MarketWatch:

The IRS’s online filing system is up and running on time. No last-minute bits of legislation to change the whole playing field. What’s the big news this year? Lots of free advice and better question paths in all services.

About 145 million tax returns were filed last year. The IRS estimates that over 70% of taxpayers are eligible to file for free using the Free File Alliance program or the Free File Fillable Form system.

With that system, skilled computer adepts can avoid commercial tax firms. This no-frills system doesn’t integrate with any state filing systems. It’s useful for folks who are either in a state without a state income tax, or a state with an online tax-return system.

Meanwhile, under the Free File Alliance program, 15 companies offer free federal tax returns to taxpayers with income under $57,000. Each provider has different age and form restrictions and other conditions. Most service all states. But some don’t. For instance, ezTaxReturn.com says it covers “any state, except…” — then lists 30 states it doesn’t service. Read more.

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New York Daily News:

No tax question is too tough for New York’s top accountants, and Your Money is putting them to work for you — for free.

The annual Daily News Tax Hotline is returning this week to assist filers. An all-star team of certified public accountants will be on hand tomorrow, Wednesday and Thursday, from 10 a.m. to 4 p.m., to take your calls and reply to your blog posts and e-mails.

To get help, call (212) 210-2044, visit nydailynews.com/money or write to tax@nydailynews.com.

The Daily News is partnering again on the Tax Hotline with the New York State Society of Certified Public Accountants, whose members have helped thousands of Daily News readers over the years.

“This is a wonderful opportunity for consumers to obtain free tax advice from top tax professionals,” said Sharon Sabba Fierstein, president of the society. “Our members have expertise in federal and state tax issues to respond to questions on any level.”

Your Money Editor Scott Wenger added: “In a tough economy, every legitimate deduction is crucial. Many readers don’t realize they may qualify for a refund.”

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BusinessWeek:

Here’s a welcome report for entrepreneurs this new year: President-elect Barack Obama’s massive stimulus plan is expected to include three key tax breaks for small-business owners.

Details are still emerging, but the plan could include a longer window for businesses to “carry back” losses; an incentive to invest in machinery, equipment and other capital improvements; and a tax credit for job creation.

Here’s how it might work: If you experienced a downtick last year, you can claim a net operating loss or NOL, which is essentially when expenses exceed revenues. Current tax law allows you to use that NOL to offset the past two years’ income, which could win you an immediate cash refund. Under the Obama stimulus plan, that carry back period would be extended, allowing you to use that NOL to reduce the past five years’ tax bills. That’s “a big deal,” she says. “It allows you to get an immediate cash infusion that you can use to help you survive now.”

If you do get a cash refund, another proposed tax break might spur you to plow that money back into your business. The Section 179 (first-year expensing) deduction for purchases of new equipment or machinery is expected to increase to $250,000.

Currently, the limit for 2009 is $133,000.

Another piece of the Obama stimulus package could be a one-year tax credit for job creation. The president-elect has pledged to create 3 million new jobs to offset 2008’s steep losses. Republican Congressional leaders have indicated they would support tax relief, although size and scope would need to be worked out. The emergency package could be passed within weeks of Obama’s inauguration.

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Inc.com:

Captive insurance companies have been growing by leaps and bounds. A captive is an insurance company that insures the risks of its parent company. It is owned by a parent or, at times, by the shareholders of the parent company. The operating entity insures all or part of its risks with its captive company. The captive may reinsure some or all of such risks, or may retain such risks. The benefits of a captive may be many, but the primary goal is to retain the profit that would have been made by an outside third-party insurance company or to provide coverage where coverage would not be available.

There are many different types of captives depending on the needs of the parent company or its owners are, including Single Parent Captives, Association Captives, Group Captives, Agency Captives, and even Rent-a-Captive, among others.

Captives, like all insurance companies, have specific tax rules that allow them special benefits not available to other companies. An insurance company receives premiums, pays it expenses, and then invests the money it has retained, known as reserves, to pay for future claims. An insurance company receives an income tax deduction for almost all of its funds deemed reserves, and can invest and accumulate these funds. A regular corporation pays income tax on the funds it retains as profits. Yet, as the business of insurance requires the payment of future claims, the accumulation of funds is a necessity for being able to pay such claims.

