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Reese Henry & Co

Year End Tax Planning Strategies for Your Business

It's safe to assume one thing with regard to income tax planning as we approach year end - no one really knows what to do. The same lack of Congressional action that affects each of us as individual taxpayers impacts business planning as well. That being said, we do know that certain strategies will be beneficial no matter what.

Expensing of Business Equipment Purchases
Two provisions remain in place for 2012 that affect the deduction value of asset purchases. The Section 179 expensing of 100% of the asset cost is capped at $139,000 for 2012, and falls to a total of $25,000 in 2013. In addition, the "bonus depreciation" provisions are still in place allowing you to immediately deduct 50% of the cost of certain assets without limitation. This provision is set to expire at the end of 2012. Because these accelerated deductions may not be available in 2013 (or will be more limited), it may be wise to purchase assets that you can put to use immediately in 2012 versus later. We can evaluate your situation to determine if it is beneficial in your situation.

Corporate Distributions
2012 may be the time to make distributions from your C- or S-corporation in order to receive the preferential tax rate on dividends. As the rate on these payments may go from 15% to over 40%, it is possible that distributing some of the earnings as taxable dividend distributions in 2012 will result in significant long-term savings.

Flow-Through Entities
It's important to note that most businesses today are either S-corporations or limited liability companies. As such, the net taxable income of the business is taxed to the owner(s). This means that most of the planning strategies for individual taxpayers must be considered in conjunction with the business planning strategies, since the individual rate increasing could dramatically affect your 2013 taxes. So, please give us a call to help coordinate these complicated provisions.

Employee Expense Reimbursements
The law has always provided that an employer can reimburse its employees for ordinary and necessary business expenses pursuant to a company policy providing for such. This reimbursement, for owner/employees as well as for non-owner/employees will be even more crucial as we move into 2013.

Because of limitations that will be, or will most likely be, imposed on an individual's itemized deductions, the value of those deductions is greater if deducted by the business entity and reimbursed by the employee (owner or not). So, get a reimbursement plan in place as soon as possible so that the deductions are not lost. Give us a call - we can help!!

Upcoming Payroll Changes
Just a reminder that there are numerous payroll-related changes set to take effect on January 1st. From changes to the withholding tables to changes in the Medicare tax rate, these provisions will have a significant effect on what employees are expecting. And a couple of fringe benefits are scheduled to expire - employer provided bus passes, adoption assistance, and employer provided educational assistance will no longer be tax free to the employee. If you use a 3rd party payroll processor such as Paychex or ADP, the changes will be dealt with automatically. However, if you process payroll in-house you need to stay abreast of the status of legislation through the end of this calendar year and beyond into 2013.

We look forward to hearing from you. Please look for our tax legislation updates in the upcoming weeks.

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Reese Henry & Company
Phone: 970.925.3771  |  Email: Info@ReeseHenry.com
Aspen Office: 400 East main Street Aspen, CO 81611
Carbondale Office: 0326 Hwy. 133, Suite 200 Carbondale, CO 81623

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