Capital Feed

Bandals International Inc., a maker of women’s sandals, raised roughly $100,000 in capital from so-called angel investors last year.

When meeting with potential investors, the owners of the Rochester Hills,Mich., business touted the state’s special tax break for angels—a term used to describe wealthy individuals who provide capital to start-ups. TheMichiganincentive at the time allowed angels to seek tax credits of 25% on their 2011 investments in qualified start-ups.

Tom Sesti, president of Bandals, says the tax credit was key to helping the three-year-old company raise the funds. “It’s almost like offering a money-back guarantee,” he says.

Tax breaks for angel investors have cropped up in recent years in about two dozen states as a means of stimulating job growth. But the effectiveness of the incentives—which range from breaks on 15% of funding inColoradoto 100% inHawaii—are coming under greater scrutiny, particularly as states face budget pressure. Many states’ programs expired at the end of 2011, were stripped of funding or were placed under a moratorium.

The incentives “can be controversial,” said the National Governors Association in a 2008 brief, adding that “even angels are in disagreement as to the economic growth benefits of tax credits.”

Hard to give tax credits when governments are starved for more money.  Can’t expect them to quit spending now, can you? Keep on reading at The Wall Street Journal.

About 60 percent of Wisconsinbusinesses that completed tax credit programs tied to job creation during the past five years actually hired as many people as they expected, according to a Gannett Wisconsin Media analysis of state data.

Of the 191 other businesses still active in the programs, just 8 percent have created the required number of jobs to earn the credits, the review shows.

Nine of 15 businesses that completed state tax credit contracts since 2007 met the hiring goal, according to records. Two of the 15 businesses in the programs did not create a single new job in five years, and four others fell short of the goal.

Economic development experts and business leaders — including some who received the incentives — said the state tax credits alone don’t spur new jobs.

Jobs will come from national economic growth, not tax hikes or cuts. Keep on reading this article at Green Bay Press Gazette.

If you and your spouse own a business together, you are supposed to file a partnership tax return with the IRS. There is no tax due at the partnership level, the profit or loss flows out on a Schedule K-1 to your individual income tax return where it is combined with other sources of taxable income and deductions then ultimately taxed.

However, what usually happens is that one spouse claims the income and expenses from the business on Schedule C of Form 1040. Because there is only one slot for a Social Security number on Schedule C and Schedule SE, only one spouse receives funding to his or her Social Security and Medicare accounts. The other spouse is shortchanged for all those years of hard work.

For tax years beginning after Dec. 31, 2006, the Small Business and Work Opportunity Tax Act of 2007 (Public Law 110-28) provides that a “qualified joint venture,” whose only members are a husband and a wife filing a joint return, can elect not to be treated as a partnership for Federal tax purposes. Your business qualifies for this election if:

So confusing. To keep reading about these tax rules go to Fox Business.