Here are some trends to watch for in 2013.

1. Uncertainty About Tax Rules Could Linger

Congress continues to debate the fate of a number of expired or expiring tax rules impacting individuals and businesses. The tax rules for 2013 are anything but certain now and “taxmageddon” (an overall tax increase of about half a trillion dollars) is still a threat; this status could continue into 2013 unless there is a solution in Congress by December 31, 2012.

The income tax rates on individuals (the rates that apply to sole proprietors, partners, limited liability company members, and S corporation shareholders) for 2013 are unknown. It is possible that current rates could be retained for every other than “high-income taxpayers,” defined by President Obama as singles with income over $200,000 and joint filers with income over $250,000.

Another possibility is the extension of current rates for 2013, with the expectation that Congress will find a permanent solution to tax rates during 2013 that will start in 2014.

2. Affordable Care Act Rules Will Come Into Focus

The Patient Protection and Affordable Care Act (“Obamacare”) was enacted in 2010 and does not impose the mandate on individuals and large businesses for health coverage until 2014. However, the impact of the law will start to be felt tax-wise in 2013.

This is because two additional Medicare taxes come into play:

• 0.9% additional Medicare tax on earned income from wages or self-employment. The tax applies to earnings over $200,000 for singles or $250,000 for joint filers. This tax on high-earners will start to be felt later in 2013 as wages, bonuses, and business earnings start to exceed these limits.
• 3.8% additional Medicare tax on net investment income. This tax applies to the lesser of net investment income or modified adjusted gross income over $200,000 for singles or $250,000 for joint filers. This tax applies to income from passive investments, such as returns to “silent partners.” It does not apply to income from a business in which an owner actively participates.

3. The Corporate Tax Rate And Regime Could Change

As recognition of the global economy increases, the current rules for taxation of C corporations could be revised in one or two ways:

• Lower tax rates. Currently, the U.S. has the highest corporate tax rate of any developed country at 35%. During the campaign, President Obama suggested that the rate be dropped to 28% (and even lower for manufacturers). There is bipartisan support for lowering the corporate tax rate, but little consensus on how to pay for the rate reduction.
• Adoption of a territorial system. Currently, the U.S. has a “worldwide” system that taxes U.S. corporations on income earned both domestically and abroad. Many countries that compete with the U.S. have switched to a territorial system that, if applied here, would tax U.S. corporations only on its income earned within U.S. borders. According to the Tax Foundation:

“The territorial design thus equalizes the tax costs between international competitors operating in the same jurisdiction, so that all firms may compete on a level playing field, and capital may flow to where it can achieve the best after-tax return on investment.”

4. The IRS Will Look Closely at Write-Offs for Company Vehicles

In 2012, the National Research Program concluded a three-year project on employment tax compliance. It is now focusing on the findings. Already, the project has revealed companies are not reporting, either properly or at all, employee use of company vehicles. The IRS has indicated that it will look closely at reporting of and tax deductions claimed for the use of company vehicles.

5. Retirement Plans Will Come Under Greater Scrutiny

In 2011, the Department of Labor’s Employee Benefits Security Administration (EBSA) added 1,000 employees to conduct audits of qualified retirement plans. Noncompliance with tax rules can result in steep penalties on these plans. Their efforts in 2012 produced significant results. Expect to see audit activities increase, especially among smaller plans, including solo 401(k)s. These audits will likely focus on whether contributions were made on time and required 5500 forms were filed.

6 .Same-Sex Married Couple’s Tax Status Will Be Settled

Two federal appeals courts have struck down the federal Defense of Marriage Act (DOMA), paving the way for the U.S. Supreme Court to decide whether the federal ban on same-sex marriages is constitutional. Many expect the high court to decide the issue in its current term, which means there will be a decision by June 2013.

What does this means to business? If the Court says that same-sex married persons should be entitled to the same treatment as heterosexual couples, then all benefits programs will have to be revised to offer the same coverage for spouses of employees who are of the same sex. This will affect qualified retirement plans, education assistance programs, and other fringe benefit options. The resulting expansion of coverage will increase the cost for companies to some degree and could lead to changes in benefits that are offered.

