Wipfli Alerts & Updates: Last-Minute Business Tax Planning Strategies

December 9, 2011
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A new year, and an election year at that, will be upon us before we know it. However, 2011 still offers many opportunities to significantly reduce, delay, or even eliminate taxes related to your business. Many Federal actions, including the 2010 health care law, will likely impact your bottom line this year or in the near future.

In particular, Wipfli can ensure you benefit from the following tax planning opportunities:

  • As of January 1, 2013, qualified dividends will be subject to ordinary income tax rates. Accordingly, corporations with excess earnings and profits should consider making larger dividends in 2011 and 2012.
  • The Code Sec. 179 deduction is limited to the taxable income of the taxpayer, whereas regular MACRS deductions are not. Foregoing the Code Sec. 179 deduction in 2011 may create a net operating loss for carryback. However, a Code Sec. 179 expense deduction in excess of current-year income can be carried over to future years and effectively increase the deduction in years when the limitation is expected to decrease. Unless Congress changes the provisions, the expense limitation reverts to $25,000 in 2013.
  • In addition to the Code Sec. 179 deduction, the bonus depreciation deduction is extended to property placed in service before January 1, 2013.
  • The 15-year recovery period for qualified leasehold improvement property, qualified restaurant property (including restaurant buildings), and qualified retail improvement property applies to property placed in service before January 1, 2012.
  • The deduction for energy-efficient commercial building property is available for five years to include qualified property placed in service before January 1, 2014.
  • The recognition period for the S-corporation built-in gains tax has been reduced through 2011. The relief provided by this provision should be valuable to small family or privately owned businesses that are forced to downsize and sell assets to raise cash.
  • Advance planning is necessary to minimize the threat of the alternative minimum tax at a flat rate of 20 percent.
  • There is an enhanced deduction for food, book, and computer donations.
  • The following credits are available for 2011:
    • Credit for increasing research activity
    • Work Opportunity Tax Credit
    • Credit for employer-provided child care
    • Credit for employer's differential wage payments to military personnel

In addition to your business, please note tremendous planning opportunities exist for you as an individual taxpayer. In particular, family business owners may have a once-in-a-lifetime opportunity to implement succession planning strategies before Congress acts, the economy rebounds, or interest rates rise. Please see the previous Wipfli Alert regarding tax planning opportunities for individuals for more information on this and many other ideas.

Act now, while the fate of many tax provisions is up in the air!

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