By now you should be fairly organized with your 2011 taxes and should be thinking about 2012 and how to plan for tax saving measures.
Those who have active Florida companies don't forget to file your annual report. If the report is not filed by May 1, there is a $400 late fee. The report is filed at www.sunbiz.org. All active limited liability companies, for profit corporations, not for profit corporations, limited partnerships, and limited liability limited partnerships are required to file annually.
Let's look forward to 2012 for future tax planning. We know that 2012 will start with one set of tax rules, and it surely will end with a different set. Congress must address the 2-percentage-point tax in employees' share of Social Security payroll tax that applies for the first two months of this year.
Currently, Congress has failed to extend: write-offs for state sales taxes; college tuition; education tax deduction for teachers' classroom supplies; a special provision allowing individuals 70 1/2 or older to donate funds from their IRAs directly to charity; many of the energy tax credits; 100 percent business bonus first-year depreciation; and 15-year write-offs for restaurant renovations and tenant improvements.
Also, the retention credit for hiring the unemployed and the tax credit for employing members of disadvantaged groups is no more. Likewise, the 100 percent gain exclusion for investors who buy stock in a small company has bitten the dust.
Other changes that are important to both individuals and businesses for 2012 are: the Social Security wage base is increased to $110,100; Social Security benefits are increased by 3.6 percent; Basic Medicare Part B premium rises to $99.90 per month; the annual caps on health savings accounts and limits on deducting long-term-care premiums are higher; the standard deduction for 2012 has increased; the maximum 401(k) contribution limit has increased; there is no change in the IRA and Roth IRA contribution limits; and the standard mileage allowance for business driving is 55.5 cents per mile.
Employers generally can provide cellphones to their employee income-tax free if the arrangement is for business reasons. The interesting thing about taxes is that Congress can change the law at its pleasure and can decide to make those changes retroactive to Jan. 1. This is great, but creates a tax planning challenge especially when the end of the year creeps up and all of a sudden congress decides to make some significant changes.
New IRS Program for Reclassifying Workers
Hiring an independent contractor instead of an employee is often cheaper because of cost savings on employment taxes, unemployment and workers' compensation insurance, and employee benefits. But improperly treating workers as independent contractors can be very costly.
The IRS has announced it will be reviewing businesses that consistently use independent contracts to confirm that they are not being misclassified. I know that on the surface it seems like a cost saving business measure but not if you are penalized by the IRS. The penalties and fines are steep. You should evaluate the rules at www.irs.gov and make sure you are not pushing the envelope.
The SBDC provides small business counselors to guide you through this process. These are experienced professionals who are working to benefit small businesses. The service is free. Call 745-3700 for an appointment.
Neil Shnider, MBA, CPA, is a special projects consultant for the Small Business Development Center at Florida Gulf Coast University. He can be reached at the SBDC center or at firstname.lastname@example.org. Go to www.theshnidergroup.com for more small business information and tools.