7. Security Concerns Will Mount

Tax information has traditionally been one of the areas in which privacy has been absolute. However, with the unrelenting growth of identity theft, there is an increased concern about the protection of tax information.

Christopher J. Lee, senior attorney, National Taxpayer Advocate Service, said on October 25, that the IRS would issue identity protection personal identification numbers (IP PINs) to about 500,000 individuals for the 2013 filing season. This is double the number in the 2012 filing season. The PINs are computer-generated numbers issued to taxpayers who may have had their Social Security number and tax information co-opted by identity thieves.

8. There Could Be A Shift From S to C Corporations

Many small businesses are set up as S corporations to avoid the double taxation associated with being C corporations. In 2013, that preference may change because of the opportunity for equity crowdfunding (offering small ownership interests to investors via an online platform). Under the Jumpstart Our Businesses (JOBS) Act passed in the spring of 2012, corporations will be able to raise money from small investors up to $1 million without the cost and complexity of going public. Rules from the Securities and Exchange Commission (SEC) on equity crowdfunding are expected to enable capital raising to begin in early 2013. Because S corporations have a 100-shareholder limit, C corporations may become the entity of choice.

9. Worker Classification Continues To Be A Focal Point

The IRS, the Department of Labor, the National Labor Relations Board, and state agencies will continue to direct attention to proper worker classification. Some companies treat workers as independent contractors rather than employees as a way to avoid paying employment taxes and benefits (it saves an estimated 30% to classify workers as contractors rather than as employees). The government does not like this when classification fails to reflect the actual work arrangement; it loses money.

10. The IRS May Move To “Real Time” Audits

If you file a tax return today, the IRS usually has three years in which to initiate an audit. The delay in auditing results from the time needed to match information provided to the IRS, such as earnings reported on Form 1099-MISCs, Payment Card and Third Party Network Transactions, with the earnings reported on taxpayer returns. Under a real-time system, information would be provided electronically to the IRS before tax returns are filed, enabling the government to match information as returns come in. Since most returns (more than 80%) are filed electronically, matching can be easily automated.

Former IRS Commissioner Doug Shulman, addressing the American Bar Association in September, expressed hopes that shifting to a real-time system could be done soon. All that is needed is for Congress to approve the measure.

11. The IRS Will Launch A New Information-Matching Program

After 2012 returns have been filed in 2013, the IRS intends to start a pilot program for matching receipts reported on Form 1099-K, with income reported by businesses on Schedule C of Form 1040, Form 1065 (for partnerships and LLCs), Form 1120 (for C corporations), and Form 1120S (for S corporations).

Company Vehicle Photo via Shutterstock

The post Top Tax Trends For 2013 appeared first on Small Business Trends.

Which will win out in 2012? Much depends on what happens in the November elections. Until then, however, there are some important trends in taxes worth noting:

1. Taxes will remain a political football.
The wrangling in the Super Committee, which failed to reach a consensus by the November 23, 2011, deadline, demonstrates the ongoing political nature of taxes. As a general rule, Republicans are against raising taxes, while  Democrats want to raise taxes on the so-called wealthy (many of whom are small business owners). This acrimony is not likely to disappear.

Taxes will surely be a key issue in the presidential race. While it’s too early to tell who will be the Republican candidate, each contender has offered his or her own tax solution (www.atr.org/presidential-candidate-tax-plan-comparison-a6588). Here are some key points from a number of the candidates:

• Mitt Romney: Supports the Bush-era tax cuts, wants to roll back tax rates by 5 percent, and wants to eliminate the estate tax.
• Newt Gingrich: Opposes higher taxes (suggests an optional 15 percent rate, meaning taxpayers could choose the current system or his option), wants to eliminate the capital gains tax, favors tax incentives for R&D, and wants a 12.5 percent corporate rate and a 15 percent rate on small businesses.
• Rick Perry: Wants an optional 20 percent tax.
• Ron Paul: Favors a 15 percent corporate tax rate and a 35 percent tax on small businesses.
• Herman Cain: 9-9-9 plan (9 percent income tax, 9 percent corporate tax and 9 percent national sales tax).
• Michelle Bachmann: Supports the Bush-era tax cuts.

