YEAR-END PLANNING: MAKING THE MOST OF QUICK WRITEOFFS FOR CAPITAL GOODS PURCHASES

Although bonus first-year depreciation and more-generous Code Sec. 179 expensing limits have been extended before, another lease on life for these tax breaks is far from certain this time around.

Unless Congress acts, additional depreciation deductions under Code Sec. 168 in the placed-in-service year equal to 50% of the adjusted basis of qualified property won't be available after this year. Also, the Code Sec. 179 expensing limit is set to plummet to $25,000 for property placed in service next year.

The message, businesses planning to purchase machinery and equipment during the remainder of this year or early the next should try to accelerate their buying plans, if doing so makes sound business sense.

THE IMPORTANCE OF ACCOUNTANTS MENTIONED IN THE PRESIDENTIAL DEBATE

Finally us accountants are getting the respect we deserve. President Barack Obama and Republican presidential nominee Mitt Romney traded barbs about tax policy and how they would control the budget deficit, with Romney telling Obama at one point that he might need to get a new accountant.

Later Obama said he wanted to end corporate tax breaks for companies that ship jobs overseas, Romney responded, “You said you get a deduction for taking a plant overseas. Look, I've been in business for 25 years. I have no idea what you’re talking about. I maybe need to get a new accountant.” I wonder what the country's financial situation would be like if us accountants ran the country?

SECTION 179 FOR 2013

As we are doing year end tax planning, the question has come up several times on how to plan for the fast write off of equipment called section 179. It is confusing. The current law is a limit of $25,000 for 2013, but will Congress change this low number. Who knows?

Both the President and Congress have discussed increasing the deduction up to $500,000 with a phase-out starting at $2 million. It appears at the moment that the Democrats are pushing this more than the Republicans, but they have other incentives that may provide small business tax relief similar to the Section 179 deduction.

There is even a chance that it may go to $500,000 from the current $139,000 in 2012. Unfortunatey we will not know until the election is over.

90 DAYS AWAY: FEDERAL TAX HIKE WILL AVERAGE $3,500 PER HOUSEHOLD, STUDY FINDS

The impending "fiscal cliff" continues to dominate the political news media. The AP reports that unless Congress and President Obama agree to change current law, "a typical middle-income family making $40,000 to $64,000 a year could see its taxes go up by $2,000 next year." A new report by the Tax Policy Center finds that nine out of 10 households would be affected by the expiration of current tax rates -- although the top 20% of earners would bear 60% of the overall cost. Across all households, the tax increases would average almost $3,500, according to the study. The AP notes that "economists warn the looming tax hikes, combined with $109 billion in automatic spending cuts scheduled to take effect in January, could throw the fragile economy back into recession."

FEDS NEED 18 PAGES TO DEFINE 'FULL-TIME' FOR OBAMACARE

The IRS just issued regulations on who is considered a “full time employee” for the Patient Protection Act.  Is it any surprise that it took over 18 pages for a law that was over 2,700 pages?

5 TIPS ON GAMBLING INCOME AND LOSSES

Do you bet on the ponies, play cards or enjoy slot machines, then you should know that as a casual gambler, your gambling winnings are fully taxable and must be reported on your income tax return. You can also deduct your gambling losses…but only up to the extent of your winnings.

Here are 5 important tips about gambling and taxes:

1. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.

2. If you receive a certain amount of gambling winnings or if you have any winnings that are subject to federal tax withholding, the payer is required to issue you a Form W-2G, Certain Gambling Winnings. The payer must give you a W-2G if you receive:

• $1,200 or more in gambling winnings from bingo or slot machines;
• $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
• More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
• $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
• Any other gambling winnings subject to federal income tax withholding.

3. Generally, you report all gambling winnings on the “Other income” line of Form 1040, U.S. Federal Income Tax Return.

4. You can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.

5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.

HIGHER FUTA TAXES FOR MANY STATES AND A CUT FOR A COUPLE

Firms in many states will pay higher FUTA taxes for 2012. The 5.4% credit against FUTA tax is reduced for companies in states that haven’t repaid loans from the federal jobless fund by November 10th.

Employers in Indiana. and South Carolina face a 0.9% cut in their FUTA credit. That translates to as much as $63 extra in tax per employee.

Staring at a 0.6% additional tax of credit of up to $42 more tax per employee are companies in the Virgin Islands and 19 states: Alabama, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolihna, Ohio, Pennsylvania, Rhode Island, Virginia and Wisconsin.

In addition, businesses in Arizona, Colorado, Delaware, Kansas and Vermont face a 0.3% drop in the credit...an up to $21-per-employee increase. The final word will be announced in mid-November. 

One bit of good news: The 0.2% FUTA surtax that lapsed last year was not revived.