By Norman G. Grill Jr.
For businesses large and small, this is an extraordinarily difficult year for tax planning. There may be some significant tax law changes in 2012 ”“ or not. The fact that it is an election year only compounds the uncertainty.
Here are three particularly hot tax issues to keep an eye on as the year winds down.
Health care
Back in June, the U.S. Supreme Court upheld the Patient Protection and Affordable Care Act (ACA), and after existing in a state of uncertainty for a while, the act is back on everyone”™s mind.
Although ACA probably won”™t have a huge impact on your 2012 year-end tax planning, there are at least a couple of provisions to keep in mind now.
First, if you filed 250 or more W-2 forms in 2011, you must start reporting the cost of your employer-provided health care coverage on those forms beginning with the 2012 tax year.
Second, you need to annually provide a uniform summary of health plan benefits and coverage (as well as a list of definitions) to employees for plan renewals and plan years beginning on or after Sept. 23 of this year. The good news is that your insurer is required to prepare these documents, not you. You, however, must ensure the information is properly prepared and mailed by the applicable deadline dates. And, if you self insure, you”™re responsible for the entire task.
Third, 2012 is the final tax year for which you can claim an income-tax deduction for the Medicare Part D retiree drug subsidy payments you receive from the federal government.
ACA is a long and complex law that will impact tax planning for years to come.
Depreciation
As the calendar winds down, you need to consider whether to buy new assets for your company this year. Why? Because the Section 179 expensing election and bonus depreciation rules offer tax savings for doing so ”“ and changes may be on the way for both.
Section 179 enables you to deduct, rather than depreciate over a number of years, the cost of buying assets such as equipment, furniture and off-the-shelf software. The 2012 expensing limit is $139,000, and the election begins to phase out dollar-for-dollar when total asset acquisitions for the tax year exceed $560,000. You can claim the election only to offset net income, not to reduce it below zero to create a net operating loss.
The expensing limit and phase-out threshold have decreased substantially from their 2011 levels ($500,000 and $2 million, respectively). Unless Congress takes action, they”™ll do so again in 2013 ”“ to $25,000 and $200,000, respectively.
Bonus deprecation, too, has gone down significantly, from 100 percent for 2011 to 50 percent for 2012. It also is scheduled to change in 2013 ”“ in this case, without an extension, bonus depreciation will disappear completely.
So which one should you choose? Generally, if you qualify for the full Section 179 expensing, it may provide more of an advantage because it can allow you to deduct 100 percent of a qualifying asset”™s acquisition cost, and it”™s available for both new and used property.
On the other hand, should your asset purchases for the year exceed the Section 179 phaseout threshold or your net income, 50 percent bonus depreciation may be beneficial. It could save you more because it has no net income requirement or limit on asset purchases. But, bonus depreciation applies only to new assets.
As of this writing, extensions of the enhanced Section 179 expensing and 100 percent bonus depreciation are possibilities.
Hiring
In an uncertain economy, adding employees to the payroll isn”™t always easy. But, for companies that do need to add staff, a hot topic this year is the Work Opportunity credit.
This tax break for employers that hire from certain disadvantaged groups was actually on the verge of expiration. Fortunately, the VOW to Hire Heroes Act of 2011 extended it through 2012 for employers that hire qualified veterans.
For this group, the act also expanded the credit in several ways. The maximum credit for hiring disabled veterans who have been out of work for six months or more in the preceding year has doubled to $9,600.
In addition, a credit of up to $5,600 has been added for hiring non-disabled veterans who have been unemployed for six months or more in the preceding year. And another credit of up to $2,400 has been added for hiring non-disabled veterans who have been out of a job for four weeks or more (but less than six months) in the preceding year. Other eligibility requirements may apply.
Norm Grill is managing partner of Grill & Partners L.L.C., which has offices in Fairfield and Darien.