2. Tax audits are on the rise.
According to one KPMG survey, tax audits of businesses have increased. Corporate executives who were surveyed reported a 61 percent increase in federal tax disputes; 37 percent reported an increase in state tax audits.

What continues to be a popular audit topic is worker classification to determine whether a company is properly treating a worker as an independent contractor or whether the worker should be treated as an employee. The IRS is not alone in this endeavor; it is getting help from the U.S. Department of Labor and various states with which there are information-sharing agreements.

3. Uncertainty about health care rules remains.
The fate of the Patient Protection and Affordable Care Act of 2010 (“Obamacare”) is uncertain. The U.S. Supreme Court has agreed to hear a case brought by the NFIB and 26 state attorneys general involving the constitutionality of the law. It will hand down a decision by the end of June 2012. In the meantime, businesses must still deal with the law.

For small businesses, the key feature of Obamacare was the creation of a tax credit for helping to pay for employee health coverage. The credit was meant to be an incentive for small businesses to continue or increase their payment of health coverage for employees. The Treasury Inspector General for Tax Administration concluded that the credit has been a bust. When the law was passed, it had been expected that 4.4 million businesses would use it; as of mid-October 2011, only 309,000 had done so. The NFIB has suggested that the current credit be replaced with a new credit that is easier to understand and compute. There may be sentiment in Congress in 2012 to move toward a better small employer credit for health care.

4. Some favorable business tax rules will be extended.
Numerous tax rules are set to expire at the end of 2011. Likely, many will be extended, at least through 2012. However, action on extension may not occur until 2012 (i.e., extension will be retroactive to the start of the year). Some of the key provisions include:

• 100 percent bonus depreciation and up to $500,000 of first-year expensing (the Section 179 deduction).
• 100 percent exclusion for gain from the sale of qualified small business stock (stock in certain C corporations held more than five years).
• Research credit.
• Work opportunity credit for hiring individuals from certain targeted groups (only certain veteran groups are set to apply after 2011).

There is bipartisan support for the extension of various business tax breaks, and the American Growth, Recovery, Empowerment and Entrepreneurship (AGREE) Act of 2011 has been introduced by members from both sides of the aisle in Congress to see that this happens. It is too soon to predict whether the measure will be enacted.

5. State and local governments scrounge for new sources of revenue.
The federal government is not the only government thirsty for more revenue. Many state and local governments are in dire need and are looking for any way to raise revenue. A number of localities are turning to gambling in order to generate more revenue, and the Nelson A. Rockefeller Institute reports that gambling revenue is on the rise. Many are looking to institute online gaming. A bill to make New Jersey the first state to legalize online gambling was passed in the state legislature, but vetoed by Gov. Christie. The issue may be brought up again in New Jersey and in other states. Other states are expanding  gambling venues (e.g., historic Saratoga Raceway in Saratoga, New York, added slot machines).

6. Unemployment taxes will go up for some employers.
Employers in 20 states will be paying higher federal unemployment (FUTA) taxes. The reason: Their states borrowed from the federal government to pay for unemployment benefits and have not yet repaid the borrowed sums. As a result, employers in these states cannot use the full credit state unemployment taxes when figuring their FUTA liability. In 18 states (Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, Virginia and Wisconsin, the credit is reduced by 0.3 percent; in Indiana, the credit is reduced by 0.6 percent; and in Michigan, the credit is reduced by 0.9 percent.

