Small Business Tax Changes for 2012 tax filings-

 

  • Lower 179 Deduction - According to Sec. 179 of the IRS code small businesses can deduct only $139,000 for newly acquired machinery, vehicles, equipment and other property.  As of 2012, real estate is no longer eligible for Sec. 179 deduction.
  • Lower Bonus Depreciation Deduction - the deduction kicks in once a small business maxes out the Sec. 17 deduction. Previously, a business could deduct 100% of certain equipment purchases when Sec. 179 and bonuses were calculated.  In 2012, the deduction is decreased to 50% (up to a maximum of $2M).
  • Retirement Plans - the amount that an employee can contribute to a 401(k) 403(b) and most 457 plans will increase to $17,000. A small business can contribute up to $50,000 to profit-sharing or SEPs.
  • Social Security Wage Base Increase -   The base is increased by 3.6% or to $110,100.  The same increase aplies to self-employed business owners and will result in an increase to the self-employment tax of approx $400.
  • The 1099-K Form - The businesses are required to report the earnings received through the third party payment systems, such a PayPal, on this form. The filing of form 1099-Misc in these cases will not be required.   





 

Tax Updates for 2013

 

We keep you informed of the most important changes:

 

Self-Employed health insurance deduction - this deduction is no longer allowed to be taken on Schedule SE.  Instead, use Form 1040, line 29 to report your deduction and decrease your gross income.
Standard Mileage Rate -  has been increased  to 56.5 cents per mile for business use and 14 cents per mile driven for charitable purposes.   
FAVR plan - for purposes of computing the allowance under a fixed and variable rate (FAVR) plan, the max standard automobile cost for 2013 is $28,100 for automobiles and $29,900 for trucks and vans.  Under this plan, a standard amount is deemed substantiated for an employer's reimbursement to employees for expenses they incur in driving their vehicle while performing services as an employee for the employer.  

Roth IRA and Designated Roth accounts - new rules apply for reporting of converted or rolled over amounts. 

Personal Exemption - increased to $3,900.

Standard Deduction - increased to $12,200 for married filing jointly.

Adoption Credit - increased to $12,970.

Estate Tax - credit increased to $5.25 million.

AMT exemption amount  - increased to $80,800 for married filing jointly and $51,900 for single taxpayers.

 

Please see Federal and State Updates section or contact us for more information about changes in tax law.