Obama’s budget means more work for you

The Prez just submitted his budget proposal for FY’11 — and it’s loaded with changes that will land in Finance’s lap.

The proposal itself is 130 pages long, but we’ve boiled it down to the six biggest changes that will impact finance:

Change #1: Extended depreciation deductions

Any large purchases on the horizon? Then this proposal is good news for your company.

Obama plans to extend the additional first-year depreciation deduction for another year, generally for property acquired and placed in service during 2010.

(Remember, the deduction equals 50% of the cost of qualified property placed in service, and is allowed for both regular tax and alternative minimum tax purposes.)

Change #2: Changes to cell phone taxability

Your organization may be inclined to buy more cell phones for employees if this proposal goes through.

There’d be no more strict substantiation requirements for the use of, and the limitation on, depreciation deductions on cell phones, BlackBerrys, iPhones, etc.

And the fair market value of personal use of a cell phone provided primarily for business purposes would be excluded from an employee’s gross income.

Change #3: No more LIFO accounting

And if any of those (or any other) purchases wind up in your warehouse, you may be in for some accounting changes.

The budget also proposes to repeal the “last-in, first-out” method that many inventory-intensive businesses rely upon.

Currently using LIFO? You’ll have to write up your beginning LIFO inventory to its FIFO value in the first taxable year starting after Dec. 31, 2011.

Change #4: Extend COBRA health insurance premium assistance

Dig deeper in those pockets — the proposal would allow qualifying individuals who suffer an involuntary termination prior to 1/1/11 to qualify for assistance.

How long are you on the hook? From an involuntary termination after 2/28/10, you’d pay for 12 months.

Change #5: No more excuses with automatic enrollment in retirement plans

Firms in business at least two years and with more than 10 employees, get ready: You’d have to offer employees an automatic IRA option.

To soften the blow, you will be eligible for a temporary tax credit for making automatic payroll-deposit IRAs available to employees.

The amount of the credit for a year would be $25 per enrolled employee up to $250, and it would be available for two years.

Note: You’re off the hook for this requirement if you sponsored a qualified retirement plan, SEP or SIMPLE plan. And if you don’t already, there’s an incentive to do that, too.

Change #6: Modest incentive to start a plan

Companies with 100 or fewer employees will get a tax credit for half the startup costs of creating a SIMPLE plan. That includes administrative costs and employee education.

Don’t get too excited, though: The incentive would be capped at $1,000 a year for three years.

You’ll have time to get these plans together: This provision would be effective Jan. 1, 2012.

Info: For the entire budget proposal, click www.treas.gov/offices/tax-policy/library/greenbk10.pdf