Tax Changes in 2014 affecting Small Business

After a year that included a governmental shutdown, preparation for sweeping changes to healthcare and a possible introduction of online sales tax, small businesses must pay close attention to what 2014 will bring. With financial guidance from your CPA firm, you can weather the upcoming tax changes with relative ease, but understanding the changes can also help you make informed decisions.

Individual Insurance Requirements and Exemptions

Under the Affordable Care Act (ACA), most people must buy healthcare insurance that meets or exceeds the new federal minimum standards. Although the law provides for some exceptions, people who have no insurance either through the Healthcare Marketplace or an employer could face penalties in 2014. Conversely, you may be eligible for tax deductions on your healthcare expenses even if you retain your current type and level of insurance. If you are self-employed, the thicket of new requirements, exemptions and deductions can be dense; your accountant can help you make your way through it.

Small Business Healthcare Credit

Companies that employ 25 or fewer full-time or full-time-equivalent employees may be eligible for tax credits under the ACA. If your business offers an affordable healthcare plan that meets federal guidelines and makes contributions that reach the necessary thresholds, you could be eligible for a credit of 50 percent of the total value of your supplementary contribution. During its initial year of implementation in 2013, the credit applied up to 35 percent of company contributions, a figure that still applies to non-profit employers.

Net Investment Income Tax

Originally implemented in 2013, this surtax is levied on your investment income in higher tax brackets. The threshold amounts for the NII tax range from $125,000 for married partners filing separately to $250,000 for couples filing jointly. Estates and Trusts are also subject to the 3.8 percent tax, and thresholds have changed for 2014. Consult your tax advisor or tax preparer for more details about how this tax could affect your personal and business tax returns.

Depreciation Deduction Changes

The 50 percent depreciation bonus that has protected many businesses from significant expenses due to tangible assets expired at the end of 2013. While Congress could still choose to extend it, current changes will reduce maximum depreciation deductions across the board, including first-year deductions for business vehicles. Depending on your business, you may lose other deductions, including some of those applied to using biodiesel fuels and maintaining railroad tracks. Because these deductions are still in a state of flux, it is vital to have a communicative CPA firm that can adjust as legislators change the tax landscape.

Payroll Tax Increases

Many small and mid-size businesses will face larger payroll taxes in 2014. Part of this rise comes from the ACA; businesses and self-employed workers now incur a 0.9 percent health insurance tax. As with the Net Investment Income tax, these increases will affect self-employed taxpayers who earn more than $125,000 for married people filing individually or $250,000 for joint filing. Some businesses will also pay more in state taxes for 2014.

With sweeping changes affecting your tax credits, payments and deductions this year, having sound advice from an accountant who is experienced with tax preparation and compliance could be pivotal in protecting your investments.


IRS Form 4868 – Automatic Extension

We are in the middle of tax season.  If you are running short on time, file IRS Form 4868 before April 15, 2014.  It is painless and will save you penalties, at the very least.  The form is only about the size of a check.  IRS Form 4868 is very easy to fill out.

If you do not have money to pay taxes (assuming you owe), still file IRS Form 4868.  As the IRS Form 4868, it is automatic.  In other words, the IRS does not have to approve a timely filed IRS 4868 Automatic Extension.  It really is automatic.  Few things are automatic under the United States Tax Code.  Take advantage of the 4868 if you need it.

I uploaded IRS Form 4868 to this site.  It is available for download for your convenience.

Patron you local Denver Tax Accountant this year.  Support local business.  A CPA is your best choice.  CPA’s are competitive on pricing with all of the large national tax preparation companies.  Most non-CPA tax preparers have minimal training, and seasonal if that.  CPA’s have a life-long dedication to accounting and tax preparation.

Build and fortify a long-time relationship with your Denver CPA.  You will be rewarded throughout your life.  As the saying goes, you want a good Lawyer, a good CPA, and a good Banker.

Take care and all the best, Philip M. Falco, CPA


New Healthcare (ObamaCare) 3.8% Tax on Net Investment Income

New Health Care (Obamacare) Net Investment Income Tax.  The Net Investment Income tax is 3.8% of Net Investment Income.  If you file as single and your adjusted gross income is more than $200,000 or file as married and your adjusted gross income is more than $250,000, you may be subject to this tax.  The tax is aimed at investors in stocks and real estate.  If you have rent income, dividends and/or capital gains that are passive, you are likely subject to this new tax.  This is a planning opportunity.

Small Business Tax Tip – Deduct employment taxes

Over the years of my practice I have gleaned that one of the best approaches to sound tax compliance is for a small business to deduct employment taxes as it pays wages.

What I have observed is that a new small business will play catch up on employment taxes or remain unaware of filing requirements. If a new business immediately deducts employment taxes, its chances of staying compliant increase.

Talk to your CPA about this and starting off on the right track!

by Philip Falco, CPA