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Small businesses and tax changes

Everyone agrees that small businesses are one of the key drivers of America's economy. One of the challenges they face, however, is keeping current with constant tax law changes.

This year is no exception. When small business owners file their taxes in the early months of 2013, they will have to take account of a host of changes that were effective this year.

The IRS pays at least lip service, of course, to providing explanations of the changes. But small business owners have limited time to devote to perusing the IRS website to track these changes. Translating the tax language into plain English can also be a bit daunting.

The constant changes underscore how important advice from experienced tax professionals can be.

To be sure, some of the changes are merely routine. The IRS conducts a review every year of deduction and tax credit limits. The agency then adjusts these limits to reflect inflation and other economic factors.

Other changes, however, are more specific in nature. They depend on legislation passed by Congress.

For example, in 2008 Congress passed a tax law that mandated a change in how third-party payment processors such as PayPal make their payment reports to the IRS. These third-party processors are required to report payments that are greater than $20,000 and involve more than 200 transactions.

This year, the IRS specified that small businesses have to provide greater detail on their 1099-K forms regarding third-party processor payments. Earnings received from third-party processors have to be broken out from other earnings.

This is only one example. There are a number of others, concerning topics that include depreciation and retirement plans, among others.

Source: "6 Small Business Tax Changes For 2012," SFGate, Tim Parker, 11-14-12

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our Texas business income tax page.

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