New Tax Laws & Information That Could Impact Your 2014 Small Business Return

by Margot Carmichael Lester, Staples® Contributing Writer

DISCLAIMER: This information is only provided for general informational purposes, and should not be considered as offering individualized tax advice. Tax laws are complex; please consult your tax advisor on specific issues related to your tax situation. 

As if the IRS doesn’t have enough to do simply collecting our taxes, it spends a significant amount of time (along with the U.S. Congress) creating, revising and deleting parts of the tax code.

Here’s a short list of some of the new tax laws and changes that could affect your small business tax return for 2014.

The Affordable Care Act

If you obtain coverage in the SHOP Marketplace, your annual business income is tightly coupled with your monthly premium costs, according to Brian Ashcraft, director of operations for Liberty Tax Service in Virginia Beach, VA.

“Changes in your net income from business could cause an increase or decrease in your monthly premiums. It’s important to work closely with a tax professional to understand the effects of business income on ACA subsidies and tax credits,” he advises. Your tax pro can also tell you if your small business qualifies for the Credit for Small Employer Health Insurance Premiums. Get the definitive word from the IRS.

Other Noteworthy Items

In other news, there’s a new standard business mileage rate for tax year 2014: 56 cents a mile. That’s good news if you track work-related driving. There are two ways to compute this deduction — ask your CPA for the best one for your business.

Also of note, the Department of Treasury now allows companies to file for the Research and Development Alternative Simplified Credit (ASC) on an amended return. Previously, you could take the ASC only on an original return, but since it requires a lot of documentation, many busy entrepreneurs didn’t bother. Now you can get an extension to file an amended return using the ASC.

“One lesser known change affecting small business owners in 2014 relates to a collection of tax provisions commonly referred to as the ‘Repair Regs,’ which go into effect for tax years beginning on or after January 1, 2014,” explains George Malina, partner-in-charge of Sikich LLP’s accounting services practice in Naperville, IL. “These regulations affect when tangible property acquired by businesses is expensed — taken as a deduction, or depreciated — where the new purchases are deducted over time. The bottom line is that nearly every business will need to comply with these regulations by filing Form 3115 Application for Change in Accounting Method or by making an election on a filed tax return. Many businesses may find that they might need to do more than one or a combination of these. Failure to take any action may result in significant consequences in future years as they affect the timing of deductions.” It’s complicated, so it’s best to work with your accountant on this.

The Tax Extenders

Things get a little more complicated when we talk about the tax extenders, which are currently under debate in Washington.

“Small business owners will find that some deductions or credits expired or were reduced at the end of 2013 — Congress still may act to extend these credits for the 2014 tax year,” Ashcraft says.

Three of the relevant expirations/reductions are:

  • Energy Tax Incentive: “This incentive allowed deductions for new or renovated buildings that save 50 percent or more of projected annual energy costs for heating, cooling and lighting, when compared to national standards,” Ashcraft says. It also allowed for partial deductions for efficiency improvements to individual lighting, HVAC and water heating or envelope systems.
  • Work Opportunity Tax Credit: This credit, up to $9,600, was available to employers hiring veterans and other workers in specific categories. It expired in 2013.
  • Section 179 Deduction and Bonus Depreciation: “Section 179 allowed business owners to deduct the entire cost of certain purchases, such as equipment and furniture, in the year in which those purchases were made,” Ashcraft explains. “The deduction limit had been $500,000, but for the 2014 tax year it was reduced to $250,000. Bonus depreciation expired in 2013. It allowed businesses to claim half of depreciation in the year of purchase.”

Even with all this activity, Malina says 2014 has been a fairly quiet year for changes compared to 2013. “Perhaps too quiet,” he cautions. Those extenders have to be addressed at some point. “In 2014, financial advisors worked largely in uncertainty, and at the time of this interview, they still don’t know any more about them than they did at the beginning of the year.”

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