Tax Moves to Consider Before Year End

chess_goldpawnYear end can be a complicated time for many tax payers.  We are usually scrambling around trying to figure out what tax moves we need in order to file our returns. This includes looking for receipts, trying to figure out (guess) if an expense counts as a deduction, wondering if we can claim our neighbors child who spends more time at our home than his/her own!  Considering how tax law can change, it is important to get as much information before year end so that you are best prepared for tax time. Below may not apply to you personally, but it explains three deductions that could affect business owners in 2013.  Below is an article pulled from that I found helpful.  To follow the post you can go to!

“Some big-dollar tax deductions that affect businesses are set to expire in 2013, so now’s the time to make sure your company considers taking advantage of them for the current tax year. Doing so may allow you to buy more equipment, send less to the IRS, or both.
Deductions related to equipment purchases and spending on research and development are among tax things that could go away in 2014, assuming Congress doesn’t act to extend them.
Section 179 deduction. “Under the Section 179 deduction, businesses can write off dollar-for-dollar their equipment purchases,” with certain limits, Lortz said. For example, a business could buy a new truck, new machinery, or new servers and deduct the first $500,000 in costs for the 2013 tax year.
Without an extension by Congress, the allowed first-year deduction drops to $25,000 in 2014. “That’s a pretty significant incentive to purchase and place into service any fixed assets or equipment,” Lortz said. He noted that making sure the equipment is placed in service by Dec. 31 is important. “So, for example, if you were to order some new servers and you ordered them December 30 and installed them after January 5, technically, they don’t qualify for the deduction in 2013,” he said. Purchases exceeding $2 million start to lose that first-year deduction of $500,000, too, he noted.
Real estate purchases aren’t covered by the Section 179 deduction, but if you’re a tenant and you’re making certain leasehold improvements, you might be able to write off up to $250,000 of those expenses, according to Lortz.
First-year bonus depreciation. Larger companies that spend more than $2 million on capital equipment should look into the “first-year bonus depreciation” allowed in 2013 but set to expire, Lortz said. Under that rule, brand new equipment can qualify for a write-off of 50 percent, with no limits, so $5 million of a $10 million purchase could be expensed.
R&D tax credit. Another tax-related item set to expire in 2013 is the tax credit for research and development. It has been extended numerous times over the years, and it’s one that tends to get extended, sometimes retroactively, Despite the high-tech-sounding name, this credit is not for tech companies alone. “If you’re having to come up with new ways of doing things, new processes, you very well might qualify,”
“Many businesses that might qualify for this tax credit aren’t aware that they qualify,” Lortz said. “The key here is making sure they’re talking to their tax professionals, saying, ‘Is there anything we do that would qualify for the research and development tax credit?’”
Another planning issue that small businesses should be looking at if they haven’t already this year is their business structure.  The impact of new taxes for 2013 that are part of the Affordable Care Act (including a 3.8 percent tax on net investment income, which can affect investors in a business, and a 0.9 percent tax on earned income) can be reduced if your business is structured as an S-Corp.
“Those new taxes just give businesses another reason to take another look at whether they’ve got a good entity,” “Businesses ought to have taken a look at this structure already, but a lot of folks were crossing their fingers that the law would get overturned on appeal. If they had put off planning, it’s time to start.”