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Tuesday, December 10, 2013; 11 am – noon (EDST)

Tuesday, December 10, 2013; 1 pm – 2 pm (EDST)

Gearing Up for Filing Season:

Business Tax Planning

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The following program is designed to provide accurate and

authoritative information in regard to the subject matter covered.

It is distributed and sold with the understanding that ADP and

SmartPros Ltd. are not engaged in rendering legal, tax, accounting,

investment or other expert advice. If expert assistance is required,

the services of a competent professional should be sought.

The views and conclusions expressed herein are those of the speaker

and not necessarily those of ADP and SmartPros Ltd.

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Tuesday, December 3, 2013; 11 am – noon (EDST)

Tuesday, December 3, 2013; 1 pm – 2 pm (EDST)

Gearing Up for Filing Season:

Individual Tax Planning

ADP Helps your Clients through all Business Stages

© Copyright 2013 ADP, Inc. Proprietary and Confidential Information.

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ADP’s Custom Version of the CCH Master Tax Guide is being delivered

An $1,700+ Value – ADP’s guide includes access to the U.S. Master Tax Guide, State Tax Law Library and the State Tax Review newsletter online!

One free CPE credit from CCH as well as many other discounts on CPE

ADP’s Fast Wage and Tax Facts for each State – this handy reference gives you and your clients fingertip access to all the key payroll tax facts for each state

ADP’s Accountant Portal – www.accountant.adp.com – your one stop resource for:

Current regulatory information in our Eye on Washington and other newsletters

Calculators for payroll, health care reform, 401k and much, much more

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EXPERT COMMENTATOR:

Barbara Weltman

•“Big Ideas for Small Business”

•www.barbaraweltman.com

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TO RECEIVE CPE CREDIT:

• This Webinar qualifies for 1 CPE credit

• To earn CPE and/or IRS Program credit, you must enter 4 words/phrases within 24 hours of the Webinar

• At conclusion of Webcast, go to: www.smartpros.com/adpwebinars

• Participants may also:

Download a copy of the PowerPoint (CPE keywords excluded)

Send the presenter a question (if unanswered during the event)

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Introduction

• Taking advantage of expiring tax breaks

• Factoring in new tax taxes on successful small business owners

• Using last minute year-end planning

• Looking ahead to possible law changes

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Expiring rules

• Rules that expire at the end of 2013:– Research credit

– 100% exclusion for small business stock issued in 2013

– 50% bonus depreciation

– Generous first-year expense (Sec. 179) deduction

– 15-year recovery period for qualified leasehold, restaurant, and retail improvements

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Expiring rules

• Other rules that expire in 2013:– Reduction in S corporation built-in gains recognition period– Basis adjustment to stock of S corporations making

charitable contributions of appreciated property– Various energy-related breaks– Various employment-related credits– New market credit– Enhanced deductions for certain charitable contributions– Empowerment zone breaks

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Using current tax breaks

• Sec. 179 deduction (“first-year expensing”)– $500,000 limit

– Dollar amount phases out for purchases over $2 million; no deduction when purchases are $2.5 million or more

– Applies to off-the-shelf software

• Last chance to change/elect/revoke the deduction without IRS consent

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Using current tax breaks

• Bonus depreciation:– 50% for 2013 of the adjusted basis of qualified property

– Qualifying property: new tangible property depreciated under MACRS with a recovery period of 20 years or less, certain computer software, qualified leasehold improvement property, and water utility property

– Must elect out • Election applies per class

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Using current tax breaks

• Fiscal year taxpayers:– Sec. 179 deduction is based on the tax year the item is

placed in service

– 50% bonus depreciation is based on the actual acquisition and placed-on-service dates

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Using current tax breaks

• 15-year straight line cost recovery for qualified real property

• Qualified real property:– Leasehold improvements property

– Restaurant property

– Retail improvement property

• Election to treat up to $250,000 of the aggregate cost as a Sec. 179 deduction

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Using current tax breaks

• Qualified small business stock– Stock issued by December 31, 2013, entitles the holder to a

100% exclusion if it is held more than 5 years– “Qualified small business stock” definition– Can be issued:

• To investors—complete funding arrangement before the end of the year

• To employees—compensation for services– Employees may want to make a Sec. 83 election

• Note: Qualified SB stock sold in 2013 has a 50% exclusion

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New tax rules for 2013

• 0.9% additional Medicare tax on earned income (taxable compensation and net earnings from self employment) over applicable threshold:– $200,000 for singles

– $250,000 for joint filers

– $125,000 for married filing separately

• Individuals complete new Form 8959

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New tax rules for 2013

• 0.9% additional Medicare tax: employer obligations:– Withholding when wages exceed $200,000 (regardless of

filing status)• Nonqualified deferred compensation: withhold when

earned, not when paid

– No employer matching

– Comply with employee requests for additional income tax withholding

– W-2 reporting (discussed later)

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New tax rules for 2013

• 3.8% additional Medicare tax on certain unearned income – Called net investment income (NII) tax

– Figured on new Form 8960

• Tax is the lesser of:– Net investment income, or

– MAGI over the taxpayer’s threshold amount (same as threshold amounts for 0.9% tax)

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New tax rules for 2013

• Determine whether business owner’s distributions from a pass-through entity are treated as investment income– Material participation (see Code Sec. 469)

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New tax rules for 2013

• Simplified option for the home office deduction (Rev. Proc. 2013-13):– $5/sq. ft. up to 300 sq. ft. of space

