It’s not too late to start thinking about ways to keep down your 1999 tax bill. Here is a list of some corporate advantages to take into consideration.
- Take advantage of Section 179 Expensing. If you meet certain requirements, you may be able to expense up to $19,000 in purchases of qualifying property instead of depreciating the expenditures over a longer period of time.
- Assess your group term life insurance costs. Because of the change in group term life insurance notes for coverage in excess of $50,000, your business could be overpaying FICA and Medicare taxes.
- Consider a like-kind exchange before selling property. Your tax liability from the sale of property can be deferred if you exchange the property for similar property. If no cash or “boot” is paid as part of the transaction, your built-in gain from the old property will be carried over to the new property.
- Consider donating computer equipment. For tax years 1999 and 2000, C Corporationss that donate relatively new computer technology to elementary and secondary schools may be eligible for an augmented charitable contribution.
- Defer income; accelerate expenses. For small businesses, using the cash method of accounting can provide real benefits. This allows you to determine the timing of your income and your expenses. On the income side, delay sending bills until after year-end. On the expense side, next year pay your bills on Dec. 31. By doing so, you will be able to reduce your income and, consequently, your taxes.
- Consider buying a sport utility vehicle for the business. Cars used in the business are subject to very strict depreciation limits and are not eligible for the full Section 179 expensing amounts. These limitations can be avoided by buying certain “heavy” SUVs. By buying a qualifying SUV for $35,000, you take $19,000 of Section 179 expense and depreciate the remaining $16,000 over five years. As another benefit, this heavy SUV is not subject to the luxury tax.
- Accrue bonuses. Accrual bonuses can be deducted currently as long as they are paid by March 15, 2000. There are limitations for corporate employees who own more than 50 percent of corporate stock.
- Accrue vacations. Accrual vacation days can be deducted currently if they are paid by March 15, 2000.
- Review newly hired employees. Certain credits are available for newly hired employees who are part of targeted groups. However, they must have been hired by July 1, 1999.
- Review AMT depreciation. New rules for property placed in service in 1999 allow the recovery period to be the same for AMT as for regular tax, thereby reducing your AMT liability.
Patrick J. Horning, CPA, is the general services manager for Bruner-Cox in Canton. He can be reached at www.brunercox.com.
