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Question: The year is young, but I've already encountered tax law changes that affect my business. If the knuckleheads in Washington keep revising the rules, how are entrepreneurs like me supposed to keep up? I want to avoid trouble and make sure I'm not overpaying. Where do I get help? Answer: Last year produced a bumper crop of small business tax law changes that are taking effect right now. In fact, there were more tax shakeups in 2004 than at any time since a massive overhaul in 1986. Some were new laws; others are rule changes issued by the IRS. Together they add up to a lot for small business owners to digest. Some moves ended previous tax breaks. For example, "bonus depreciation" - an additional 50 percent deduction for the cost of business equipment beyond regular depreciation - is gone. And Congress closed the "SUV loophole" that let business owners immediately deduct the entire cost of a large sport utility vehicle. But according to George Jones, a senior tax analyst at CCH, Inc., over a dozen business tax credits and deductions due to expire last year were extended through 2005, including the work opportunity tax credit, welfare-to-work tax credit, research credit and charitable contributions of computers to schools, among others. And starting this year, many small businesses can claim a significant new tax deduction for "manufacturing" production activities. The key, says Jones, is that "manufacturer" is defined broadly. Many business owners will be surprised to hear they qualify. Businesses that stand to benefit include traditional manufacturers, as well as computer software makers and companies involved in construction, engineering, energy production, film and video production and food processing. The change will effectively lower their income tax rate by three percent this year, rising to nine percent by 2010. Beyond the big changes, however, are many lesser changes that can cost your business a bundle if you miss them. Here are a few that the American Institute of Professional Bookkeepers has dug up:
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These resources can help you stay informed and find professional help:
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Daniel Kehrer (editor@business.com) is Editor at Business.com, the leading business search engine.
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