News & Tech Tips

Review ATRA for Possible Tax-Saving Opportunities

bberry on May 15, 2013

It’s been about six months since Congress passed the American Taxpayer Relief Act (ATRA) of 2012. The legislation prevented many of the tax hikes that were scheduled to go into effect in 2013 and retained a number of tax breaks that were scheduled to expire. On the negative side, individual income tax rates rose with the top rate increasing from 35 percent to 39.6 percent.

While much focus was given to ATRA at the start of the year, it’s probably a good time to review some of the bill’s provisions and determine if there are still opportunities for you and your business:

  • Section 179 Expense Deduction – Section 179 Expense was increased to $500,000 for both 2012 and 2013 (2012 was previously scheduled to be $139,000, and 2013 was only $25,000)
  • Bonus Depreciation – Bonus Depreciation was extended through December 31, 2013. This will allow the business to depreciate 50 percent of the asset cost in 2013 for equipment, fixtures, furniture, signage and land improvements.
  • Luxury Auto Depreciation – $11,160 is now allowed for first-year depreciation for luxury autos placed in service in 2013.
  • Restaurant Improvements Depreciation – The 15-year write-off for “qualified restaurant” improvements was reinstated and extended through December 31, 2013.
  • WOTC – The Work Opportunity Tax Credit was extended through December 31, 2013.  The maximum credit is generally $6,000, but can be as high as $12,000, $14,000, or $24,000 for qualified veterans depending on service connected disability, amount of time unemployed and when the period of unemployment occurred.
  • Enhanced Deduction for Food-Inventory Donation – This deduction was reinstated and extended through December 31, 2013. The donation must be wholesome and be for the ill or needy. An owner/operator can get 150 percent of their basis in the donation as a charitable contribution.
  • Empowerment Zone – If your restaurant is located in a Federal Empowerment Zone, you can potentially qualify for a tax credit. The tax credit was extended through December 31, 2013.

If you have questions about any of these provisions or would like additional information, contact Patrick McClary, Director/Tax Department, or Bruce Berry, Director/Accounting Department.

Be prepared for the health care act’s “play or pay” provision

rlewis on May 7, 2013

wojciechowskiThe Patient Protection and Affordable Care Act of 2010’s shared responsibility provision, commonly referred to as “play or pay,” is scheduled to take effect Jan. 1, 2014. It doesn’t require employers to provide health care coverage, but it in some cases imposes penalties on larger employers that don’t offer coverage or that provide coverage that is “unaffordable” or that doesn’t provide “minimum value.”

A large employer is one with at least 50 full-time employees, or a combination of full-time and part-time employees that’s “equivalent” to at least 50 full-time employees. The nondeductible penalties generally are $2,000 per full-time employee.

Although the shared responsibility provisions don’t take effect until 2014, employers will use information about the workers they employ in 2013 to determine whether they’re subject to the provisions and face the potential for penalties in 2014. The rules are complex, so contact us today to learn how they may affect your business and what steps you can take to avoid, or at least minimize penalties.

Portability doesn’t preclude the need for marital transfers and trusts

lshuneson on April 24, 2013

Lisa Shuneson, CPA, PFS
Lisa Shuneson, CPA, PFS

Exemption portability, made permanent by the American Taxpayer Relief Act of 2012, provides significant estate planning flexibility to married couples if sufficient planning hasn’t been done before the first spouse’s death. How does it work? If one spouse dies and part (or all) of his or her estate tax exemption is unused at death, the estate can elect to permit the surviving spouse to use the deceased spouse’s remaining estate tax exemption.

But making lifetime asset transfers and setting up trusts can provide benefits that exemption portability doesn’t offer. For example, portability doesn’t protect future growth on assets from estate tax like applying the exemption to a credit shelter trust does. Also, the portability provision doesn’t apply to the GST tax exemption, and some states don’t recognize exemption portability.

Have questions about the best estate planning strategies for your situation? Contact us — we’d be pleased to help.

April 15 has passed — now what?

kbotti on April 19, 2013

bottiWith the 2012 tax filing season behind us, it’s time to start thinking seriously about 2013 tax planning — especially if you’re a higher-income taxpayer, because you might be subject to one or more significant tax increases this year:

  • Taxpayers with FICA wages and self-employment income exceeding $200,000 for singles and $250,000 for joint filers face an additional 0.9% Medicare tax on the excess.
  • Taxpayers with modified adjusted gross income exceeding $200,000 for singles and $250,000 for joint filers may face a new 3.8% Medicare tax on some or all of their net investment income.
  • Taxpayers with taxable income in excess of $400,000 for singles and $450,000 for joint filers face the return of the 39.6% marginal income tax rate — and of the 20% long-term capital gains rate on long-term capital gains and qualified dividends.

Contact me at karen.botti@whalencpa.com to learn whether you’re likely to be hit with these tax hikes and what strategies you can implement to minimize the impact.

 
Karen Botti is the staff manager of tax services. She has more than 30 years of experience in the public accounting field with extensive experience in preparing and reviewing federal, state and local income tax returns for businesses and individuals as well as for non-profit entities. She serves as a resource to clients and staff in multiple tax areas. Her areas of expertise also include like-kind exchanges, fixed-asset reporting, tax software and S-Corporation issues. She also has experience in accounting and the preparation of financial statements and payroll taxes.

 

The perils of filing for an extension

mnarog on April 10, 2013

Now that the 2012 tax return deadline is nearly upon us, if you haven’t filed your return yet, you may be thinking about an extension. This allows you to delay filing your return until the applicable extension deadline:

  • Individuals — Oct. 15, 2013
  • Calendar-year partnerships — Sept. 16, 2013
  • Trusts and estates — Sept. 16, 2013

While filing for an extension can provide relief from April 15 deadline stress, it’s important to consider the perils:

  • If you expect to owe tax, keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by April 15.
  • If you expect a refund, remember that you’re simply extending the amount of time your money is in the government’s pockets rather than your own.

Still, filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now. Please contact us if you have questions about avoiding interest and penalties.

Whalen CPAs
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Worthington, OH 43085-2215
(614) 396-4200

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