Texas --Multiple Taxes: Governor Proposes Increase in Small Business Tax Exemption

In his January 27, 2009 State of the State address, Texas Gov. Rick Perry called on the Legislature to expand the revised franchise tax exemption for small businesses from those with total revenue under $300,000 to include businesses with revenue under $1 million. The governor also characterized the property tax appraisal system as broken and cautioned that without reforms in "accountability, transparency and restraint" taxpayers would be subjected to an continually increasing property taxes. Lastly, the governor also praised the previous repeal of telecommunications taxes and indicated he supported a combination of lower utility taxes and increased, diversified energy production to preserve the leadership in the energy industry.

State of the State Address, Texas Gov. Rick Perry, January 27, 2009

Broker Reporting Deadline for Composite Tax Statements Extended

Broker Reporting Deadline for Composite Tax Statements Extended (Notice 2009-11)

The IRS has provided additional time to furnish certain composite annual tax reporting statements, including Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, without penalty. The deadline under Code Sec. 6045(b) with respect to reportable items from calendar year 2008 is February 17, 2009. Entities that report such statements have until February 17, 2009, to report all items that they customarily report on these annual composite form recipient statements to all customers, whether or not each customer's transactional history for 2008 triggered an obligation to furnish Form 1099-B to that particular customer. The new February due date was established under section 403 of the Energy Improvement and Extension Act of 2008 (P.L. 110-343) to provide Form 1099-B information to customers and also applies to other tax information customarily reported to customers with Form 1099-B statements on an annual composite tax reporting statement. This would typically include interest and dividends reported on Form 1099-INT and Form 1099-DIV.

Notice 2009-11, 2009FED ¶46,241
Other References:
Code Sec. 6045

Accounting Method-Cash vs. Accrual

You have established a legal entity and are ready to start your active trade or business. Before you take the leap and actually start business you need to choose an accounting method. The most commonly used accounting methods are cash and accrual. The major difference between the two methods relates to when income and expense is actually recognized.

Under the cash method of accounting income and expense is generally not recognized until cash or other assets actually change hands. If you receive an invoice from a merchant on 12/14/2009 but do not pay the bill until 1/5/2010 the expense is deductible on the entity’s 2010 income tax return. Recognition of income works the same way. If you bill a client on 12/14/2009 but do not receive payment until 1/5/2010 then you recognize the income on the entity’s 2010 income tax return. Remember that the day you receive a check is the day the IRS considers the payment to be received and not the day you actually cash the check.

Under the accrual method of accounting income and expense is generally recognized in the year the income or expense is incurred. If you receive and invoice from a merchant on 12/14/2009 you are able to deduct the expense on the 2009 income tax return even if the bill is not paid until 1/5/2010. If you bill a client on 12/14/2009 you need to recognize the income on the 2009 income tax return even if you do not receive payment until 1/5/2010.

For more information on this subject read the IRS article at IRS.GOV