Beginning in 2010, an IRA conversion to a Roth IRA can be done regardless of income level.The previous AGI threshold of $100,000 will be eliminated. Additionally, married filing separate taxpayers will be able to make the conversion to a Roth, which has previously been an unavailable option. These new rules will pose tax planning challenges and opportunities for the next few years.

There are advantages to converting a Traditional IRA to a Roth IRA. For one, unlike Traditional IRAs, qualified distributions from Roths are tax-free-including earnings. Additionally, the required minimum distribution rules do not apply to Roth
IRAs.

Those who would benefit the most from converting their IRA into a Roth IRA include:
● Taxpayers with a number of years before
retirement (to recoup the tax paid on conversion)
● Those who anticipate being in a higher tax
bracket in future years.
● Those who can afford to pay the tax on the conversion without using cash from the retirement account.

Now for the fun part: Any income from the conversion to a Roth IRA in 2010 is automatically deferred. Half of it will be reported in 2011 and the other half will be reported in 2012. An election can be made to include the entire amount on your 2010 taxes. You don’t want to overlook that option—especially if it is clear that you will be in a higher tax bracket for 2011 or 2012.

It generally makes sense to write off eligible equipment using the Section 179 expense option in the year of purchase. You’ll get the tax deduction faster than if you took depreciation over time. However, expensing may not make sense if you’re in a low tax bracket in the year of purchase but expect to be in a higher bracket in future years, or if your new sole proprietorship is not making enough to trigger self-employment tax.

While the depreciation deductions may be spread out over time, if you’re in a higher tax bracket or paying self-employment tax, the deductions will be worth more. You’ll have to crunch the numbers and consider the time-value of money to be sure. Keep in mind that you don’t have to write off the entire asset. If a machine cost $5,000, you can claim the Section 179 expense option on $2,000 and take regular depreciation over time on the remainder.

The below information is taken directly from the Internal Revenue Service website.

It is important to keep good records for property you depreciate. Do not file these records with your return. Instead, you should keep them as part of the permanent records of the depreciated property. They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records.

You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. This is the section 179 expense deduction. You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions.

This part of the chapter explains the rules for the section 179 expense deduction. It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction.

For more information, see chapter 2 of Publication 946.

April 15:

• Individuals: 2009 Form 1040 due, or file Form 4868 for automatic 6-month ex-tension. Last day to contribute to an IRA and ESA for 2009. First installment of 2010 estimated tax due. 2009 Form 709, US Gift Tax Return, due if more than $13,000 was gifted to any individual other than a spouse or charity in 2010.
• Partnerships: 2009 Form 1065 due, or file Form 7004 for automatic 5 month extension.
• Calendar Year C Corporations: First in-stallment of 2010 estimated tax due.

April 30:

• Employers: File Form 941 for 1st quarter 2010.

May 17:

• Partnerships & S Corporations: Form 8752 due for those using a fiscal year under a Section 444 election.

June 15:

• Individuals: Second installment of 2010 estimated tax due for individuals. 2009 Form 1040 due for U.S. citizens or resident aliens living and working (or on active military duty) outside the U.S. and Puerto Rico, or file Form 4868 for 6-month extension.
• Calendar Year C Corporations: Second installment of 2010 estimated tax due.