Good tax preparation relies on solid accounting services, and although the bookkeeper should not be confused with a tax preparation expert, the accounting department or outsourced accounting service provides data critical to the tax preparer. A number of new tax regulations went into effect January 1, and others changed or are may be revisited by Congress later this year, and while it’s the tax professional’s job to stay abreast of these changes, they impact bookkeeping as well.
Here are some current areas where a good accounting service will track information that will be needed at the end of 2012 when tax time rolls around again:
– Payroll tax cut: The payroll tax cut for employees was due to end after 2011, but Congress has revived the cut through the end of February 2012. This will have an impact on payroll and payroll planning, at least in the short-term.
– Depreciation drops to 50 percent: Among the tax breaks no longer available to business is the 100 percent bonus for first-year depreciation. Now, instead of deducting all of new equipment or capital expenditures, small business owners can only write off 50 percent of the cost of assets in the year they are placed new equipment into service.
– A higher ceiling on expenses: Businesses can now only expense up to $139,000 of assets put into use in 2012, down from $500,000.
– The R&D tax credit: Congress has eliminated the research and development tax credit, but experts predict they will probably revive it after the election.
– Social Security wage base rise: This year there is a $3,300 increase over 2011, the first increase since 2009. The Social Security tax rate will stay at 4.2 percent for the year, and 6.2 percent for employers; and the 1.45 percent Medicare rate will affect employers and employees alike. Self-employed workers will pay 13.3 percent on the first $110,100 in profits and 2.9 percent after that.
– Uncertain tax positions: More corporations will need to file Schedule UTP to report uncertain tax positions, since the $100 million asset threshold has been cut to $50 million.
– Reporting value of health coverage: As part of W-2 reporting, employers now must report the value of health coverage on W-2s for 2012.
These are just some of the changes in the tax rules and regulations affecting small business. Smart business owners need to be sure their accounting departments are sufficiently familiar with changes in tax law, or they need to seek help from accounting services that are paid to keep up with regulatory changes. Now is the perfect time to lay the groundwork for 2012 and to make certain that the company is in compliance. Are you confided that your accounting department is tracking the proper information and taking advantage of the current tax regulations?