The amount of reserves that a company can accumulate is determined by an actuarial calculation of the nature and amount of risks it covers, combined with the insurance rules as to the types of allowable investments for company reserves. There are restrictions upon what types of investments and what percentage of assets per investment may be made. The jurisdiction or state of the insurance company’s license will also have an effect on its operations and retentions.

A company owning a captive normally receives an income tax deduction for the payments it makes to such captive as an ordinary and necessary business expense within IRC §162. The captive receives such funds, pays its operating expenses and then deducts the allowable amounts of reserves it invests. If a claim is made the reserves are used to pay such claims.

A captive insurance company may provide an opportunity for a company that either self insures certain risks to have a current income tax deduction for payments to another entity it owns, or its shareholders own, that will provide the future funds for what would otherwise have been a non-deductible current assumption of risk. Read full article.

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Forbes:

Maryann, a home-based Web site administrator in Virginia, owns 11 computers: five desktop models in the formal office area, another in the basement, a laptop by her bed, another in the den, two more in the dining room and one in her purse.
“It’s a veritable showroom,” she says. Coming soon: a notebook for the sunroom.

It’s not that Maryann and her husband–who have been running the business since 1999 and who chose not to reveal their real names–have a compulsive computer-buying disorder. They want the tax deductions.

“At the end of each December, my husband and I look around and say, ‘We haven’t spent enough yet,’ ” she says. “Then we run out and buy things or do renovations. Of course, we keep detailed receipts. We save about $25,000 a year this way.”

It’s not just computers. The couple’s list of work-related write-offs has included an office massage chair, a Kindle (Amazon’s e-book reader) and even a mini refrigerator in the shape of R2-D2, the famously chirpy Star Wars droid.

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U.S. News & World Report:

Running a small business can be a life-consuming process, so sometimes small-business owners miss the forest for the trees. Maybe that’s why only about 16 percent of businesses with fewer than 50 employees in the United States have 401(k) plans. Small-business owners are so focused on developing their businesses that some do not realize that those assets can grow at a much faster rate for their retirement under the right plan. An October survey by ING DIRECT’s ShareBuilder401k, which designs 401(k) plans for small businesses, found that “not enough employees” was the top reason cited by small-business owners as to why they do not have a 401(k) plan. That’s despite the fact that even sole proprietorships with no other employees can have 401(k)’s.

Of course, that’s not to say that small-business owners can’t use other retirement plans like IRAs. But there are some unique benefits to 401(k)’s. In 2001, Congress changed the laws in a way that allowed self-employed people to put more money into their 401(k)’s. Today, a business owner under 50 with a 401(k) can invest up to $46,000 a year into the account, with up to $15,500 ($20,500 if over 50) coming from his or her own income, and then up to 25 percent of the business’s profits under the “profit sharing” provision. Regardless of the size of the profits, the total amount cannot exceed $46,000 (or $51,000 if you’re over 50), but that can make a huge difference. That $46,000 “can drop you a tax bracket,” says Stuart Robertson, general manager of Sharebuilder401k. “That is a great tax shelter for these folks.”

But if, like many small-business owners, you’re not very familiar with 401(k)’s, what do you need to know before you get your own plan started? Read on…

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… let’s grab a fistful of paper dollars. Think about stuffing them down a storm drain. Small businesses unwittingly throw money away — well, no. They actually send it to the government.

Droves of small-business owners overpay taxes because they don’t know the rules, they don’t take time to learn, they are too busy running the business, they have paperwork chaos.

Business offices need to identify transactions so the tax preparer has a fighting chance to get it right. I’ve seen the brown paper bag of receipts come to a CPA office. Hundreds of dollars worth of restaurant receipts for, well, who knows, crumpled in the bag.

To be deductible, slips need some identifiers. I’ve been taught to write the names of the people who ate, plus the business topics that were discussed on the receipts for those meals. And those receipts also need to show the date and the place where the meal took place.

Properly notated, all or most of those receipts in that crumped bag might have been deductible at tax time. But I was instructed to ignore them. They wouldn’t have passed an audit. Generally, only 50 percent of meal expense is deductible. You need to “stay tuned” to the tax laws and the information the preparer will need. Standard meal allowance may be used when traveling. Higher percentages are allowed for “hours of service,” defined by the federal Department of Transportation.

