Abacus CPAs handles individual, corporate, nonprofit, estate, trust and partnership tax planning. What’s the biggest area of concern when filing this year’s taxes? At the end of the year, (the IRS) extended some of the tax credits that had expired on Jan. 1, 2014. They extended them in late December of 2014, but they expired again on Dec. 31, 2014. We are back in the same boat again. There are major tax credits, tax deductions, out there that have now gone away, and we aren’t sure what will happen with them.
The problem is taxpayers can’t plan. Things we hope would come back into play, we weren’t sure. On Dec. 19, they finally passed the bill allowing these tax credits to come back in, but all year we didn’t know. Some of the bigger ones involved purchasing of equipment and whether you could expense it immediately. They had two weeks or less once the bill was passed to get it done. If it was a large piece of equipment, they probably couldn’t get it installed in time.
It created hustle at the end, but the most frustrating part was you couldn’t plan. You could only assume all year.
The tax-filing deadline is just more than a month away. What should business owners be doing right now? Unfortunately, at this point, it’s hard to get a lot of benefit done. We take all of our clients through planning toward the end of the year. We are looking a year out. We need to plan before the cutoff. After the end of the year, there are very few things we can do.
To get the maximum benefit out of any professional, but especially with accounting, use them for planning prior to the end of the year and take advantage of the tax laws.
The government likes small business, and they have given tax breaks to small business.
What frequent mistake do you see business owners making? Not planning in advance. People don’t want to do that because they think the cost is too expensive. But if we do it right, that benefit always outweighs the cost. The other thing people do, from an aggressive standpoint, is they want to do anything they can to save taxes. That may not always be good. You may be spending a dollar to save 28 cents on your taxes. Nobody likes to pay taxes, but we always want to make a good business decision.
What bills on the horizon have the potential to affect business owners? What we are hearing in 2016, there is going to be major tax reform. Now, whether that really happens or not given that we have a Democratic president and Republican Congress, we will see. Hopefully, we can get something done and have major tax reform. If not, we will probably see a repeat of what we just went through.
What would major tax reform look like? What would you want to see out of that process? We would like to see taxes overall reduced, the tax burden on businesses reduced. Realistically, is that going to happen given that as a society we want more and more from our government? That would be hard to do. The more realistic thing we would like to see is some form of stability. Give us the tax laws, let us know what they are, then we can plan, structure and organize businesses and individuals around those things.
How has full implementation of the Affordable Care Act affected filing this year? Are you seeing many people paying the penalty? We do see a lot of people with the penalty. The surprising part of that, or what people were not aware of, was they heard it was a $95 penalty. Well, it’s the greater of $95 or 1 percent of your household income. If you had an adjusted gross income of $30,000, then your penalty is $300, not $95. There are a lot of people getting surprised by their penalty. Next year, that goes up to 2 percent and $325.
Another thing that comes into play this year with ACA, in 2015, we had relief for businesses with more than 50 employees. As the law stands right now, starting in 2016, businesses with 50 or more will now have to comply with ACA. We are starting to plan for that process.
What big questions are you hearing from clients this year? There was another big change that’s been out a couple years we thought would go away, but it didn’t. They changed the capitalization and repair regulations on how we handle the capitalizing of assets and repairs on assets. That has created some confusion. Every business has to deal with that, if they have any fixed assets, they have to be making elections in their returns going forward. Also, businesses, we thought, would have to file a form, 3115, but in the last couple weeks they have issued some relief. If the business is less than $10 million in revenue, you don’t have to.[[In-content Ad]]
