Business Income Taxation

As a business owner, you bear the responsibility of paying income tax whether your business is a sole proprietorship, a partnership, an LLC, or a corporation. Proper calculation and payment of your business taxes are essential for the financial health of your company and to ensure that you do not encounter any legal or tax liability issues in the future. Business income taxes are extremely complex, especially in light of recent changes in tax legislation. Without the proper skills and an intimate knowledge of tax law, it is very easy to make a mistake that could prove costly for your company. Attorney and Certified Public Accountant Jo Ann M. Koontz of Koontz & Associates, PL can assist you in calculating your business income tax, taking advantage of the deductions available to you, and avoiding serious mistakes.

New Legislation Makes Business Income Tax Preparation More Complicated

New tax legislation is passed every year and has great impact for individuals and for businesses, but unlike the provisions made for individuals, the incentives and benefits for corporations may be temporary. It is essential that you take advantage of the tax incentives and create a comprehensive tax plan that takes temporary benefits into consideration. Koontz & Associates, PL have followed these changes closely and are ready to help you take advantage of these incentives and put a creative financial strategy in place for the future.

Significant Benefits for Companies that Invest in Equipment, Property, and Services

Both the American Taxpayer Relief Act of 2013 and the 2012 Relief Act provided significant incentives for businesses who invest in capital and equipment. However, because many of these incentives are temporary, it is vital that you take advantage of them now. Changes included:

  • A 50% first-year bonus deprecation allowance to apply for qualifying property placed in service through 2013. For longer lasting and transportation property, the allowance extends into 2014.
  • Under Internal Revenue Code Section 179, taxpayers in 2013 may expense as much as $500,000 of qualifying property reduced by the amount by which the property exceeds $2,000,000. Beginning in 2014, however, taxpayers may only deduct $25,000 of qualifying property with an investment cap of $200,000 regardless of inflation.
  • Research Tax Credits, originally set to expire in 2011, have been extended through 2013. This credit may be claimed for costs incurred by business research or payments to universities and other institutions for their research. This applies to the amount by which the research for this fiscal year exceeds the annual average for research for the last four years.
  • The Relief Act extended the 15-year recovery period for leasehold, retail, and restaurant improvements. Taxpayers may continue to take those deductions through 2013.

Changed Vehicle Deductions Have Easy-to-Miss Details

Business vehicles have always been eligible for tax deductions. However, new changes have been made with regard to depreciation reductions and lease inclusions. Vehicle expenses can be calculated using mileage costs or using actual expenses, such as lease payments, registration, maintenance, storage, repairs, oil changes, and tolls. The actual deductions taken will vary depending on the size and type of vehicle, whether it is a luxury car, and whether it is leased. Deciding whether to calculate costs based on mileage or actual expenses can be tricky. Koontz & Associates, PL can help you make the right decision for your business.

Sweeping Health Care Reform Has Significant Effects on Southwest Florida Business Owners

The U.S. Supreme Court ruled that the Patient Protection and Affordable Care Act (PPAC) is constitutional. This act has significant consequences for businesses. With the Supreme Court’s declaration, all businesses are now required to meet the provisions of PPAC. Employers must report the total cost of provided health benefits on their employees’ W-2 forms, whether the employer or the employee pays for it.

Small businesses have slightly different provisions for health care. If you own a small business with no more than 10 employees and an average wage that does not exceed an average of $25,000, you may be able to take a 35% tax credit on health insurance premiums paid in 2012 and 2013. Tax exempt employers can take a 25% discount on premiums paid between 2010 and 2013. After 2014, taxable employers can deduct 50% of insurance costs and non-profit employers can deduct 35%. An employer must offer insurance through a state insurance exchange.

Employee Services Are Rewarded with Significant Tax Incentives

In addition to health care, employers are rewarded for giving jobs to those-in-need and to providing services to their employees. The Work Opportunity Tax Credit (WOTC) grants tax incentives to employers who hire from hard-to-employ groups. Usually, this incentive is equal to 40 percent of the worker’s wages, with a maximum set at $6,000. The Heroes Act of 2011 extended this tax credit to companies who hire veterans and disabled veterans. The tax credit for hiring these workers can go as high as $9,600.

In addition, the Relief Act made a permanent extension for tax credits given to companies that provide child care and facilities for their employees. Companies may deduct 25% of all child care costs and 10% of all child care resource and referral costs, not to exceed $150,000 in any tax year.

Some Tax Hikes Negatively Impact Business Owners

Not all of the changes in tax law will positively impact business owners. There are increases of which you should be aware. They include:

  • Personal holding company taxes – The rate on these taxes has been permanently raised from 15% to 20%, beginning December 31, 2012
  • Accumulated Earnings Taxes – The rate on these taxes has also been permanently raised from 15% to 20%, beginning December 31, 2012

It is vital that you be aware of these changes or work with and who is familiar with them to keep from unwittingly making a smaller payment than required and having issues with the IRS in the future.

Call Koontz & Associates, PL for Corporate Income Tax Services in Southwest Florida

Jo Ann M. Koontz offers a powerful combination of in-depth knowledge of tax regulations, a firm grasp of the business world, and years of experience representing tax clients. To schedule a consultation, call the Sarasota office of Koontz & Associates, PL at 941.225-2615.

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