Where else is Ms. or Mr. Small Business throwing money away? The Internal Revenue Service allows 100 percent deduction for holiday parties, summer picnics for employees and employee/stockholder/director meetings. Also, entertainment and meals made available to the general public are 100 percent deductible. Read full article.

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Forbes.com:

1. Tax credits make it easy to get started: Businesses with fewer than 100 employees, but at least one besides the owner, qualify for a $500 tax credit to offset the administrative costs of the plan for each of the first three years, providing a cumulative savings of more than $1,500 to each business.

2. A tax shelter of $15,500, plus any matching: This amount is three times greater than what can be expected from a traditional IRA and also allows for a catch-up of an additional $5,000 for individuals 50 and older. Businesses that choose to match their employee’s contributions also gain additional tax-deferred savings on those amounts and can deduct matching from their company’s taxes.

3. Self-employed workers can shelter up to $46,000 annually: The Solo 401(k) is a great option for one-person businesses as it allows participants to: contribute $15,500 to their plan, and make additional employer contributions that defer up to $46,000 based on the amount they earn.

4. Profit-sharing that provides flexibility: A 401(k) can make it easier for employers to share their success with employees when they have good years and to a lesser degree or not at all during the lean ones. As an added benefit, profit-sharing is typically tax deductible up to 25% of the amount each business contributes.

5. New Roth 401(k) feature allows for after-tax contributions: That’s right. New regulations now enable small businesses to make after-tax contributions with no income level restrictions–unlike the popular Roth IRAs that have income limits that restrict eligibility. This means that employees with a Roth 401(k) will have the advantage of tax-free withdrawals, earnings and all, when they use these funds in retirement. Employers can choose to put all, part or none of their personal contributions into their Roth. The caveat here is that any company match you do must be made on a tax-deferred basis and not into your Roth.

Don’t let 2008 deadlines sneak up on you. To ensure maximum tax benefits in the year ahead, it pays to get started sooner than later. With that in mind, there are a couple important 401(k) deadlines to be aware of.

If you have employees and are willing to provide matching contributions, the “Safe Harbor” deadline is Sept. 15. A safe harbor match provides the best of both worlds: the ability to contribute the maximum allowed to your individual account and to avoid the time and hassles of government plan testing. Businesses not interested in matching or those that are self employed have until December to get set up.

While worrying about money is a year-round experience for most small-business owners, this time of year provides the perfect opportunity to alleviate some of the stress associated with taxes. Before businesses close their books on another tax season, they should take a look at some proactive ways to be better prepared for next April 15. A 401(k) is one way they can put their money to work for them. It’s a small investment in time that can pay big dividends now and when they retire.

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BizJournals:

A New York congressman has introduced a bill that would offer a standard $1,500 deduction to taxpayers who work out of an office in their homes.

The bill from Rep. John McHugh, a Republican, is backed by the National Association for the Self-Employed. It also has won the support of the U.S. Small Business Administration’s Office of Advocacy.

Taxpayers currently can take a deduction for home-office expenses if they use part of their home exclusively for business. But less than half of the people who would qualify for the deduction take it, according to the IRS’ taxpayer advocacy office, because of the law’s complexity and strict record-keeping requirements.

A standard deduction of $1,500, which would rise in future years along with inflation, could encourage more small-business owners to take the deduction, McHugh says in a release. It also would be optional, allowing business owners to continue to itemize their deductions if they want.

According to NASE’s Web site, this is the third effort backed by the organization to simplify the home office deduction. The previous two attempts failed amid concerns about revenue and taxpayer abuse.

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American Coin-Op:

While the tax rebates for individuals are getting plenty of media coverage, the economic stimulus package also includes tax relief for small-business owners. There are a couple of provisions that will help commercial laundry owners increase cash flow and lower life-cycle costs.

Todd Rice, director of financial services at Alliance Laundry Systems, recently addressed the state of our economy and its impact on the coin laundry industry, as well as beneficial aspects of the economic stimulus package.

Q: How has the current state of the economy impacted the vended laundry business?
A: While the economy certainly continues to be volatile, I don’t think it’s had much of an impact on this business. This is due in large part to a strong business model. Laundries are virtually recession-proof. Laundry is something we all need to do, and necessities don’t go away even in uncertain economic times.

