Changes in the tax law will affect the way business owners
complete their 1999 tax returns and the way they'll conduct business in the year
2000. Some changes include: new rules that make it easier to claim a business
deduction for the business use of your home; new thresholds to determine which
businesses have to make electronic tax payments; a change in the standard
mileage rate for vehicle use; new rules concerning the use of the installment
method of accounting; and increases in the health insurance deduction for
self-employed taxpayers.
Beginning in 1999, it is easier for your home office to qualify as your
principal place of business for the purpose of deducting expenses. In order to
qualify, you must meet the following requirements:
- You use it exclusively and regularly for administrative or management
activities of your trade or business.
- You have no other fixed location where you conduct substantial
administrative or management activities of your trade or business.
See Publication 587, Business Use of Your Home, for more information.
Beginning in 1999 and continuing in 2000, the threshold that determines
whether you must deposit federal taxes electronically has been increased from
$50,000 to $200,000. If you don't meet the $200,000 threshold, you can still
make electronic deposits voluntarily.
If you use a vehicle for business, the standard mileage rate in 1999 for
operating costs is 32 cents per mile for all miles driven before April 1. The
rate for miles driven after March 31 is 31 cents per mile. In 2000, the rate is
32 cents per mile for all business miles. See IRS Publication 463, Travel,
Entertainment, Gift and Car Expenses, to get more information.
If your business normally reports income using the installment method of
accounting, you cannot use the installment method of accounting to report gains
or sales or other dispositions of property after December 16, 1999. This rule
does not apply to sales or other dispositions of: 1) property used or produced
in the trade or business of farming, or 2) timeshares or residential lots if you
elect to pay a special interest charge.
The health insurance deduction for self-employed individuals increases for
1999 to 60% of the amount you paid for medical insurance for yourself and your
family. After 2001, the deduction will increase again. You can find more
information in IRS Publication 535, Business Expenses.
Publication 553, Highlights of Tax Law Changes, can give you additional
tax law changes for this filing season. You can download most IRS publications
and forms through our site.
Publications can also be ordered free through the IRS at 1-800-829-3676.
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