For accountants and small businesses, 2012 was a year of uncertainty with hopes that 2013 will have a light at the end of a long tunnel.
Small businesses, already grappling with the prolonged economic downturn, first waited out a presidential election that would determine the fate of the Affordable Care Act. The re-election of President Barack Obama gave businesses little breathing room as they waited with bated breath to see if Congress would strike a deal to avoid going over the fiscal cliff.
“Without over-exaggerating, this was probably the most unpredictable year it could be for small businesses,” said Mike Durant, director of the New York chapter of the National Federation of Independent Businesses (NFIB). “You can’t really pin it all on one thing.”
Durant also said that Hurricane Sandy further impacted small businesses. In 2013, businesses will also have to adjust their business models to determine how further implementation of the Affordable Care Act will affect them.
“You have to be active in groups and organizations and pay attention to make sure you have the best available information to make an informed decision,” said Durant. “Public policy and the economy are extremely tough to get a read on. We hope the economy picks up and that the ideological gridlock flushes itself out.”
Durant said that in New York, Gov. Andrew Cuomo and the Legislature have to look at ways that New York can be more business friendly. The NFIB is against New York raising the minimum wage.
“We already have the highest cost of doing business with mandates,” Durant said. “Increasing costs is not the route to take. We need regulatory reform and workers comp reform. The state needs to look in the mirror; we’ve been cutting off our nose to spite our face.”
Bernadette Schopfer, director of taxation for White Plains-based Maier Markey & Justic L.L.P., said the fiscal cliff negotiations made for a tense holiday season for accountants.
The Jan. 1 deal also gives businesses little time to plan, and Schopfer blamed Washington for waiting until the last minute.
“It’s one thing to plan and it’s another thing to scramble if you misunderstood or lost track of time,” said Schopfer. “But we knew about the fiscal cliff for a long time, we knew everything was going to hit, but no one paid attention to try and change this until the last minute. They made it a scramble.”
Schopfer said the deal made in Washington, D.C. means that things will not be as harsh as feared and most tax rates and deductions will remain the same. The government also approved a one-year patch for the Alternative Minimum Tax to adjust for inflation and kept Section 179, which allows small businesses to buy equipment and deduct the cost the year they buy it.
“There’s a lot of moving parts,” she said. “I’m not completely well versed because it just happened this week. … You always have to be careful of unintended consequences. Businesses and people have to be well informed and proactive.”
According to Schopfer, from an accounting standpoint, 2012 was a very frustrating year.
“We didn’t know if things were going to change,” Schopfer said. “We didn’t know if rates were going to be higher or stay the same. It was hard to tell a client whether to accelerate or defer their income.”
All the uncertainty made it difficult for Schopfer and other accountants to assist with tax planning and develop a tax strategy.
“It made it impossible to evaluate things,” she said. “You can’t predict when you don’t know what the rates are going to be. You didn’t know what changes they were going to make or what they were going to undo.”
Schopfer said that while things are stable, the situation has been resolved and now they can better advise clients.
“It didn’t help with us how to handle year-end tax planning,” she said. “They needed to settle it in the fall. You need to give people the ability to execute transactions. We just couldn’t do anything.”
Schopfer said businesses and people have to remember that taxes are their own personal responsibility and to make sure they stay on top of the rules, saying that it’s their signature on the tax return. She said that the IRS website is a great source for information.
“It’s not a good signature if you don’t know the rules,” she said. “You can’t make a statement without knowing what you’re doing. It’s not about being misled by an accountant or tax preparer. You are supposed to pay the smallest amount you are obligated to pay. It’s not extra patriotic if you pay too much.”