Lets Talk Taxes Jim Forbes, CPA February 12, 2013 AGEND GENDA - - PowerPoint PPT Presentation
Lets Talk Taxes Jim Forbes, CPA February 12, 2013 AGEND GENDA The income tax had made more liars out of the American people than golf. Will Rogers The hardest thing in the world to understand is the income tax. Albert
February 12, 2013
“The income tax had made more liars out of the American people than golf.” – Will Rogers “The hardest thing in the world to understand is the income tax.” – Albert Einstein “Taxes: Of life’s two certainties, the only one you can get an automatic extension.” - Anonymous
Planning Considerations
– Expiring NOLs – Basis limitations – Future tax rate will be higher
increase loss
depreciation
– Was $139,000 for 2012, $25,000 for 2013 – Increased to $500,000 retroactively for 2012 and for 2013
– Was $560K for 2012, $200K for 2013 – Increased to $2M retroactively for 2012 and 2013
– The excess dollar amount over the credit base by 14% – Credit base = average R&D costs over the prior three years multiplied by 50%
– Technological in nature and new or improved process
– Process of experimentation – “Discovery” test eliminated
Research Tax Credit
(formerly FAS 109)
credits
Why make the 280C election?
W/ 280C W/O 280C Taxable Income (before R&D) 1,000,000 1,000,000 Addback: R&D Expenses
Taxable Income 1,000,000 1,100,000 Federal tax due (at 35%) 350,000 385,000 R&D Credit 65,000 100,000 Federal Tax Due 285,000 285,000
– Building owners can segregate costs of building into shorter life assets instead of 39-year property – Automatic method change that can be filed with 2012 tax return (3/15/13 or 9/15/13) – Requires an engineering study – Buildings with a cost of more than $500K
– Accrual method taxpayers – Deduct prepaid expenses such as insurance and software maintenance. – Automatic method change that can be filed with 2012 tax return (3/15/13 or 9/15/13)
– Accrual method taxpayers – Allows deduction for vested vacation pay that is paid by 3/15/13 – Automatic method change that can be filed with 2012 tax return (3/15/13 or 9/15/13)
– Accrual method taxpayers – If employment is required at time of payment, the bonus cannot be deducted until fixed and
– Consider setting up a bonus “pool” for all employees. – No accounting method change required if it is a change in facts and not a change in method. – IRS audit issue
– C Corporations – Overpaid 2012 estimates can be refunded immediately – Filed after year-end and before original due date – Generally between 1/1/13 and 3/15/13 for calendar year taxpayers
– In the following order: – File 7004 – Preliminary Form 1120 with data sufficient to be considered a valid return – File 1139 (processed within 90 days) – File a superseding Form 1120 prior to the extended due date.
Itemized Deduction Phase Out
which AGI exceeds threshold, not to exceed 80%
Personal Exemption Phase Out
thereof) by which AGI exceeds threshold.
– 0.9% increased Medicare tax due on wages over $200,000 (single) and $250,000 (MFJ) – 3.8% surtax on at least a portion of investment income such as capital gains, dividends, and net rental income
Example 3: Married taxpayer $200,000 Combined Wages $150,000 Net Investment Income $350,000
$100,000 subject to 3.8% surtax Lesser of Net Investment Income or Excess of MAGI over threshold
Example 4: Married taxpayer $260,000 Combined Wages $ 10,000 Net Investment Income $270,000
$ 20,000 However, only $10,000 subject to 3.8% surtax Lesser of Net Investment Income or Excess of MAGI over threshold
Entity Materially Participate 3.8% Tax 0.9% Tax S Corp Yes No No S Corp No Yes No Partnership Yes No Yes Partnership No Yes No