Tuesday, October 30, 2012

Make the most of depreciation-related breaks while you can


Many businesses may benefit from purchasing assets by Dec. 31 to take advantage of depreciation-related deductions that are scheduled to either disappear or become less favorable in 2013:

Bonus depreciation. For qualified assets acquired and placed in service through Dec. 31, 2012, this additional first-year depreciation allowance is, generally, 50%. Among the assets that qualify are new tangible property with a recovery period of 20 years or less and off-the-shelf computer software. With a few exceptions, bonus depreciation is scheduled to disappear in 2013.

Section 179 expensing. This election allows a 100% deduction for the cost of acquiring qualified assets, and it’s subject to different rules than bonus depreciation. On the plus side, used assets can qualify for Sec. 179 expensing. On the minus side, a couple of rules may make Sec. 179 expensing less beneficial to certain businesses:
  • For 2012, expensing is subject to an annual limit of $139,000, and this limit is phased out dollar for dollar if purchases exceed $560,000 for the year. So larger businesses may not benefit.
  • The election can’t reduce net income below zero. So for businesses that are having a bad year, it can’t be used to create or increase a net operating loss for tax purposes.
The expensing and asset purchase limits are scheduled to drop to $25,000 and $200,000, respectively, in 2013.
These depreciation opportunities, however, bring with them a challenge: Determining whether the larger 2012 deductions will prove beneficial over the long term. Taking these deductions now means forgoing deductions that could otherwise be taken later, over a period of years under normal depreciation schedules.

In some situations, future deductions could be more valuable. For example, tax rates for individuals are scheduled to go up in 2013, which means flow-through entities, such as partnerships, limited liability companies and S corporations, might save more by deferring the deductions.

Finally, keep an eye on Congress: It’s possible the current versions of these breaks could be extended or even enhanced.

Wednesday, October 3, 2012

October 2012 tax compliance calendar

Doeren Mayhew 
As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of October 2012.

October 3 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates September 26-28.

October 5 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates September 29-October 2.

October 10 Employees who work for tips. Employees who received $20 or more in tips during September must report them to their employer using Form 4070.

October 11 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 3-5.

October 12 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 6-9.

October 15 Individuals. Individuals with automatic 6-month extensions to file their 2011 income tax returns must file Form 1040, 1040A, or 1040EZ, and pay any tax, interest, and penalties due. Partnerships.Electing large partnerships that obtained a 6-month extension for filing the 2011 calendar year return (Form 1065-B) must now file the return.

October 17 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 10-12.

October 19 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 13-16.

October 24 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 17-19.

October 26 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 20-23.

October 31 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 24-26.

November 2 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates October 27-30.