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How Will New Tax Changes Affect Your Business?

Dennis Fitzpatrick of Kaufman, Rossin & Co.With the recent passage of the American Taxpayer Relief Act of 2012, many of our clients are asking us what tax changes they should be aware of and how these changes will affect them. While we recently shared an overview of the 2013 tax changes affecting individuals, Congress also extended several popular business tax benefits that were set to expire. Here’s a look at some of the new tax provisions affecting businesses:

Business Asset Expensing

  • Section 179 Deduction. The Act extends Section 179 small business asset expensing through 2013. The Section 179 deduction is available for most new and used capital equipment and also includes certain software. For tax years 2012 and 2013, businesses can expense up to $500,000 of qualifying purchases with a $2 million investment limit. In addition, the Act includes a two-year extension of Section 179 expensing of up to $250,000 for qualifying leasehold improvements, restaurant property, and retail improvement property through 2013.
  • Bonus Depreciation. The 50% bonus depreciation is extended through 2013; some transportation and longer production property is eligible through 2014. Qualifying property includes most new equipment that is depreciable under the Modified Accelerated Cost Recovery System (MACRS) with a depreciation period of 20 years or less. Original use of the property must begin with the taxpayer claiming the bonus depreciation, and the property must be placed into service during the tax year.
  • Cost Recovery Periods. The Act extends through 2013 the 15-year cost recovery period for qualified leasehold improvements, restaurant property and retail improvement property.

R&D Tax Credit

Congress extended the research and development tax credit retroactive to January 1, 2012. Businesses can claim the incremental credit for increases in business-related, qualified research expenditures. Companies developing new or improved products or outsourcing product testing may be eligible.

Work Opportunity Tax Credit

The Work Opportunity Tax Credit (WOTC) is extended through 2013. Employers who hire veterans and other individuals from certain target groups who face barriers to employment are eligible for a credit with a maximum range from $2,400 to $9,600, depending on the employee hired.

Other Business Tax Benefits

Congress also extended the following business tax provisions through 2013:

  • The 100% exclusion for gains on a sale of small business stock
  • Special tax incentives for businesses located in empowerment zones
  • Rules on S corporations making charitable donations of property

If you have questions about the American Tax Relief Act of 2012 or want to learn more about how your business may be affected by these tax changes, please contact us.

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Dennis Fitzpatrick, J.D., is a tax principal at Kaufman, Rossin’s Miami office. Kaufman, Rossin & Co. is one of the top CPA firms in the country. Dennis can be reached at dfitzpatrick@kaufmanrossin.com.

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Create STRONG passwords that you won’t forget!

Too often we are expected to create random, complicated passwords with special characters and lots of restrictions. Especially now, with all the security breaches, we recommend the following method to help you develop passwords that are strong and easy to create and remember:

For website passwords, use the first four or five letters of the website to start the password. For example: 

Website Password
www.amazon.com amaz
www.citibank.com citi
www.hotmail.com hotm

 

For added security, add the @ symbol and a number (1,2,3,4,5,6,7,8,9,0) to the first letters of the website. For example:

Website Password
www.amazon.com amaz@1
www.citibank.com citi@1
www.hotmail.com hotm@1

 

Pick a phrase that is easy for you to remember, but that no one else will be able to attribute to you. For example:

Passphrase: “My Wife’s Birthday Is April Twenty-Fifth Nineteen Sixty Six”

Use the first letter of each phrase to form an abbreviation. For example:

m – My
w – Wife’s
b – Birthday
i – Is
a – April
t – Twenty-
f – Fifth
n – Nineteen
s – Sixty
s – Six

Abbreviated pass phrase: mwbiatfnss

Add the passphrase to the first letters of the website, the @ symbol and number. For example:

Website Password
www.amazon.com amaz@1mwbiatfnss
www.citibank.com citi@1mwbiatfnss
www.hotmail.com hotm@1mwbiatfnss

Following this pattern will help you develop strong passwords that are easy to create and remember. Remember that at a minimum the passwords must:

  • contain at least 1 letter
  • contain at least 1 number or punctuation mark
  • be at least 8 characters long

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Jorge Rey, CISA, CISM, CGEIT is an associate principal and the director of information security & compliance for Kaufman, Rossin & Co. Kaufman, Rossin is one of the top CPA firms in Florida. Jorge can be reached at jrey@kaufmanrossin.com.

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Using payroll service for QuickBooks 2009? It’s time to upgrade!

Payroll service for QuickBooks 2009 will be discontinued on June 30, 2012, and all payroll subscriptions for customers with QuickBooks 2009 will be inactivated.

