As the year comes to a close, it’s time to start thinking about year-end tax planning for your business and your family. There are a lot changes on the horizon that you need to be aware of to be sure that you are in full compliance with tax laws and that you are maximizing your potential for tax benefits and savings.
Here are some things to consider:
· Tax Rate Increases
· Net Operating Loss Utilization
· Estate Tax Issues and Planning
· Health Care Reform
· Energy Tax Credits
· Accelerated Depreciation
· Roth IRA Conversions
· State Tax Law Updates
TAX RATE INCREASES: TIMING IS KEY
As you may be aware, the rates for ordinary income as well as the preferential rates for long-term capital gains and qualified dividends are likely to rise.
· Have you fully considered the timing of your business and personal income and deductions?
· Have you fully explored all tax planning tools to minimize your tax exposure & liability?
NET OPERATING LOSS UTILIZATION: MINIMINZING YOUR TAX LIABILITY
Due to the struggling economy, many businesses have suffered losses in the past couple of years.
· A loss year presents an opportunity to maximize the benefits of the Net Operating Loss (NOL).
· Bad debt deductions and cancellation of debt income could have a big impact on your tax liability.
REVISIT YOUR ESTATE PLAN
Estate tax is another issue that has been on many people’s minds as of late due to the change in administration and the uncertainty surrounding the sunset provision that is still set to restore the tax to its higher original rates in 2011 after a complete phase out of the tax in 2010.
· While the tax is scheduled to go away in 2010, it is likely that new legislation will be passed
· Will the sunset provision be moved up to 2010?
· Will a patch be created to restore the gift tax using current rates and exemptions in 2010?
The current debate is a good excuse to take the time to reexamine your estate plan and possibly seek consulting and planning services to assist you.
HEALTH CARE REFORM BRINGS BIG CHANGES
Also on the horizon is extensive health care reform, the details of which are still uncertain.
· It is expected that a “Play or Pay” approach will be taken, in which all employers would be required to offer coverage to all of their employees that meets certain minimum standards & requirements.
· You should begin planning for these changes as soon as possible to ensure your business doesn’t fall behind and fail to meet the new compliance measures when they arrive.
ENERGY TAX CREDITS
Several things are driving this market faster and in new directions:
· Cost – Opportunity to save money
· Environmental awareness & concerns
· Uncertainty regarding supply of nonrenewables, federal carbon policy, & effect of green house gases
Are you aware of the opportunities for both businesses and individuals to qualify for the credits available?
ACCELERATED DEPRECIATION
Have you fully considered all accelerated depreciation options to minimize your tax liability?
· Section 179 expensing of newly acquired assets
· Bonus Depreciation is still available on certain assets through the end of 2009
ROTH IRA CONVERSIONS
Starting in 2010, it will be possible to convert a Traditional IRA to a Roth IRA without being subject to an Adjusted Gross Income limitation. Have you considered the potential benefits of making this transaction?
· Current & future tax rates & tax brackets should be considered when evaluating this decision
· Your projected time frame before needing assets is key
· Ordinary income must be recognized for the amount converted; how will you fund the tax payment?
STATE TAX LAW UPDATES
Are you aware of the state legislative changes and court case decisions that are relevant to your business and personal tax planning?
· Have you considered your possible nexus and tax exposure for any expansions of your business into new locations or contracts and sales to out-of-state consumers?
· Are you fully aware of Ohio and other states’ audit division activity and the most common audit adjustments?
· These factors can help you plan for and minimize your state & local tax liability
These are just a few of the many things to consider as you assess your individual and business tax planning for 2010 and beyond. If you would like to know more or have any questions, please contact me.
Dan Gerwe
Plante & Moran, PLLC
Direct: 513-744-4741
Plante & Moran is the nation’s 12th largest certified public accounting and business advisory firm, providing clients with financial, human capital, operations improvement, strategic planning, technology selection and implementation, and family wealth management services. Plante & Moran has a staff of more than 1,500 professionals in 20 offices throughout Michigan, Ohio, Illinois, Monterrey, Mexico and Shanghai, China. Plante & Moran has been recognized by a number of organizations, including FORTUNE magazine, as one of the country’s best places to work.
