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TOP TAX ISSUES FOR SMALL BUSINESS What Will Affect Businesses This Year (and Beyond). Updated January 27, 2014 Katie Powell, CPA and Yulia Sharapova-Leamy, CPA Thompson Kessler Wiest & Borquist PC. Cutting Through the Complexity. 2013 Survey by the National Small Business Association:

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top tax issues for small business what will affect businesses this year and beyond

TOP TAX ISSUES FOR SMALL BUSINESSWhat Will Affect Businesses This Year (and Beyond)

Updated January 27, 2014

Katie Powell, CPA and Yulia Sharapova-Leamy, CPA

Thompson Kessler Wiest & Borquist PC

cutting through the complexity
Cutting Through the Complexity
  • 2013 Survey by the National SmallBusiness Association:
    • Most small companies spend more than40 hours a year dealing with federal taxes
    • 38% spend more than 80 hours a yearon tax compliance
small business health care tax credit
Small Business Health Care Tax Credit
  • Small businesses can qualify for a credit basedonhealth insurance premiums paid if they:
    • Have fewer than 25 FTE employees
    • Pay an average annual wage of lessthan $50,000
    • Contribute 50% or more to employeehealthinsurance premiums
small business health care tax credit1
Small Business Health Care Tax Credit
  • For tax years beginning in 2014, the credit is 50% of premiums paid(35% for small tax-exempt employers)
  • Credit will apply only to participants in the Small BusinessHealth Options Program (SHOP) Marketplace
  • SHOP opens to companies with up to 50employees; expected to expand in 2016
new tax rates on ordinary income and capital gains
New Tax Rates on Ordinary Income and Capital Gains
  • Highest individual income tax rate: 39.6%
  • Qualified dividend and long-term capitalgains tax rate: 20% for highest earners
    • If the new net investmentincome tax applies: 23.8%
new 3 8 tax on n et investment income
New 3.8% Tax on Net Investment Income
  • Modified adjusted gross income (MAGI):
    • >$250,000 for joint filers
    • >$200,000 for single filers
  • Tax applies to the lesser of:
    • Net investment income (NII)
    • Amount of MAGI > threshold
  • NII includes capital gains, interest,and dividend income frominvestment assets
  • May also apply to rental androyalty income
repair and capitalization regulations
Repair and Capitalization Regulations
  • Areas affected
    • Capital expenditures
    • Materials and supplies
    • Repairs and maintenance
    • Acquisition and production costs
    • Improvement costs
repair and capitalization regulations1
Repair and Capitalization Regulations

New safe harbor provisions

  • Capital expenditures up to $5,000
    • Applicable financial statements
    • Written book capitalization policy
  • Capital expenditures up to $500
  • Election to follow book capitalization policy
  • Materials and supplies up to $200
repair and capitalization regulations2
Repair and Capitalization Regulations

Annual election not to capitalize improvements

  • Repairs, maintenance, and improvements up to lesser of:
    • $10,000
    • 2% of unadjusted building basis
  • Gross receipts up to $10 million
  • Building cost up to $1 million
section 179 expense and bonus depreciation deduction
Section 179 Expense and Bonus Depreciation Deduction
  • Section 179 expense limit
    • 2013: $500,000
    • 2014: $25,000 plus inflation
  • Section 179 threshold
    • 2013: $2,000,000
    • 2014: $200,000 plus inflation
  • Bonus depreciation
    • 2013: 50%
    • 2014: 0%
home office deduction
Home Office Deduction
  • New safeharbor method
    • $5 per squarefoot
    • Up to 300 square feet
  • Regular and exclusive use
planning for retirement and business succession
Planning for Retirement and Business Succession
  • Variety of retirement savings options
    • SEP
    • SIMPLE
    • 401(k)
  • Succession planning starts now!
    • Expected and unexpected
    • Sources of financing
choice of entity
Choice of Entity
    • Sole proprietorships
  • Flow-through entities
    • Partnerships
    • LLCs
    • S corporations
  • Double taxation
  • New individual tax rates
foreign accounts tax compliance
Foreign Accounts Tax Compliance
  • Foreign bank account report (FBAR)
    • Annual requirement
    • Financial interest or signature authority
    • Maximum balance of $10,000 or more
  • Foreign financial asset report
    • Filed in addition to FBAR
    • Part of individual tax return
foreign accounts tax compliance1
Foreign Accounts Tax Compliance
  • Offshore voluntary disclosure initiative (OVDI)
    • Previously unreported accounts
    • Penalty of 27.5% of highest balance
    • Amended returns for up to 8 years
state and local tax concerns
State and Local Tax Concerns
  • Nexus
  • Filing requirements
  • Apportionment issues
  • Withholding requirements
  • Oregon developments
planning opportunities
Planning Opportunities
  • Added complexity may open up new opportunities
  • CPA and small business owner partnership
  • Year-round tax planning
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Questions

KatieP@ThompsonKessler.com

YuliaS@ThompsonKessler.com

111 SW Columbia Street, Suite 750

Portland, Oregon 97201

(503) 225-1612