News From Terre Haute, Indiana

February 24, 2013

Business Cents: Businesses should watch for tax changes

Heather Strohm
Special to the Tribune-Star

TERRE HAUTE — Dear Small Business Owners:

Tax season is upon us again. With 2012 in the past, what is going to happen in 2013? Our Congress still has many decisions to make regarding taxes and the impact they will have on both large and small businesses. A few things looming around the corner:

1. Affordable Care Rules are honed in on. The Patient Protection and Affordable Care Act (“Obamacare”) was enacted in 2010. The Act does not impose any mandate on health coverage until 2014, but you will begin to feel the pressure of the taxes beginning this year. This is because two additional Medicare taxes come into play:

A. A 0.9 percent additional Medicare tax on earned income from wages or self-employment. The tax applies to earnings over $200,000 for singles or $250,000 for joint filers. This tax on high-earners will start to be felt later in 2013 as wages, bonuses, and business earnings start to exceed these limits.

B. 3.8 percent additional Medicare tax on net investment income. This tax applies to the lesser of net investment income or modified adjusted gross income over $200,000 for singles or $250,000 for joint filers. This tax applies to income from passive investments, such as returns to “silent partners.” It does not apply to income from a business in which an owner actively participates.

2. Do you write your company vehicle off? The IRS will begin analyzing in more detail writeoffs for company vehicles. Recently a report was completed on employment tax compliance and its conclusions indicated that some companies are not reporting employee use of company vehicles.

3. Same Sex Married Couple’s Tax Status will be settled. Currently the Supreme Court is listening to a case to determine if same sex couples are entitled to the same benefits as married heterosexual couples. The decision is expected this summer and will most likely also have an impact on benefits offered through companies to their employees and their spouses/partners.

4. How to form? Are you changing your status? It appears that a shift is taking place from S to C Corporation. The shift is directly linked to the JOBS Act of 2012 and related to the ability to obtain financing through equity crowd funding.

There are so many more trends coming in 2013. As a small business owner, be sure you work with your accountant to understand the impact that each of these may have on your company. The better you understand the trends, the better you can leverage the knowledge to provide a solid foundation for your company and better work environment for your employees and hence increased production and revenue.

Heather (Penney) Strohm is the regional director for Indiana State University’s Indiana Small Business Development Center.