3. Deduct the expense of certain equipment purchased in 2012. Internal Revenue Code section 179 allows a business to elect to treat the cost of certain property (such as computers, office furniture, equipment, and machinery used for business) purchased this year as a
one-time deductible expense. Companies can expense up to $139,000 for 2012. The deduction is phased out dollar-for-dollar for purchases exceeding $560,000. So, for example, if your company bought equipment for $572,000, the maximum eligible 179 deduction would be $127,000 ($139,000 reduced by the $12,000 excess).
4. Take the allowed depreciation on new equipment. New business equipment and machinery put into service before year end qualifies for the 50 percent bonus first-year depreciation allowance. Unless Congress acts, this bonus depreciation allowance generally won’t be available next year.
5. Write off your heavy SUVs. Heavy SUVs (those built on a truck chassis and rated at more than 6,000 pounds gross-loaded vehicle weight) are allowed an immediate tax deduction of up to $25,000 in 2012. In 2013, these write-off rules may not be as generous.
6. Hire a vet to qualify for a tax credit. If you’re thinking of adding to your payroll, consider hiring a qualified veteran before the year ends to qualify for a Work Opportunity Tax Credit. Under current law, the WOTC for qualifying veterans won’t be available for post-2012 hires. The WOTC for hiring veterans ranges from $2,400 to $9,600, depending on a variety of factors.
7. Distribute dividends if you are an S- or C-corp. If the Bush tax cuts expire, the tax on “qualified” dividends of 15 percent is scheduled to end on Dec. 31. Therefore, corporations (C-corporations and certain S-corporations) with excess earnings and profits should consider making dividend payments in 2012.
8. Increase withholding to avoid estimated tax penalties. Small-business owners who have not withheld the appropriate amount from their salaries (or have not made the required amount of quarterly tax payments) may be subject to underpayment penalties. Income tax withheld from wages or salaries is treated as paid in equal amounts throughout the year. Therefore, the underpayment penalty can be eliminated if sufficient additional taxes are withheld from wages or salaries for the balance of the year.
May your small business prosper in the new year!