As we look to 2013 for tax issues, the first thing you need to know is – don’t blink.
Congress will be passing new laws late in December of 2012 or during the first quarter of 2013, we hope. So pay attention and meet with your tax pro as soon as the laws change in order take best advantage of any changes.
Meanwhile, a key area rich with tax benefits is group health insurance and medical expenses.
- Not only will this help your staff, it may provide better rates on your own coverage – especially if you have pre-existing conditions.
- With fewer than 25 employees, there is a nice tax credit on Form 8941. IRS offers information and step-by-step instructions.
- Can’t cover the additional cost? Ask your employees which they would rather have – a fully taxable raise? Or non-taxable health coverage?
- Have your employees pay for their own coverage using the reduced group rates you negotiated. Set up a premium only plan (POP), allowing them to pay their premiums before taxes. Paychex can incorporate this into your payroll system effortlessly call 888-681-3304.
- Set up a Flexible Spending Account, allowing employees to set aside up to $2,500 of their annual compensation to cover medical expenses they know they will pay in the current year. This is an excellent way to cut taxes when they will have out-of-pocket costs for braces, dental implants, laser eye surgery, therapy of any kind, etc.
- For businesses without employees, hire your spouse and provide full family medical coverage via your spouse’s payroll. Your spouse must really be working for the business, not just answering calls periodically. There is a special tax break for this (originally designed for farmers). You can take advantage of this most easily by using the Agri-Biz Plan system.
Other things to watch out for include reductions in depreciation benefits.
- The special bonus depreciation will be gone. That was an incentive to encourage the purchase of brand new items. However, there may some special provisions for bonus depreciation in 2012 disaster zones. (Historically, they do that.)
- Section 179 depreciation drops from $500,000 worth of business assets to $125,000 (new or used assets). Really small businesses won’t be affected (except for farms and truckers). They don’t need that much equipment anyway.
The most important thing for you to know, though, is that the new 1099-K is back. These forms report all the income you generate via PayPal, merchant credit cards, and other similar ways that your clients pay you.
The bad news is, you might get some income reported twice – via the 1099-K from the banks and via the 1099-MISC issued by your clients. Be sure to learn how to avoid paying taxes on the same income twice. Come to www.TaxMama.com for tips.
The good news is, if you have been using PayPal to pay your affiliates, web designers, consultants, etc., you won’t need to issue 1099-MISCs to them. Same thing if you have been paying for services via the vendor’s merchant credit card account (their shopping cart). If your vendors learn this, there will be less of a chance of duplicate income reporting.
There will be lots more news as 2013 progresses. Drop by www.TaxMama.com to stay up-to-date or to get answers to your tax questions – for free.
Eva Rosenberg, EA , author, Small Business Taxes Made Easy. Reduce your taxes -increase business profits. A fun and helpful tax site www.TaxMama.com
This article is from the SmallBizLady special blog series: 31 Ways to Boost Your Small Business in 2013. #Boost2013