November 2004 Newsletter

IntraScope Accounting Solutions, LLC

November 2004 Edition

_______________________________________________________

New Tax Law

Two new Tax Acts have become law in 2004 - the American Jobs Creation Act and the Working Family Tax Relief Act. While there were hundreds of provisions that benefit both individuals and businesses, I am only going to highlight the provisions that might affect you.

The Biggest change is the tax deduction for business income from domestic manufacturing and production starting in 2005. The deduction will allow businesses to exclude 3% of such income. The definition of production is broad and includes manufacturing, construction, architectural and engineering services. More to come as we receive guidance from the IRS. You can bet the regulations will be complicated and expect to see plenty of audits on this issue in the future.

State Sales Tax Deduction

For 2004 and 2005, you can elect to deduct sales tax instead of claiming a deduction for state income tax. The amount of sales tax you can deduct will be determined by using IRS tables or you can accumulate your receipts and deduct the actual sales taxes paid. If you purchase a car during the year and use the tables, you are allowed to add the sales tax for the car to the table amount. It is too early to know which deduction will be more beneficial but we will be looking at it when we prepare your income tax return.

SUV Depreciation Deduction has Changed

New buyers of SUVs that weigh more than 6000 GVW after October 2004 will not be able to deduct the full cost of the SUV in the year of purchase. The depreciation deduction will be capped at $25,000. While this may affect those buyers who were expensing $100,000 SUVs, the majority of taxpayers will be able to write off most of the SUV in the year of purchase.

Depreciation Changes

The ability to expense up to $100,000 of assets purchased during the year has been extended to 2006 and 2007.

The deduction for the additional 30% or 50% of bonus depreciation was not extended and will not apply after 2004.

Finally, leasehold improvements can be written off over 15 years instead of the prior 31.5 years. This will apply to leasehold improvements made after October 2004.

Welcome to Rebecca Connet

We are very excited to announce that Rebecca Connet has joined the firm as our new bookkeeper. Becca will be working with new clients as we continue to grow. The good news is that Jennifer James is still with the firm. She was completely full and we were looking at closing the practice to new clients until we found Becca. You may be hearing from either Becca or Jennifer during tax season as they assist me with completing your tax returns.