Tax Credits
Contribute To Retirement Plans
As a business owner, you can lower your business taxes - and help accumulate funds for your own retirement - by maximizing contributions to tax-favored retirement plans. Check out the table for the 2012 contribution and deduction limits for various retirement plans. Let us know if you need assistance choosing a suitable plan.
Accelerate/ increase deductions While you're thinking about your deductible expenses, you may also want to consider ways you might accelerate deductible expenses into 2012 to increase your business deductions and lower taxes. Here are a few ideas:- You might have equipment or vehicle repairs done or purchase supplies before year·end if these expenses would be incurred in 2013 anyway.
- If you're an accrual-method taxpayer, you have a little more freedom to accelerate deductions. Look at deducting employee bonuses that you don't plan to pay until early next year (within the first 2Y, months of (2013). But note that you generally can't use this strategy for employees who own a greater-than-SO% interest in the busi ness, and other restrictions may apply.
- To deduct charitable contributions your accrual-method corporation will make in the first 21/2, months of 2013, make sure you note the charitable obligation in the corporate minutes before the end of 2012 (assuming the company uses a calendar year),
- Increasing business use of a car that you drive for both business and personal purposes can boost your total write-off for the vehicle. When actual expenses are deducted, your deduction depends on the ratio of business miles to total miles driven. If you use the standard mileage rate, increasing business mileage will give you a higher deduction.
Tax Credits
As they do for individual taxpayers, tax credits can offset your business income tax, dollar for dollar.
2012 may be the last year to claim the employer-provided child care credit for buying, rehabilitating, or expanding property to be used as part of an employer's qualified child care facility and for amounts paid or incurred under a contract to provide child care resource and referral services to employees. Be su re to take advantage of this credit if you can, while you can.
| General business credit | |
| Investment | 10% (or more) of the costs of (1) qualified rehabilitation of a building (irst placed in service before 1936 and certified histonc structures (regardless of when placed in service) or (2) Installation of solar, geothermal, or combineG heat and power system property |
| FICA tip | The amount of a food and beverage establishment employer's FICA tax obligation attributable to employee tips received in excess of tips treated as wages for purposes of satisfying minimum wage requi rements (whether or not the tips are reported) |
| Employerprovided child care |
25% of expenses to buy, build, rehabilitate, or expand property that wdl be used as part of an employer's child care facility plus 10% of amount paid under a contract to prOVide child care resource and referral services to employees, up to a maximum credit of $150,000 a year (not available after 2012 tax year) |
| Disabled access | For eligible small businesses, 50% of elig ible access expenditures greater than $250 and not more than $1 0,250 |
| Smal l employer health insurance |
Up to 35% of employer contributions for employee health Insurance (through 2013; up to 50% starting in tax year 2014) |
| Small employer pension plan start-up |
50% of administrative and (etirement-(e~ t ed education expenses ("qualified start-up costs") for the first three plan years, up to a maximum credit of $500 a year |
Alternative Minimum Tax
Like individual taxpayers, larger corporations can find themselves subject to alternative minimum tax. When it applies, the corporate AMT rate is 20%, and the exemption amount is $40,000 (subject to an income-based phaseout with alternative minimum taxable income between $150,000 and $310,(00).
Your corporation wi ll be exempt from AMT if it satisfies a gross receipts test. The exemption generally applies where a corporation's average annual
gross receipts for all th ree·tax-year periods beginning after 1993 and ending before the current tax year are $7.5 million or less. (There's a lower $5 million threshold for the first three-tax-year period taken into account in the test.)
The Clock Is Ticking
Now that you've reached the end of this guide, we hope you have a better understanding of the need for tax planning and the short time frame you have for taking advantage of year-end planning opportunities. As skilled professionals, we have the experience, knowledge, and expertise to help you with your planning needs. For more information on any of our services, call us today.
The general information in this publication ;s not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can be used by any taxpayer for the purposes of avoiding tax penalties.
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