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Small Business and Work Opportunity Tax Act of 2007
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The U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007 was signed into law by President Bush on May 25, 2007. The legislation is primarily an emergency war supplemental funding bill; however, also contained in the bill is an increase in the federal minimum wage and $4.84 billion in small business tax relief! Below are some of the highlights of the new act: Increase in Federal Minimum Wage The federal minimum wage will gradually increase from $5.15 to $7.25 an hour in increments over a three-year period. The first increase takes effect on July 24, 2007, when the federal minimum wage becomes $5.85 per hour. The next increase to $6.55 per hour will take place in July 2008, and finally to $7.25 per hour in July 2009. Increase in Age for Kiddie Tax The kiddie tax is expanded to apply where the child turns age 18, OR if the child is a full-time student under age 24 before the end of the tax year. This is effective for tax years beginning after May 25, 2007. For calendar year taxpayers, the new kiddie tax rules first go into effect in year 2008. Section 179 Expensing For 2007, the deduction limit will increase to $125,000 and the phase-out threshold will increase to $500,000. These increased amounts will be indexed for inflation after year 2007 and before 2011. Other miscellaneous provisions regarding Section 179 include the right to revoke or change a Section 179 expense election without IRS consent and making off-the-shelf computer software eligible for the Section 179 expensing election for tax years beginning before January 1, 2011. Work Opportunity Tax Credit (WOTC) The hiring deadline for purposes of the work opportunity tax credit is extended from December 31, 2007 to August 31, 2011. This is effective for individuals who begin work for the employer after May 25, 2007. This extension doesn't apply with respect to Hurricane Katrina employees. Employees falling into this targeted group must be hired by the employer on or before August 27, 2007. Husband and Wife Joint Ventures If a qualified joint venture is conducted by a husband and wife who file a joint tax return for the tax year, the joint venture is no longer not treated as a partnership for tax purposes. Each spouse will report his or her share of of income, gain, loss, deduction, and credit on the appropriate form, such as Schedule C, E, or F which is part of the Form 1040. A qualified joint venture means any joint venture involving the conduct of a trade or business if:
Effective for tax years beginning after December 31, 2006. Technical Explanation and Other Provisions of the Act For more information
on the Small Business and Work Opportunity Tax Act of 2007 (SBWOTA),
click here
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