4. Accelerate expenses /defer income. Corporations expecting profit in 2012 may want to review their ability to accelerate expenses or defer revenue to the extent prudent and appropriate. Each corporation has its own set of facts and circumstances; therefore you should meet with your clients’ management team before year-end to determine the optimal strategy for their company.
There is some flexibility for bonuses, particularly with respect to closely held corporations. However, in light of the distinct possibility that tax reform could raise individual income tax rates in 2013 it may be prudent for corporations to deduct a bonus in 2012 and for individuals to recognize the income in 2012. “This would generally require that a bonus be paid before year-end,” DiSalvo says.
5. Review potential impacts tied to employer mandate for health insurance. Generally, under health care reform an employer can be taxed up to $2,000 per full time employee (with the first 30 exempt) if it carries insufficient or no health insurance for its employees. This tax does not start until 2014 and it only applies to “applicable large employers”, which are those employers who have, on average, at least 50 full time equivalent employees during 2013.
Nevertheless, urge your clients to review their employment levels now and in early 2013. “There may be steps that can be taken throughout 2013 that could mitigate or, in limited circumstances even eliminate, the potential for tax in 2014,” DiSalvo says.
Lauren Prosser currently serves as the Manager of Advisory Services at Sageworks Inc. She is also a member of Sageworks Professional Services (SPS), a team of specialized consultants providing partner coaching and client service plan development services to accounting professionals throughout North America.