Q: Are you seeing the volume of new-store development being impacted?
A: Alliance Laundry Systems’ financing has seen new-store development hold steady. But I expect we could see an upward swing not only in new stores, but store retools. I think in a declining real estate market and uncertain stock market, investors begin to explore alternative options.

Q: Doesn’t this counter what one would expect in our current economy?
A: Normally I would agree, but the Economic Stimulus Act of 2008 that was signed into law in February offers some outstanding incentives for new-store development and replacement of laundry equipment that many owners or potential investors may not be aware of. Simply, if you have a dated store with inefficient equipment or are pondering a second location, this may be one of the best opportunities in recent years to address your situation.

Q: What specifically in the stimulus package helps those in our business?

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Kansas City Star:

Small-business tax rule No. 1: Don’t mess with the Internal Revenue Service.

But that doesn’t mean you should cheat yourself. Take every legal deduction you can. Here are a dozen that even savvy small-business owners and entrepreneurs sometimes forget.

1. Home office
Concerned that claiming a home office deduction is tantamount to sending an engraved invitation to an IRS auditor? Don’t be, says Jan Zobel, author of Minding Her Own Business: The Self-Employed Woman’s Guide to Taxes and Recordkeeping.

“I don’t agree that chances of getting audited are greater with a home office deduction,” said Zobel, a San Francisco Bay area tax expert who specializes in serving the self-employed. The key is that you use the term “home office” the same way the IRS does. The tax agency says it must be a space devoted to your business and absolutely nothing else. Deducting the den that houses the family computer and serves as a guest bedroom won’t fly with Uncle Sam.

“If you only have one computer and you have a child over 4, the IRS is going to be pretty certain that the child is using the computer,” said Zobel. “And the burden of proof is on you.”

The deduction, however, isn’t limited to a full room. Your home office can be part of a room. Just how much of the space is deductible? Measure your work area and divide by the square footage of your home. That percentage is the fraction of your home-related business expenses — rent, mortgage, insurance, electricity etc — that you can claim.

2. Office supplies
Even if you don’t take the home office deduction, you can deduct the business supplies you buy. Hang on to those receipts, because these expenditures will offset your taxable business income.

3. Furniture
When your office supplies are more than just pens and paper, you have another tax-cutting opportunity.
Office furniture acquisitions provide a couple of choices. Deduct 100 percent of the cost in the year of the purchase or deduct a portion of the expense over seven years, also known as depreciation.

To take the whole cost in one tax year, you’ll use the Section 179 deduction (named for the part of the tax code where the law appears). Recent tax law changes have made this deduction even more attractive. For the 2007 tax year, a business owner can expense up to $125,000. The news is even better for the 2008 tax year. The economic stimulus bill enacted in February increased the Section 179 amount for this tax year to $250,000.

If you choose instead to depreciate the desks and filing cabinets, you can’t simply split the cost into equal portions over the depreciation period. Instead, you must use an IRS chart to make separate calculations each year.
Which is better for you? Anticipate the times that your business will need these deductions the most. Both options are reported on IRS Form 4562.

4. Other equipment… read on.

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Seattle Post Intelligencer:

Here’s a small business stereotype: a wild-eyed company owner, frantically filing for an extension of the income tax filing deadline.

Sure, there are many owners panicking as April 15 approaches, but there’s another, calmer group out there – owners who routinely and methodically file for extensions as part of their year-round financial planning. Many of these owners use extensions to give themselves more time to fund their employee retirement plans.

“Most of the extensions we see are for that very reason,” said Gordon Spoor, a certified public accountant in St. Petersburg, Fla. “It’s a cash flow consideration.”

An extension allows taxpayers – including company owners who file business returns along with 1040s – an extra six months until Oct. 15 to file their returns. Under the tax law, the owner doesn’t have to make a prior-year contribution to a retirement plan until the due date, including an extension, of his or her return.

And so many owners this year will take advantage of that extra time to determine how much money they can contribute for 2007. And the size of the contribution, in turn, can affect an owner’s tax bill.

Extensions also come in handy for members of a partnership. Read on…

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