Advanced Tax Planning

In recent years, end of year tax planning for businesses has been further complicated by uncertainty over the future availability of many tax incentives. The 2013 year-end is no different. In the early hours of January 1, 2013, the Senate passed the American Taxpayer Relief Act of 2012, which permanently extended the so-called Bush-era tax cuts. However, other popular provisions were only extended through 2013. Therefore, 2013 tax strategies include concerns over expiring provisions. But 2013 is also unique due to changes that are affecting businesses.

For example, as part of its primary purpose to facilitate health care reform, the Patient Protection and Affordable Care Act (PPAC<) includes key tax provisions that affect businesses. Some requirements are already in effect, while other provisions apply starting in 2013 or later. Higher tax rates may be imposed on distributions to owners and the net investment income regulations have the potential to impact individuals who are owners of pass-through entities. In addition, the U.S. Supreme Court's ruling in mid-July on the unconstitutionality of the federal Defense of Marriage Act (DOMA) means changes to retirement plans and employee benefits for same-sex marriages. Also, compliance with final repair regulations affects virtually all businesses.

We were asked:

I am trying to find out if it is true that homeowners selling after Jan 1 2013 will have to pay a 3.8% sales tax on their sale. I have asked a couple of realtors but on one can give me an answer. I get emails all the time claiming that this is a part of Obamacare in order to pay for it.

We get this question all the time. There was an extremely popular email that claimed such, and the idea gained new life as 2013 rolled around.

The IRS has issued long-awaited and much needed proposed reliance regulations on the operation of the two new surtaxes imposed under the 2010 healthcare legislation: the 3.8 percent Net Investment Income Tax (NIIT), and the 0.9 percent Additional Medicare Tax. Both surtaxes are scheduled to come into full effect on January 1, 2013. The proposed reliance regulations and the frequently asked questions on the IRS website attempt to address many of the gaps in the application of these surtaxes that have been questioned by tax professionals, employers, and taxpayers. The guidance on each of these surtaxes is extensive and is immediately critical for affected taxpayers.

We know that you have worked hard for your money and would like to reap the benefits to the greatest extent possible. Your ultimate goal is to sustain a successful wealth-building strategy while avoiding unnecessary and expensive tax consequences. We are interested in helping you achieve these objectives.

For the last few years, there has been talk of major tax reform that would place an increased tax burden on higher income individuals. Included in these discussions is the so-called “Buffet Rule,” which would impose a minimum tax rate of 30 percent on adjusted gross income (AGI) over $1 million. Most tax professionals predict that tax reform has little chance of becoming law in 2014, but it is wise to weigh your options carefully with higher tax rates looming on the horizon.

"Form 8752 - Required Payment or Refund Under Section 7519" is certainly not the clearest form title.

Simply:

The IRS asks Fiscal Year, S Corporations, and Partnerships to file a Form 8752. The IRS then holds in an escrow-like account an estimate of you would have paid if you operated on a calendar year end. Essentially its like a security deposit that a landlord may require from a tenant.

However, since it is "in escrow" you receive a portion of the funds back if your profit decreases from year to year, and your receive the funds back in total if there is a tax loss or the business is dissolved. 

In recent years, end of year tax planning for businesses has been complicated by uncertainty over the availability of many tax incentives. The 2014 year-end is no different. In the early hours of January 1, 2013, the Senate passed the American Taxpayer Relief Act of 2012, which permanently extended the so-called Bush-era tax cuts. However, other popular provisions were only extended through 2013. Therefore, 2014 tax strategies include concerns over the fate of the expired provisions. President Obama, the chairs of the House and Senate tax writing committees, and individual lawmakers all made tax reform proposals in 2014. The proposals ranged from comprehensive tax reform to more piece-meal approaches. However, any progress on legislation is stalled until after the elections and possibly into the beginning of 2015.