Plan Your Taxes With Certainty


With the Protecting Americans from Tax Hikes (PATH) Act of 2016 from Congress, small businesses will experience some relief regarding tax rules and their fluctuations. This PATH Act is applicable for taxes of 2015 and 2016.

Taxes for 2015

The new liberal tax rules are applicable for 2015 and they are the same which were applicable back in 2014. That is, if eligible you may write off the cost of equipment, in service which is up to $500,000. For accounting and tax purposes you may depreciate additional $8,000 for the new vehicle bought in 2015 for the reason of bonus depreciation.

Permanent Changes

Many of the tax rules have been dealt with expirations and subsequent extensions in their applicability. Yet many of those have become permanent. Some of them are illustrated below –

  • Under Sec. 179 a limit of $500,000 on the business property expenses can be used for inflation deductions from the year 2015 and filing in 2016.
  • Small businesses can now use the credit against Social Security taxes and not against income taxes.
  • The recovery period for leasehold, retail improvements, and restaurants has been made 15-years.
  • Active duty employees will get wage differential payments.
  • S corporation period for built-in gains is reduced.
  • Free parking and mass transit passes are deemed equal. The benefits are not subject to any income and employment taxes and results in tax benefits for employee and employer both.
  • Food inventory donations are applicable for charitable contribution deductions.
  • Appreciation in the property value of S corporation which it donates is considered in basis adjustment of the corporation’s shareholders.

Temporary Tax Law Extensions

Since some of the temporary extensions in tax laws stay for more than a year, it gives a better perception on the tax planning for the coming year. Some of the tax rule extensions which were primarily temporary –

  • Work opportunity tax credit (WOTC) has been extended through 2019. A new category of targeted workers (qualified long-term unemployment recipients) has been introduced and by definition stands for long-term unemployed individuals who has remained unemployed for 27 weeks or more.
  • Bonus depreciation by 50% extended through 2019. All Businesses are eligible to depreciate 50 percent for the equipment cost which was used for service in 2015, 2016 and 2017. Bonus depreciation will be phased out by 40% in 2018 and by 305 in 2019.

For 2016 Extensions include:

  • Applicable deductions for energy-efficient commercial buildings.
  • First $15 million expensing of qualifying film and television programs cost.
  • Empowerment zone (EZ) incentives are extended till 2016.
  • Credit limit for energy-efficient home manufacturers.
  • Race horses categorization as three-year property.
  • Recovery period for depreciation of motorsports entertainment complexes is 7-years.
  • Tax-credits for various energy-related business operations.

PATH (Protecting Americans from Tax Hikes) Act: New Rules

Old tax rules extended and taken in as part of PATH. Here is a scenario:

  • Applies to the safeguarding against penalties for errors on information and payee statements. Error in information return for $100 or less, the issuer does not have to do anything. These rules are applicable to returns and statements that are supposed to be filed after December 31, 2016.
  • The dates for filing the taxes relating to employee wages and nonemployee compensation. That said, the due date for returns and statements is on or before January 31 for the last accounting year. This means copies of W-2s and 1099s should reach the social security administration and IRS by the date mentioned above.

It All Boils Down To…

Congress wants to enact comprehensive tax reform in 2016, but the permanency of favorable tax rules has given an ambiguous hue to the tax rules in total. With the implementation of the comprehensive tax reforms, some of the permanent provisions will be modified.

PATH tax act would ensure greater tax savings for the businesses. It is advisable to meet a tax advisor and explore the rules in details to know what all is beneficial for your business.

That would also include considering individual tax rules and regulations that play a major part in personal tax filing.

As a small business owner, you can be rest assured that the recording and filing of your accounting, tax filings along with necessary W-2s and 1099s will be taken care of timely with CheckMark’s MultiLedger – our integrated accounting software geared for small and medium-sized businesses in the USA.