Businesses
should consider buying machinery and equipment before year end and, under the
generally applicable “half-year convention,” thereby securing a half-year's
worth of depreciation deductions for the first ownership year.
Although
the business property expensing option is greatly reduced in 2014 (unless
legislation enhances this option for 2014), consider making expenditures that
qualify for this option. For tax years
beginning in 2014, the expensing limit is $25,000, and the investment-based
reduction in the dollar limitation starts to take effect when property placed
in service in the tax year exceeds
$200,000.
Businesses may be able to take advantage of the “de
minimis safe harbor election” (also known as the book-tax conformity election) to expense the costs of
inexpensive assets and materials and supplies, assuming the costs don't have to
be capitalized under the Code Sec. 263A uniform capitalization (UNICAP) rules.
To qualify for the election, the cost of a unit-of-property can't exceed $5,000
if the taxpayer has an applicable financial statement (AFS; e.g., a certified
audited financial statement along with an independent CPA's report). If there
is no AFS, the cost of a unit of property can't exceed $500. Where the UNICAP rules
aren't an issue, purchase such qualifying items before the end of 2014.
A
corporation should consider accelerating income from 2015 to 2014 where doing
so will prevent the corporation from moving into a higher bracket next year.
Conversely, it should consider deferring income until 2015 where doing so will
prevent the corporation from moving into a higher bracket this year.
A
corporation should consider deferring income until next year if doing so will
preserve the corporation s qualification for the small corporation alternative
minimum tax (AMT) exemption for 2014. Note that there is never a reason to
accelerate income for purposes of the small corporation AMT exemption because
if a corporation doesn't qualify for the exemption for any given tax year, it
will not qualify for the exemption for any later tax year.
A
corporation (other than a “large” corporation) that anticipates a small net
operating loss (NOL) for 2014 (and substantial net income in 2015) may find it
worthwhile to accelerate just enough of its 2015 income (or to defer just
enough of its 2014 deductions) to create a small amount of net income for 2014.
This will permit the corporation to base its 2015 estimated tax installments on
the relatively small amount of income shown on its 2014 return, rather than
having to pay estimated taxes based on 100% of its much larger 2015 taxable
income.
If your
business qualifies for the domestic production activities deduction for its
2014 tax year, consider whether the 50%-of-W-2 wages limitation on that deduction
applies. If it does, consider ways to increase 2014 W-2 income, e.g., by
bonuses to owner-shareholders whose compensation is allocable to domestic
production gross receipts. Note that the limitation applies to amounts paid
with respect to employment in calendar year 2014, even if the business has a
fiscal year.
To
reduce 2014 taxable income, consider deferring a debt-cancellation event until
2015.
To
reduce 2014 taxable income, consider disposing of a passive activity in 2014 if
doing so will allow you to deduct suspended passive activity losses.
If you
own an interest in a partnership or S corporation consider whether you need to
increase your basis in the entity so you can deduct a loss from it for this
year.
These
are just some of the year-end steps that can be taken to save taxes. Again, by
contacting us, we can tailor a particular plan that will work best for you. We
also will need to stay in close touch in the event Congress revives expired tax
breaks, to assure that you don't miss out on any resuscitated tax saving
opportunities.
Please
give us a call if you have any questions. We would be pleased to assist you in
applying the tax rules for treating computer software costs in the way that is
most advantageous for you.
(651) 621-5777, (952) 583-9108, (612) 224-2476, (763)
269-5396
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