On July 1, 2012, QuickBooks 2009 will no longer automatically calculate correct payroll taxes or provide payroll tax forms. Live technical support and add-on business services such as payroll, credit card processing, QuickBooks Email, and online banking will also be discontinued.

However, if you don’t use live technical support or any of the add-on services, and are happy with your current version of QuickBooks, you can continue to use it.

Products for which services will be discontinued are:

  • QuickBooks Pro, Premier and Simple Start 2009
  • QuickBooks for Mac 2009
  • QuickBooks Enterprise Solutions 9
  • QuickBooks Premier Accountant Edition 2009
  • Credit Card Processing Kit 2009
  • Invoice Manager 2009

We encourage you to upgrade your QuickBooks software as soon as possible to minimize disruption to your business. If you have any concerns, please contact your Kaufman, Rossin professional or one of our QuickBooks ProAdvisors.

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Lisa K. Grossman is an associate principal at Kaufman, Rossin & Co., and a leader in the Firm’s QuickBooks consulting practice. Lisa is a Certified Public Accountant in the state of Florida and a QuickBooks ProAdvisor. Kaufman, Rossin & Co. is one of the top CPA firms in the country. She can be reached a lgrossman@kaufmanrossin.com.

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Top 10 reasons you should update your estate plan before the end of 2012!

  1. Tax exemption is higher now than ever, but not for long.
    The current estate, gift and generation skipping tax exemption is currently $5,120,000 ($10,240,000) per couple. This is higher than it has ever been and is scheduled to drop to only $1,000,000 (only $2,000,000 per couple) in 2013 unless Congress and the President can reach an agreement. This may be a use it or lose it!
  2. Your plan may disinherit your spouse!
    Do your current estate planning documents include a formula for determining the amounts passing to heirs or trusts for heirs based upon the exemption? With the currently high exemptions, your plan may disinherit your spouse!
  3. Is your business safe from creditors or predators?
    Do you have a succession plan for your business? Does your plan include the use of asset protection trusts funded up to the amount of your exemption to safeguard your business from your heirs’ creditors, spouses and predators?
  4. Interest rates are historically low!
    The interest rate that the IRS requires to be used for interfamily loans, sales to family trusts, and other planning techniques is at historical lows. The current required interest rate for a 9 year loan made in June 2012 is only 1.07%.
  5. Discounting the value of assets is still available.
    Discounted values for lack of control and lack of marketability for interests in Corporations, Partnerships and LLCs are still available for interfamily transactions. There has been much talk about limiting such discounts, but currently, discounting is still available for planning purposes.  When discounting the value of assets by 33%, the effective interest rate on a note as mentioned in item four above drops to only 0.7%!
  6. If you’re feeling generous – there’s no estate or gift tax!
    If you are currently giving or planning to give significant sums of money or assets to your favorite charity, the current low interest rates allow you to help your charity and transfer assets to your heirs with no estate or gift tax. Ask about the use of a charitable lead trust.
  7. Consider a Roth IRA conversion for estate tax savings.
    If you have a large IRA or retirement plan as part of your taxable estate, which is in excess of the exemption, you should consider a Roth IRA conversion. This will reduce your taxable estate and provide years of tax free cash flow to heirs.
  8. Avoid aggressive taxation on your vacation home.
    Do you have a vacation home outside Florida that will be subject to state estate tax and the costs of an ancillary probate administration in that state? Simple steps can avoid the often very aggressive taxation of these homes.
  9. Is your life insurance subject to estate taxes?
    An irrevocable life insurance trust can avoid the estate tax and provide asset protection for your heirs.
  10. Do you have a family member who has special health needs?
    You may want to consider unique provisions in your estate planning documents.

Don’t wait until the end of the year to get started.  Do it now!

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John R. Anzivino, CPA is in charge of Kaufman, Rossin’s estate, trust and exempt organization practice. Kaufman, Rossin & Co. is one of the top CPA firms in the state and offers a wide variety of services for high-net worth individuals. John can be reached at janzivino@kaufmanrossin.com

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Another IRS email scam

The IRS will never initiate contact via email. If you receive an email claiming to be from the IRS, it is a SCAM!

Below is a screenshot of one of the scam emails being sent.

If you have any concerns or questions, feel free to contact your Kaufman, Rossin professional.

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Scott F. Berger is a tax and accounting services principal at Kaufman, Rossin’s Boca Raton office.  Kaufman, Rossin & Co. is one of the top CPA firms in the country.  He can be reached at sberger@kaufmanrossin.com.