- Partnership tax returns will be due on March 15, not April 15 (for calendar year Partnerships)
- C-corporation returns will be due on April 15, not March 15 (for calendar year C Corporations)
- S-corporation returns will continue to be due on March 15 (for calendar year S Corporations)
- Code Section 179 expensing is a key component of year-end tax planning. Sec. 179 property is generally defined as new or used depreciable tangible property purchased for use in a trade or business. Software was also recently included, as was qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property.
- Currently, the Section 179 depreciation deduction limit has been reduced to $25,000.
- Year-end placed-in-service strategies can provide an almost immediate cash discount for qualifying purchases.
- Be Aware: Although the 179 limit has been reduced and the 50% Bonus Depreciation has been eliminated, Congress is still deciding on whether or not to retroactively reinstate the limit on Section 179 to $500,000 as well as reinstate Bonus Depreciation. Check with us to get updates on these regulations!
The Code Section 199 domestic production activities deduction is an often under-utilized potential break. This deduction is a tax break for businesses that perform domestic manufacturing and certain other production activities. Recent Internal Revenue Service guidance highlights many qualifying business activities, including: manufacturing, construction, oil-related work, film production, agriculture, and many other pursuits.
- In general this section allows a deduction equal to 9% of the lesser of--
- the qualified production activities income of the taxpayer for the taxable year, or
- taxable income (determined without regard to this section) for the taxable year.
Work Opportunity Tax Credit
If your business is considering expanding payrolls before 2015 ends, take a look at the Work Opportunity Tax Credit (WOTC). (Although the WOTC, under current law, expired after 2014, Congress is expected to renew the WOTC for 2015 and possibly for 2016).
Generally, the WOTC rewards employers that hire individuals from certain groups, including veterans, families receiving certain government benefits, and individuals who receive supplemental Social Security Income or long-term family assistance.
- The credit is generally equal to 40 percent of the qualified worker's first-year wages up to $6,000 ($3,000 for summer youths and $12,000, $14,000, or $24,000 for certain qualified veterans).
- For long-term family-aid recipients, the credit is equal to 40 percent of the first $10,000 in qualified first-year wages and half of the first $10,000 of qualified second-year wages.
Currently, a de minimis safe harbor under the so-called “repair regs” allows you to deduct, rather than capitalize, certain items costing $5,000 or less that are deductible in accordance with your company’s accounting policy reflected on your applicable financial statement (AFS). IRS regulations also provide a $2,500 de minimis safe harbor threshold if you don’t have an AFS.
Routine Service Contracts
If you’re an accrual-basis taxpayer (meaning you have a right to receive income as soon as you earn it), you have a new tool for planning. The IRS has provided a safe harbor under which accrual-basis taxpayers may treat economic performance as occurring on a ratable basis for ratable service contracts—perhaps particularly useful in connection with your regular services that extend into 2016. If your business meets the safe harbor for ratable service contracts, you may be able take a full deduction in the current tax year for certain 2015 payments even though you may not perform the services until next year.
Affordable Care Act
For large businesses, the ACA imposes many new requirements, including the employer shared responsibility provision (also known as the employer mandate). Small businesses, although generally exempt from this mandate, need to review how they deliver employee health insurance.
Many small businesses have provided a health benefit to employees through a health reimbursement arrangement (HRA). Following passage of the ACA, the IRS described certain types of HRAs as employer payment plans – therefore subject to the ACA’s market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing. Failure to comply with these reforms triggers excise taxes under Code Sec. 4980D.
Pending legislation in Congress would allow small employers (that is, those with fewer than 50 full-time and full-time equivalent employees) to have stand-alone HRAs and reimburse expenses without violating the ACA’s market reforms.
- Code Section 45R credit
- If your business has no more than 25 full-time equivalent employees, you may qualify for a special tax credit to help offset your costs of employee health insurance. You must pay average annual wages of no more than $50,000 per employee (indexed for inflation) and maintain a qualifying health care insurance arrangement. (Generally, health insurance for employees must be obtained through the Small Business Health Options Program, part of the Health Insurance Marketplace.)
Don't Delay! There is still time to implement year-end tax strategies. Contact us today!