Money Matters: Sandy, fiscal cliff deal could change taxes for small businesses
Small business owners should be on the lookout for some changes to their federal taxes in 2013. Bree Driscoll filed the following report.
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Tax experts say between the fiscal cliff deal and Hurricane Sandy, small business owners should be on the look out for big changes in 2013.
The first is the change to their employee's paychecks, stemming from the end of the Social Security payroll tax cut.
Experts say the cost of living increase some employers are giving out is almost nullified by the change.
"I just did an adjustment for one of my clients on all his employees' payrolls, and he said it looks like they got a decrease instead of a raise," says Ellen Minkow, a CPA with MS 1040 LLC.
Meanwhile, as businesses affected by Hurricane Sandy struggle to survive day-to-day, experts say they also need to look on the horizon.
"Now, what will happen is, their income will go down for 2012, but for 2013, their insurance proceeds will come in, and a lot of businesses are cash bases," says John Lieberman, managing director of Perelson Weiner LLP. "Now they have to report the income."
That means they will have to pay more in taxes.
On the flip side of things, some small businesses, like construction and remediation, have seem a boom since Hurricane Sandy.
"All of a sudden, their income is going to go up, and unfortunately, we are not able to income average," Lieberman says. "So some people will be pushed into that higher tax bracket. So again, planning is essential for these small businesses."
Some of this income may be off set by the new Section 179 Deduction limits for 2012 and 2013 that were raised as part of the fiscal cliff deal.
"Instead of making you depreciate, they allow you to take the expense in year one," says Fred Slater, a CPA with MS 1140 LLC.
Businesses can apply this deduction to things like new equipment, business furniture and building new offices.
Meanwhile, certain industries like energy and television and film production are seeing a continuation of their tax credits.
"It is exciting to see that there is filming all the time on a street corner, and you see the vendors, the food vendors, and it brings in the tourists to watch," Minkow says. "So there is a lot going on, and I think it helps the economy to have that type of business here."