Congress finally nailed down tax law changes for 2013 and small business owners s have some reason to celebrate the fiscal cliff deal.
The last-minute legislation includes provisions that small businesses should take advantage of:
1. Section 179 expensing of equipment, vehicle, fixtures, and furniture assets was set revert to $25,000 for 2013 but Congress established a limit of $500,000 for 2012 and 2013 in an effort to spur economic growth. Bonus depreciation was also set to expire but was also renewed through 2013.
2. The Work Opportunity Credit was extended through 2013 and is available to employers who hire workers from specified groups. To take the credit, owners generally have to request and be issued a certification for each employee from the state employment security agency (SESA). The certification proves that the employee is a member of a targeted group. You must receive the certification by the day the individual begins work or complete Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, on or before the day you offer the individual a job. Qualified employees include: Hurricane Katrina employee, long-term family assistance recipient, qualified recipient of Temporary Assistance for Needy Families (TANF), qualified veteran, qualified ex-felon, designated community resident, vocational rehabilitation referral, summer youth employee, SNAP recipient, SSI recipient, unemployed veteran, or disconnected youth.
3. The Research Credit and the production tax credits are also extended through 2013. According to the IRS, qualified research means “research for which expenses may be treated as section 174 expenses. This research must be undertaken for discovering information that is technological in nature, and its application must be intended for use in developing a new or improved business component of the taxpayer. In addition, substantially all of the activities of the research must be elements of a process of experimentation relating to a new or improved function, performance, reliability, or quality.” Because there are so many rules surrounding this credit, check with a tax professional to check specific items.
Bonnie Lee is an Enrolled Agent admitted to practice and representing taxpayers in all fifty states at all levels within the Internal Revenue Service. She is the owner of Taxpertise in Sonoma, CA and the author of Entrepreneur Press book, “Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn't Want You to Know.” Follow Bonnie Lee on Twitter at BLTaxpertise and at Facebook.