7. Estate planning for business owners remains challenging.
The estate tax rules are fixed only through 2012. This means that after 2012, the rules are set to revert to pre-Bush-era rules. Instead of the $5 million exemption that applies for 2011 ($5.12 million in 2012), the exemption will be only $1 million. Many believe that estate tax is particularly harsh for small business owners. If they die with estates (including their business interests) that are valued at more than the exemption amount, their families may be forced to sell off business interests to raise the funds to pay the estate tax. Often this results in the demise of some family-owned businesses.

Expect to see renewed interest in abolishing the estate tax entirely (a platform of some Republican presidential candidates) or at least maintaining the current exemption level. As 2012 draws to a close, the debate likely will grow louder on the question of estate tax.

8. Filings will be almost exclusively online.
Starting with the 2012 tax season, paid tax return preparers are required to e-file client returns if they expect to file more than 10 forms in the 1040 series and/or 1041 (the income tax form for trusts and estates). Thus, almost all individuals who use paid preparers will have their returns filed electronically.

E-filing isn’t limited to personal income tax returns. Businesses can e-file employment tax returns. They usually must e-file returns related to their retirement plans and excise taxes, as well as for certain other federal tax purposes. This trend will surely continue.

9. Low interest rates will have an impact.
Due to low interest rates used by the IRS, such as for penalties for underpaying estimated taxes, there is less incentive to avoid the penalties. For example, the IRS interest rate charged on underpayments in the fourth quarter of 2011 and the first quarter of 2012 is only 3 percent. Thus, an owner of pass-through entity, such as an S corporation or limited liability company, who pays income tax on his/her share of business profits on the personal return likely will be paying less estimated taxes. Even if this results in an underpayment that is subject to penalty, the amount of the penalty (3 percent) is small compared with the value of retaining the cash that could be needed for cash flow.

Caution: Be sure to have sufficient funds available when it’s time to pay the balance of the taxes due. Failure to pay by the April filing due date triggers both penalties and interest.

10. The U.S. tax system will continue to become more and more complex.
According to one PWC report, America has a very complex tax system for business taxes. The U.S. ranks 69th out of 183 countries in complexity; it was 23 places better as recently as 2009. While other governments continue to reform their tax systems, ours continues to grow more complex as new tax rules are added year after year. The complexity serves as a disincentive for foreign capital to invest in U.S. companies. However, referencing the first trend in this article, politics and the compromises that it demands likely will help to keep the U.S. tax system complex.

Bottom line: Taxes will continue to be an important issue for small businesses in 2012. Hopefully, but not likely, advocacy groups and sanity will prevail to move toward simplification and lower taxes. However, stay alert to specific opportunities that could help you.

Image from NatashaBo/Shutterstock

The post Top 10 Small Business Tax Trends for 2012 appeared first on Small Business Trends.

1. More e-filing

In the 2010 income tax filing season (for 2009 returns), the number of returns filed electronically reached an all-time high. According to the IRS, 70.37 percent of individuals filed (or had their returns filed through paid preparers) electronically; e-filing should increase in 2011.

For businesses, electronic filing is required for large corporations (those with $10 million or more in total assets and that file 250 or more returns a year) and encouraged for small businesses. E-filing isn’t limited to income tax returns. Businesses are encouraged to e-file information returns and excise tax returns with the IRS and e-file their W-2 forms with the Social Security Administration.

Also, tax return preparers are now required by federal law to e-file client returns if they prepare at least 100 returns. The threshold will decline to 11 or more returns in 2012.

2. Taxes as a political issue

Tea Party candidates helped to bring tax issues to the fore in 2010. Expect this trend to continue in 2011, as the need for more revenue to reduce deficits continues to dominate the political conversation.

Tea Party sympathizers argue that reducing tax rates will help the economy and ultimately increase tax revenues. Many Democrats have argued that “fairness” dictates higher taxes be imposed on wealthier taxpayers. A new Congress in 2011 will debate tax reform. One proposal likely to be introduced early on by some Republicans is the “Fair Tax,” which would include abolishing the IRS and creating a national sales tax. A Fair Tax video explains what this tax would mean.

