Have you developed a proactive year-end tax planning strategy for 2013? Cathy Goldsticker, CPA, member, Tax Services at Brown Smith Wallace, discusses some of this year’s added complexities and strategies to help reduce your tax liabilities.

1. INSIGHTS
ACCOUNTING
Year-end tax planning
How the ACA and the end of Bush-era
cuts affect tax strategy
INTERVIEWED BY ROGER VOZAR
I
t’s wise to consider the tax implications of
business and financial decisions as the year
winds down. This year, many tax benefits
from the American Taxpayer Relief Act of
2012 (ATRA), which was extended through
2013, and many Bush-era tax cuts will end.
The tax law changes from ATRA extensions
ending and the implementation of the
Affordable Care Act (ACA) introduce layers
of complexity.
“It’s difficult for anyone to keep track of
everything that is expiring, let alone what’s
new. There are more moving parts than I’ve
seen in a long time,” says Cathy Goldsticker,
CPA, partner, Tax Services at Brown Smith
Wallace.
“You need to plan and do some projections
so you don’t discover in April that you have
unexpected taxes due or you didn’t take
advantage of a departing tax write-off.”
Smart Business spoke with Goldsticker
about strategies businesses and individuals
can follow to reduce tax liabilities.
What effect does the ATRA have on 2013
taxes?
Many of the provisions enacted under
President George W. Bush are set to expire.
Although the tax brackets from the Bush
tax cuts will remain in place and are now
permanent, individuals with taxable incomes
of $400,000 or more — $450,000 for
married couples filing jointly — are subject
to a top marginal tax rate of 39.6 percent
instead of the 35 percent marginal rate.
These individual tax rates also will affect the
taxes of the owners of pass-through entities.
A business relief provision that is scheduled
to expire is for the built-in gain tax that is
created when converting your C corporation
to an S corporation, but is imposed after a
subsequent sale of corporate appreciated
assets. The temporary rule has been that
CATHY GOLDSTICKER, CPA
Partner, Tax Services
Brown Smith Wallace
(314) 983-1274
cgoldsticker@bswllc.com
WEBSITE: To request your free copy of our 2013 Year-End
Tax Planning Guide, visit bswllc.com/taxguide.
Insights Accounting is brought to you by Brown Smith Wallace
if you hold your S corporation and related
assets for five years, built-in gain tax goes
away. Starting next year, the waiting period
is 10 years. For owners looking to sell assets
or a company, that may expedite the impetus
to sell before the end of 2013.
Also being eliminated are faster writeoffs for depreciation. Under Section 179,
companies were able to deduct $500,000 for
equipment in year one assuming less than
$2 million in assets was acquired during the
year. That will revert to the previous limit of
$25,000. Bonus depreciation, which allowed
you to write-off half of qualified property,
is being removed for common acquired
depreciable items.
You should think about accelerating your
planned purchases, but also consider what
your future income levels might be. You
could be taking away deductions from future
years when it’s possible to get a bigger bang
for your buck with higher tax rates.
On the personal side, this is the last year
business owners will have a choice between
deducting sales taxes or state income taxes
because the sales tax option will be going
away. This could be a lost state benefit for
those paying Alternative Minimum Tax.
This also will be the final year that
taxpayers ages 70½ and older can transfer
up to $100,000 from an IRA to a charity and
bypass having the IRA distribution included
as income. That can be important if you’re
trying to stay below the $400,000 level and
avoid the 39.6 percent tax bracket.
How will taxes change as a result of the ACA?
There is a new 3.8 percent tax on investment
income and 0.9 percent Medicare tax that
applies to self employment income for high
income earners. Careful planning could
avoid the claws of this extra tax.
T avoid these taxes and receive more
o
benefit from your writeoffs, you might
want to bunch deductions that are subject
to phase-outs based on income. Instead of
paying expenses such as advisory fees, and
tax planning and preparation fees in 2013
and 2014, you might see if you can pay them
in the same year.
Do the expiring cuts mean it’s best to move
up as many deductions as possible?
You can’t look at your taxes in a vacuum;
you still need to consider the impact of all
options to determine the best route. Among
the many moving parts, we could still see
extensions of some provisions.
You should take the facts as they
currently stand and put together pro forma
projections for the next several years. Do
some tax calculations for these years to
figure out what you’ll encounter from a
cash-flow standpoint, as well as what you
could do to reduce some of the current
increases. ●
© 2013 Smart Business Network Inc. Reprinted from the November 2013 issue of Smart Business St. Louis.