We did a webinar last month on Taxmageddon. I’ve gotten questions on what that means and where that word comes from.
Taxmageddon is a word that was first coined by the Washington Post and refers to the financial and tax cliff that occurs January 1, 2013. That’s when we have dozens (in fact, close to 100) changes happening to the tax law because of expiring tax acts. And did we mention Obamacare taxes? Finally, you’re going to have the return of some old not-favorites like the marriage penalty tax, alternative minimum tax and the phase out of individual deductions.
First of all, let me be really clear. None of us have any idea of what is going to happen. There are a lot of different tax plans being thrown around right now by the Presidential candidates. Personally, I’m not sure much is going to happen regardless of which candidate wins, because one person can’t control everything.
But one thing is certain: By the time we know what is going to happen, it will be too late to plan.
There are two strategies that we are promoting heavily for our clients:
- If you don’t have a business, start one.
- Add a C Corporation to your plan, even if you continue to operate your main business through an S Corporation or LLC.
We’re pretty certain that taxes are going up next year (2013). The thing that’s interesting is that ALL of the tax rate changes, sur-taxes and individual deductions are targeted at the individual. There are NO changes at the C Corporation tax rate.
If you have a business and it’s in a flow-through entity such as an S Corp, LLC or partnership, it will all report on your individual tax return. That means more taxes.
Normally year-end planning means that you accelerate deductions and push off income. That’s because tax later is better than tax now. But if the rates are going up, then tax now is better than tax later. Of course, you want to make sure you’re using your Section 179 deduction (allows immediate expensing for fixed assets) this year.
Those are just a few general comments. You also need to figure out how to move your expenses off of your personal return to your business return, maximize C Corp tax rates and plan for alternative minimum tax.
On November 3, 2012 (Sat), we will have a free webinar called “Your After Election Tax Plan”. You can register at http://www.DianesSeminars.com. If you’re reading this after the date of the webinar, you can go to http://www.CCorporationTax.com and scroll to the bottom of the page to listen to the webinar.