Tips to Help You Plan Your Business Taxes in 2012From estate planning to health care, here's how to prepare for next year's tax time.
ByCarol Tice•
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Ordinarily, this is the time of year when I hand outsome tipsabout small-business tax breaks that will be available next year. Unfortunately, the mud-wrestling between our Democratic president and Republican House of Representatives makes that forecasting a lot harder to do this year.
Still, it's smart to bear in mind how the tax landscape may change next year. When you know what's coming may help you make a few smart moves before the end of this year. Here are a five tips fromtax expert Barbara Weltmanon what to expect:
- Some business tax breaks live on.While some helpful credits expire at the end of this year, good things that continue for 2012 include the 50 percent first-year bonus depreciation write off and the chance to immediately deduct up to $125,000 of expenses as long as your total annual purchases do not exceed $500,000 through theSection 179 deduction. Also still alive is the research credit and some of the work opportunity credits -- particularly if youhire veterans.
Related:Six Small-Business Tax Breaks for 2010 - You could get audited.A recent KMPG survey foundsmall-business tax audits are on the rise. So be sure you understand tax laws, are in compliance and have the documentation you need to answer any questions.
Related:How to Survive a Tax Audit - The healthcare tax credit may change.The U.S. Supreme Court will hear the National Federation of Independent Business's case on the constitutionality ofhealthcare reform, with a decision expected in June. In the meantime, there's a key provision that may change -- the tax credit to help small business owners pay for healthcare coverage for workers. The hope was that 4.4 million businesses would use it, but only about 300,000 have done so. The NFIB has suggested the credit be simplified and improved.
- Estate planning -- just do it.The crystal ball is completely cloudy on this one, as the estate-tax rules are only known through next year. After that, the rules revert to only a $1 million tax exemption instead of the current $5 million. This is likely to change next year and beyond, depending on who is elected. Expect renewed interest in abolishing the estate tax, which can hit small, family-owned businesses hard. But the one thing that's for sure is -- reducing your estate by gifting heirs now will always be a good idea.
Related:What Entrepreneurs Should Know About Estate Planning - Low interest rates.If you end up owing penalties on outstanding money the Internal Revenue Service thinks you should have paid sooner, the good news is interest rates are currently only about 3 percent. That's so low, it may not provide much incentive for some taxpayers to pay up on time. Let's hope that doesn't lead to unexpected budget shortfalls.
What do you think will happen with taxes in 2012?Leave a comment and give us your prediction.
Corrections & Amplifications:An earlier version of this story misstated the 2012 first-year bonus depreciation write off, which is 50 percent. The story also misstated the Section 179 deduction, which is $125,000 (before adjusting for inflation) in 2012.
