As Washington lets the country slide cliff-ward, small business owners are ending the year with little clue as to what tax policy will look like next year. In the absence of a deal to soften pending tax hikes and spending cuts, rates are set to go up for most taxpayers. Any compromise that President Obama agrees to will likely mean higher taxes on top earners. Despite the uncertainty, planning now can help business owners navigate the foggy depths beyond the fiscal cliff. Here are four lessons from Smart Answers columnist Karen E. Klein‘s reporting that can guide you.
How to plan for expiring tax cuts:
“Business owners are often advised to defer fourth-quarter income into the following calendar year to delay tax liability. But if tax rates rise in 2013, it might be better to recognize the income in 2012 and defer deductions to 2013 when they could have more impact.”
How a rising gift tax affects succession planning:
“The significant difference in tax exemption rates between this year and next could indeed factor into your small business succession plans,” says Ed Kohlhepp, president of Kohlhepp Investment Advisors in Doylestown, Pa., “but it should not be the deciding issue.”
Why you shouldn’t fudge business expenses:
“Nobody wants to be the subject of an audit or have a deduction challenged that can give rise not only to back taxes but also interest and penalties,” says Ben Straughan, an attorney and partner in the emerging-companies practice at Seattle-based Perkins Coie. “But it also presents an appearance issue for potential investors and other persons who want to evaluate the profitability of your business.”
What Obamacare means in 2013:
Starting in January, employers will have to report health benefits on the W-2 tax forms they issue to employees for wages in 2012. In October, the new health insurance exchanges are scheduled to open enrollment for individuals and businesses with fewer than 100 employees.