– Must meet basic home office deduction rules

– No depreciation (year of simplified option ignored for purposes of future depreciation when the actual method is used)

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New tax rules for 2013

• Limited carryover for FSAs (Notice 2013-71)– Plan can allow a carryover up to $500 (not cumulative)

– Can have either carryover or grace period

– Carryover does not impact annual contribution

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Last minute year-end planning

• Income tax strategies: deferral or acceleration– Basic strategy for cash basis businesses: defer income

when possible• Example: Delay year-end billing for services so that

payment is received next year

– Factor in the additional Medicare taxes if applicable

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Last minute year-end planning

• Income tax strategies: deferral or acceleration– Basic strategy for cash basis businesses: accelerate

expenses when possible• Pay outstanding payables• Pay bonuses to owners

– Use qualified small business stock

– Take 0.9% additional Medicare tax into account

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Last minute year-end planning

• Income tax strategies: deferral or acceleration– Basic strategy for cash basis businesses: accelerate

expenses when possible• Buy/place in service equipment before year end to use

current bonus depreciation/Sec. 179 rules• Consider vehicle purchases (especially heavy SUVs before

year end)• Shelter profits by setting up a qualified retirement plan (e.g.,

profit-sharing plan) before year end

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Last minute year-end planning

• Dividends– Pay dividends before the end of the year

• Note new 20% rate on high-income shareholders

– Check with S corporations that have accumulated E&P from their pre-1987 C corporation days

• Stock redemptions (may be dividends or capital gains)– Execute corporate resolutions

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Last minute year-end planning

• Deduction planning– Review final regulations on repairs (especially the de

mimimis rules and safe harbors)

– Make charitable contributions• Accrual basis C corporations: declare before year-end

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Last minute year-end planning

• Basis strategies– Owners of pass-through entities should check basis if

losses are expected for the year• S corporation shareholders:

– Make loans to the corporation

– Re-work loans with guarantees so that shareholders become the borrowers (check with lenders)

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Last minute year-end planning

• Tax credits planning– Hire qualifying workers before year end to use the work

opportunity credit• Make sure to file Form 8850 within 28 days of hiring

– Check eligibility for the small employer health insurance credit

• Top credit in 2013: 35% of employer-paid premiums• Top credit in 2014: 50% of employer-paid premiums for

coverage obtained through SHOPs

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Last minute year-end planning• Payroll tax planning

– W-2 reporting• Report employer-sponsored health coverage in box DD (not taxable to

employee)– Small employers (250 or fewer forms in the prior year) still exempt

• Report 0.9% additional Medicare tax in box 6

– Form 941• New line for reporting the 0.9% additional Medicare tax

– FUTA taxes• Check for credit reduction states (www.irs.gov/pub/irs-dft/f940sa--dft.pdf)

– Same-sex married employees: see Notice 2013-61

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Last minute year-end planning• Compensation planning for S corporation owner-

employees– Set 2014 salary in light of:

• $117,000 Social Security wage base• 0.9% additional Medicare tax

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Last minute year-end planning• Consider changes in accounting method

– Examples:• Acceleration of certain prepaid expenses• Deferral of income recognition for qualifying advance

payments

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Last minute year-end planning

• Get ready for NOL carrybacks– Check businesses impacted by the November tornados in

the mid-West or other federally-declared disasters

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Last minute year-end planning

• Tax payments– Corporations: 2013 estimated tax (4th installment) due on

December 16 (December 15 is a Sunday)

– Business owners: 2013 estimated tax (4th installment) due on January 15, 2014

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Last minute year-end planning

• State taxes– Businesses that sell online should watch for changes in

state definitions of nexus (“affiliate” and “click through”) for sales taxes

• Note: Federal Marketplace Fairness Act not likely to be passed in 2013

– Some states are moving to “economic” presence for income/franchise taxes

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Looking ahead

• Quality Stores, Inc. to be decided by the U.S. Supreme Court (whether certain severance benefits are exempt from FICA).– File protective refund claims?

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Looking ahead

• Sen. Baucus’ draft proposal for overhaul of cost recovery and accounting rules (www.finance.senate.gov/imo/media/doc/Chairman's%20Staff%20Discussion%20Draft%20on%20Cost%20Recovery%20and%20Accounting%20Summary.pdf)

• Bipartisan budget committee report due December 13 (may include tax reform proposals)

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Looking ahead• Sec. 179 deduction of $1 million; $2 million phase-out

• Overhaul of depreciation (change to 4 pooled asset groups); 43-year recovery period for realty

• Change in taxation of foreign income of U.S. corporations

• Extensions of some expiring provisions

• Advertising costs (50% expensed; 50% amortized over 5 years)

• End to LIFO and like-kind exchanges

• Start-up expenses ($10,000/20-year amortization for excess)

• Sec. 197 intangible: increase to 20-year amortization period

• Requiring businesses to verify W-9s for independent contractors– Withholding for unverified contractors from gross payments

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Conclusion

• Watch for last-minute business-related tax changes

• Keep clients informed

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TO RECEIVE CPE / IRS PROGRAM CREDIT:

• This Webinar qualifies for 1 CPE credit

• To earn CPE and/or IRS Program credit, you must enter 4 words/phrases within 24 hours of the Webinar

• At conclusion of Webcast, go to: www.smartpros.com/adpwebinars

• Participants may also:

– Download a copy of the PowerPoint (CPE keywords excluded)

– Send the presenter a question (if unanswered during the event)