Somerset Accountant Explains: Your Business Taxes
October 23, 2011
“As you slide down the banister of life, may the splinters never point in the wrong direction.”
– Irish blessing
I often write about marketing, sales and management strategies when I reach out to my business clients and contacts. That’s because the simple fact is that most of them prefer that “we handle it all for them” when it comes to books and taxes
So, we do what we can to push you in a GROWTH direction — not just cost-cutting (and yeah, we can help with that too). However, I thought I’d hit “pause” on this normal programming and point out some possible tax issues for your business (and, possibly, for your family finances) in my weekly Note here. Because the tax situation is about to get worse.
Mark Clark’s “Real World” Business Strategy Business Tax Issues Rearing Their Head
During the course of my week, I meet a number of people who find out I work with taxes, and the grumbling and griping about taxes commences. Makes sense — they’re not about to mouth off to the IRS (if they’re smart, at least!). And my standard answer is, “Think they’re bad now? Just wait!” You see, there are a few federal changes for this next year we need to pay attention to, and even more changes in 2013.
Here are some highlights:For 2012:
- 100% Bonus Depreciation reduces to 50%
- Alternative Minimum Tax raises its ugly head again For 2013
- The 3.8% Medicare Surtax on passive income kicks in. This includes rent (net), capital gains, interest, dividends, and royalties.
- The top tax bracket moves from 35% to 39.6%. That’s a 13% increase in tax rate (not 4.6% as is sometimes reported in the media)
We’re also seeing a number of states pulling away from federal tax incentives. Just because the federal government comes up with a tax break, don’t assume your state is following suit.
Many states did not follow the federal bonus depreciation rules, many have severely limited Section 179 deductions and many are taxing items that previously were tax exempt (such as unemployment insurance payments). So, as a business owner, what can you do to protect yourself in the months ahead?
1) Good record-keeping is crucial. You need to know what your income and expenses are so you can do tax planning in advance. (And see below on that, as well)
2) Plan for taxes before year end. The more lead time you have in planning, the more you’re going to save. (ibid.)
3) Know what states you have “nexus” in. Nexus means connection. What states do you have a connection with?
4) Understand the state tax laws for states in which you have nexus. These issues are pretty common areas where business owners get tripped up — especially without proper planning.