3. More IRS tax audits

As part of the government’s fiscal year 2011, the IRS requested a 5.33 percent increase in enforcement activities—investigations, examinations and collections. Since the government continues to operate on a temporary basis, actual figures for allocations to the IRS for FY 2011 are not yet set.

4. Continued uncertainty about health-care rules

The fate of the massive health care package enacted last March remains in doubt.

• Courts have entertained the argument that the mandate for all individuals to carry health coverage is unconstitutional; a federal district court in Virginia agreed that it is unconstitutional. Higher courts should weigh in during 2011.
• Some Republicans have vowed to repeal the health-care package in total or “unfund” certain portions of it.

5. Push to make business provisions permanent

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 extended a number of provisions that had expired at the end of 2009; the extensions end on December 31, 2011. Congress likely will take up the issue of additional extensions, at least of key provisions.

One key provision is the research credit. The credit was created as a temporary provision by the Economic Recovery Tax Act of 1981. Since then, it has been extended 14 times (including this new extension). Many business leaders want the credit to be made permanent.

6. No AMT reform

The alternative minimum tax (AMT) is a second income tax system that runs parallel to the regular tax system, but has different rates, different exemption amounts and other rules. Individuals figure their taxes under the regular tax rules and the AMT and pay the higher amount. The AMT has been “patched” for 2010 and 2011 by an increased exemption amount, which effectively will keep millions of taxpayers from owning this tax. However, what will happen after 2011? Expect this matter to come under debate in 2011.

The Obama Tax Commission’s report has suggested complete repeal of this complex tax system, but unfortunately the cost of repeal ($1.4 trillion over 10 years) is just too high. Simplification to AMT rules is another of the Commission’s options; this likely will receive greater attention, along with another “patch” for 2012.

7. Higher state and local taxes

Many states will continue to see budget shortfalls during 2011 and beyond. While there has been considerable spending cuts, revenues are still insufficient and federal subsidies are declining (about $60 billion remains from the funds under the American Recovery and Reinvestment Act of 2009 to help with 2011 fiscal problems, but only $6 billion will remain for FY 2012).

To meet the budget shortfalls, over 30 states have raised taxes, and new tax hikes could be introduced in the next year.

8. Greater crackdown on return preparers

The IRS has taken a variety of steps to weed out uninformed and unscrupulous tax return preparers. It has initiated a new practitioner identification number, or PTIN program, for those who prepare returns for a fee.

In the spring or summer of 2011, it will announce new continuing education requirements and competency testing for preparers who are not accountants, attorneys or enrolled preparers who are already subject to such oversight.

Also, the IRS is continuing its efforts to pursue civil or criminal prosecutions of return preparers who use questionable practices. Clients of such preparers are vulnerable to examination, making a taxpayer’s selection of a return preparer more critical than ever.

9. Taxes and social media

In an effort to make the subject of taxes more accessible, the IRS has launched a number of programs to expand its reach on the Web:

• IRS twitter accounts @irsnews for taxpayers and @IRStaxpros for tax professionals
• YouTube videos

These social media efforts should ramp up during the tax filing season.

10. More information reporting

The IRS uses information returns to make sure that taxpayers are reporting their income rather than relying on the honor system. In 2011, for the first time, banks and other financial institutions will have to report merchant transactions on a new Form 1099-K. The transactions include amounts processed on credit cards, debit cards, PayPal and other electronic transactions.

Additional information reporting scheduled to begin in 2012 requires all businesses to report payments of goods and services of $600 or more annually to other businesses. Most small businesses, along with the Obama Administration, want this measure repealed as soon as possible; it is simply an administrative nightmare.

Bottom line: Taxes will undoubtedly change in 2011 and in years to come. Stay alert to opportunities that could help you.

The post Top 10 Tax Trends for 2011 appeared first on Small Business Trends.

