Dec 4, 201209:55 AMOpen Mic
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2012 year-end tax-planning tips for businesses
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In light of our Congress being in gridlock, the election, the impending fiscal cliff, the enactment of the Affordable Care Act, and the expiration of all or part of the Bush-era tax cuts, it has been a challenging environment for business owners who need to plan for the future of their companies. What assumptions do you make about taxes when, even at this late date, the only thing that is certain is that our tax policy is uncertain?
What we do know, however, is that without action, the Bush-era tax cuts will expire. While there is no current talk of increasing business tax rates, it seems fairly likely that individual tax rates are on the way up for higher-income earners. What are some things that businesses can do to plan for next year?
1. Think about capital expenditures: In 2011, a company could expense (under “bonus” depreciation rules) 100% of the cost of new fixed assets placed in service with a useful life under 20 years. In 2012 the amount of the immediate deduction was reduced from 100% to 50%. In 2013, there is no longer any “bonus” depreciation allowed. If you have plans to buy new equipment, computers, etc., you may want to consider accelerating the purchases into 2012 to take advantage of the 50% bonus.
2. Consider year-end bonuses: Hopefully you had a great year and are planning on paying out bonuses. The timing of the bonuses can be used to the advantage of you and your employees. Typically, companies declare and accrue bonuses before year-end and pay them in the next year. With rates likely to increase, it may be beneficial to actually pay the bonuses in 2012 so they can be taxed at lower rates. This may force employees into higher brackets, so make sure to adjust the withholding rate. A word of caution: Do not ask employees when they would like to receive the bonus because the IRS can deem this as constructive receipt and make the employee pick the income in 2012 whether they want to or not.