With the 2013 calendar year coming to an end and everyone busy sorting out their taxes, it would be a good idea to go over some of the continuing business tax provisions (“tax-extenders”) that are about to expire. There is a great deal of uncertainty as to whether any of these provisions will be extended beyond 2013 (considering the cost of these provisions and benefit to the related business/industry). The tax professionals at AG Tax have prepared a brief summary (based off of a recent IRS announcement) on the major provisions that are scheduled to expire at the end of 2013 if not extended. If taxpayers had previously relied on these provisions for their tax planning, they should consider a visit to their tax consultant.
• First-year “bonus” Depreciation: 2012 Taxpayer Relief Act has extended 50% bonus depreciation on qualified business service property to the end of 2013. Whether this provision will be extended again after 2013 has not yet been determined.
• Increased Section 179 expense limits: 2012 Tax Relief Act has increased the small business expense up to $500,000 with a $2 million investment limit through the end of 2013. Whether this provision will be extended again after 2013 has not yet been determined.
• Depreciation for qualified leasehold/Retail Improvements, Restaurant Property: 2012 Taxpayer Relief Act has extended a 15-year recovery period (using the straight-line method) for qualified leasehold improvements, qualified retail improvements and qualified restaurant property . However, whether the depreciation life and method will stay the same after 2013 has not yet been released.
• Work Opportunity Tax Credit (WOTC): WOTC is a federal income tax credit incentive provided to private sector employers, who may be eligible for this credit when he/she hires job seekers who face employment barriers. It is a one-time tax credit for each new hire. The credit is usually equal to 40% of first-year wages up to $6,000. The 2012 Taxpayer Relief Act extended the WOTC through 2013, but it has not yet released whether it will be extended further.
• Research & Development tax credit: This credit applied to the excess of eligible research expenditures . If the taxpayer is developing, improving, or refining products, processes, formulas, or computer software, they may qualify to take the credit. The 2012 Taxpayer Relief Act has extended the credit through 2013, but has not yet released the availability to take this type of credit after 2013.
• Reduced recognition period for S corporation built-in gains tax: An S corporation shareholder is usually not subject to tax on corporate distributions. In case a C corporation converts to an S corporation and then liquidates, these built-in-gains tax provisions are designed to prevent the C-corporation from avoiding payment of a corporate-level tax on its distributions made during a recognition period. This recognition period was originally 10 years; through different legislations the recognition period was reduced to 7 years and 5 years. Through the 2012 Taxpayer Relief Act, the recognition period of 5 years was temporarily extended.
• Health Coverage Tax Credit: The credit on 72.5% of the amount paid for qualified health insurance coverage by a taxpayer expires on January 1, 2014 and the tax credit will no longer be available.
AG Tax LLP Can Help
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance.
Furthermore, as a full service accounting firm, AG Tax associates are dedicated to assist you with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