Looking ahead, taxes will continue to be used for social engineering-to encourage job creation, help the unemployed, provide incentives for going green, assist U.S. companies going global, and ensure that most Americans have health coverage. Taxes will also be used to serve its traditional function as a revenue raiser to pay for the war in Afghanistan. Within this context, here are the top 10 trends in accounting and taxes for 2010.

1. More guidance to move from GAAP to IFRS

Generally accepted accounting standards (GAAP) in the U.S. are likely to be replaced over time by international financial reporting standards (IFRS). IFRS, used in Europe and elsewhere, provides improvements over GAAP in financial reporting to investors. Companies with a global presence could benefit from changing their standards to the format in greater use worldwide.

The SEC has proposed a roadmap that public companies can use to make the transition. If milestones in the roadmap can be achieved, it could mean required use of IFRS by U.S. public companies by 2014; some public companies will be able to use IFRS as early as 2010.

It will take years for the transition to be made by privately-held corporations and other small businesses, but eventually they will follow public corporations to IFRS. Expect to hear more chatter about IFRS in 2010.

2. More IRS tax audits of businesses

The ever-present audit threat is always lurking in the minds of business owners. In 2010, there’s good reason for concern. As part of a budget measure, the House has approved a $5.504 billion increase in the IRS budget for fiscal year 2010; these funds will largely be used for enforcement activities.

Starting in February 2010, the IRS will launch employment tax audits of 5,000 random returns.

The IRS is also gearing up for more income tax audits. As part of the federal government’s 2010 budget (it’s fiscal year started October 1, 2009), the IRS has hired or is hiring 5,000 to 7,000 new revenue agents (auditors), revenue officers (collectors), and special agents (criminal investigators) in 2009 and another 5,000 in 2010 in an effort to combat the “tax gap.” The tax gap is the $345 billion spread between what the government collects and what it thinks it should collect. Schedule C filers (independent contractors, sole proprietors, and one-member limited liability companies) are in the government’s crosshairs because of the belief that many don’t report all their income or overstate their deductions, so these business owners could be most vulnerable to audit selection in 2010.

3. Higher taxes to pay for health care reform

With House passage of a massive health care bill and the Senate poised to follow suit, look for new taxes levied on small businesses and their owners to help pay for reform. While final tax provisions will need to be worked out in a House-Senate conference bill, these are the likely results that will impact small business owners:

• Tax penalties on individuals, such as independent contractors, who opt not to obtain health coverage.
• A payroll tax on businesses that fail to provide health coverage for their staff. There may be some limited relief for small businesses, in the form of a tax credit, to encourage them to provide coverage for their staff.
• A surtax on high income individuals (about a third of whom are small business owners).

4. New taxes to support cap and trade legislation

Cap and trade is a government run program to limit (cap) the amount of emissions resulting from energy usage. In June the House approved a bill that would aim to cut emissions 17% by 2020 from 2005 levels. The Senate has several bills currently in committee on cap and trade and President Obama promised the world conference in Copenhagen in December that the U.S. would achieve significant emissions reductions by key dates. If a cap and trade program is enacted, payments by businesses that exceed their allocated energy usage will amount to a tax on doing business.

Short of cap and trade, Congress could enact an emissions tax. The Congressional Budget Office reports that a good alternative to cap and trade would be a tax on emissions because it would be less costly for the government to implement. Either way, it will mean higher costs for doing business.

5. No AMT reform

The alternative minimum tax (AMT) is a stealth tax system that applies when certain taxpayers lower their regular tax bill through various deductions that are not allowed for AMT purposes. However, it has become a significant revenue raiser (it could cost $2 trillion over 10 years if AMT were eliminated); Congress can’t easily eliminate it without raising other taxes as a substitute.

Rep. Rangel, head of the House Ways and Means Committee, has been promising for several years to “handle” the AMT problem, but has yet to do anything other than maintain the status quo. Unless there is a “patch” for 2010, millions of individuals, many of whom are small business owners, will owe this tax. Even a patch, however, isn’t reform.

