may not be the same as those presented here. Therefore, we urge you to do additional research and make sure that you are fully informed and knowledgeable before using the information contained in this publication.

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