Page 67 - BusinessWest February 19, 2024

increase in the Code Sec. 179 deduction limitation and expense limitation for property put into service post-2023.
Bonus Depreciation
The most recent change, under the Tax Cuts and Jobs Act of 2017, allowed for immediate expensing of qualified property placed in service between Sept. 17, 2017 and Jan. 1, 2023 (100% bonus depreciation). Starting in 2023, the first-year depreciation gradually reduces (80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026) until it is eliminated for property placed in service in 2027. The proposed bill extends 100% bonus depreciation for property placed in service before Jan. 1, 2026 (Jan. 1, 2027 for longer production period property and certain aircraft). In 2026 and 2027, the 20% and 0% bonus depreciation rates would continue to apply.
Increased 179 Deduction
Under current law, businesses can choose to expense certain qualifying property instead of depreciating it. This includes tangible personal property, off-the-shelf computer software, and qualified real property used in the active conduct of a trade or business. The deduction is limited to an inflation-adjusted amount. In 2024, the deduction is capped at $1.22 million, reduced dollar-for-dollar by expenses exceeding $3.05 million.
Employee Retention Credit
The Employee Retention Tax Credit (ERTC) was established
in March 2020 during the COVID-19 pandemic. The purpose of
the credit was to provide businesses with a credit against certain payroll taxes if they retained employees during lockdowns that
may have impacted their income. The American Rescue Plan Act
of 2021 extended the credit and expanded its scope to include Medicare taxes and dropped the precentage threshold for revenue decrease establishing eligibility for the credit. Taxpayers were able to make ERTC claims until April 15, 2025, despite the expiration of the period for which the credit can be claimed.
The IRS has identified fraudulent claims made by taxpayers, often unknowingly, facilitated by third-party processors (COVID- ERTC promoters) who boldly advertised on television and plagued businesses with calls implying that almost any business qualified due to facts and circumstances. To address this issue, the IRS tem- porarily suspended the acceptance of new claims in late 2023 while investigating potential instances of fraud in its backlog. Additionally, an amnesty program was established for taxpayers to voluntarily withdraw unqualified claims or repay the credit without penalty.
The proposed bill aims to combat fraudulent claims by increas- ing penalties for COVID-ERTC promoters, extending the limitations period on assessments of ERTC claims to six years, and imposing reporting requirements on COVID-ERTC promoters similar to pro- moters of listed transactions. Notably, the bill sets Jan. 31, 2024 as the deadline for making ERTC claims.
In Addition
In an effort to reduce compliance burdens on businesses, the Act raises the filing threshold for Form 1099-NEC and 1099-MISC from $600 to $1,000 for payments post-Dec. 31, 2023. The $1,000 will be adjusted for inflation.
IN SUMMARY
In essence, the Tax Relief for American Families and Workers Act of 2024 is a comprehensive package addressing varied aspects of the American economic landscape with a keen eye on relief and progression. These changes aim to promote economic growth, sup- port independent contractors and businesses, and address housing affordability concerns.
While the House’s passage of the Act marks a significant mile- stone, it’s important to keep a vigilant eye on the upcoming Senate proceedings, as the Act still requires approval there before becom- ing law. BW
Kristina Drzal Houghton, CPA is a partner at the Holyoke-based accounting firm Meyers Brothers Kalicka, P.C.
“In essence, the Tax Relief for American Families and Workers
Act of 2024 is a comprehensive package addressing varied aspects
of the American economic landscape with a keen eye on relief and progression.”
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