6. Stimulus 2

The $787 billion American Recovery and Reinvestment Act of 2009 that was supposed to create jobs and jump-start the economy may not have provided the desired results. What to do? Congress is thinking about a second stimulus package aimed primarily at jobs creation. If there is a Stimulus 2, look for tax incentives, such as a tax credit for small businesses that add to their payroll or a payroll tax holiday; the bill being discussed in December 2009, which could become law in early 2010, could cost $300 billion.

7. An ever-increasing array of state and local taxes and fees

Some states are teetering on the brink of bankruptcy and need to find new sources of revenue wherever possible. This will lead to new (and often disguised) taxes.

States that raised taxes in 2009 may discover that revenues will decline as individuals and businesses more to more tax-friendly locations. New York, for example, has changed the income tax rules for millionaires-this is likely to induce many wealthy people to relocate, and if they are business owners, to take their companies with them.

Some states are looking closely at their tax structures and could move forward with sweeping changes. For example, a bi-partisan commission in California, a state with one of the worst fiscal crises around, recommended this past fall a tax overhaul that included slashing individual, business, and sales taxes.

8. More e-filing

Last income tax filing season, the number of returns filed electronically reached an all-time high. According to the IRS, 67.18% of individuals filed (or had their returns filed through paid preparers) electronically. About 34% of these filed returns from home computers.

For businesses, electronic filing is required for large corporations (those with $10 million or more in total assets and that file 250 or more returns a year) and encouraged for small businesses. Guidance on e-filing for the coming tax season (for 2009 income tax returns) should be available in January 2010.

E-filing isn’t limited to income tax returns. Businesses are encouraged to e-file; look for new and improved e-filing options to the following programs for 2010:

• Information returns about retirement plans (Form 5500) with the Department of Labor via EFAST

• Excise tax returns (typically businesses that use special fuels), called ETEC with the IRS
• W-2 forms for employees with the Social Security Administration through Business Services Online.

9. New tax breaks to build retirement savings

The “lost decade” (the previous 10 years) of poor stock market performance has left many individuals with less than they expected in their retirement accounts. New tax incentives have been introduced to encourage more retirement savings-by workers and their employers (especially small businesses).

New for 2010 is the DBk, a hybrid retirement plan that can be used only by small businesses (between 2 and 500 employees) to offer a small pension plan combined with a 401(k)-type savings plan within a single trust. Proposed guidance on the DBk was issued in 2009, but many employers are sitting on the sidelines while regulations are finalized and financial institutions start marketing DBk products. This likely will happen in 2010.

10. A VAT?

A valued added tax (VAT) is imposed on each link in the supply chain-from manufacturer, to wholesaler, to retailer, and ultimately to the consumer. With the ever-pressing need for revenue by the federal government, renewed attention will be given to the possibility of a VAT in the U.S. (It has been considered and rejected several times over the past 30 days.) A VAT has long been used in Europe, with a standard VAT rate of 15% in most EU countries (25% in Sweden). The Tax Policy Center estimates that a 5% VAT would produce revenues of $3.3 trillion from 2010 to 2019.

Bloggers have pointed out that a VAT in the U.S. would be on top of state and local sales taxes. Thus, a 15% VAT would look more like the 25% rate in Sweden in states such as California and Tennessee where state and local sales tax rates top 9%.

Bottom line: Accounting rules and taxes will undoubtedly change in 2010 and in years to come. Stay alert to opportunities that could help you.

* * * * *

About the Author: Barbara Weltman, an attorney, is a leading authority on tax, law, and finance for small business. She hosts a weekly radio show, Build Your Business, and publishes “Idea of the Day®” and monthly e-newsletter, “Big Ideas for Small Business®” at Barbara Weltman. She has written over 25 books, including perennial top sellers “J.K. Lasser’s Small Business Taxes” and “The Complete Idiot’s Guide to Starting a Home-Based Business” and is a blogger for Business.gov, Startup Nation, and SCORE’s Women Entrepreneurs.

The post Top 10 Trends in Accounting and Taxes in 2010 appeared first on Small Business Trends.