The Internal Revenue Service sets the depreciation allowance based on the Code as promulgated by Congress. The most commonly referenced section is 179. This is a form of accelerated depreciation allowing the small business owner the opportunity to take a large expense deduction and reduce their tax obligation immediately.
The first Form 1040 in 1914 was a mere 5 lines of information. Today, the Internal Revenue Code spans 5 volumes with over 700 pages each in 8 point font. This doesn’t include the associated regulations. This section covers income tax and how the small business entrepreneur deals with proper filing and the associated deadlines.
Simply put, this is a tax on your net earnings from your small business operation. If you are unincorporated, you have to pay this tax. This includes those in partnership arrangements, and in any form of Limited Liability Company status. Why don’t corporations pay the tax? Actually they do, it’s just called a different name.