As Atlanta accountants, we like to offer helpful tips to our readers regarding taxes. As 2012 is quickly winding down, we thought it would be a good idea to help you decide if there are things that can be done to reduce your tax liability for 2012, or even for next year. Considering 2012 was an election year, it’s impossible to know which tax legislations will become reality, and when. By knowing what is at stake, owners of small businesses can make sound decisions for their companies before December 31st, when the ball drops and it’s a new year.
In 2013 there are numerous taxes which are set to increase unless extensions are applied to current laws. Here are a few strategies which may be applicable for your small business.
Expenses
If your business operates on a cash basis, it may be beneficial to delay paying expenses until after the first of the year, since there may be a substantial difference in the tax rate between 2012 and 2013. For many small business owners, the deductions would be more beneficial in 2013 than in 2012. Consider delaying major expenses until after January 1st if your company operates on an accrual basis.
Income
Consider the possible implications if the tax rate increases do take effect as scheduled. As a business owner, it may behoove you to increase your profit payout or personal salary prior to December 31st, as income earned in 2012 may be taxed at a substantially lower rate, meaning quite a savings on personal tax.
Depreciation
Regarding business equipment and furnishings, there are two major tax changes set to take place affecting depreciation deductions. Currently, $139,000 can be claimed on depreciation of furniture or equipment purchased in 2012. If tax legislation is not changed in 2013, this amount will decrease to $25,000. Additionally, at the close of 2012 the bonus depreciation of up to 50% of purchase price on some new furniture and equipment which has been allowed in recent years will end. There are restrictions which apply to both of these deductions.
Ultimately, the depreciation changes which are scheduled mean that it may be to your advantage to purchase any equipment you know you will be buying prior to year’s end.
Need assistance with tax, payroll, budgeting, bank reconciliation or other aspects of accounting? At Sound Business Services, Inc., we have provided quality, affordable Atlanta bookkeeping services to businesses and organizations, small and large, since 2006. Contact us for all of your accounting needs!