Though the American Taxpayer Relief Act, more commonly known as the Fiscal Cliff Bill, was passed back in January of this year, it still has a lot of small business owners wondering how, if at all, this new legislation will affect them.
According to the SBA, 97% of small business owners will not see an increase in their taxes in 2013. Of course this doesn’t include the 2% bump in the social security tax that went into effect after the two-year long tax holiday was allowed to expire, but by and large this is good news. However, According to Deborah Sweeney, CEO of MyCorporation.com, there are still a couple of notes small business owners should be aware of in regards to the 2013 tax season, and how legislation might impact their 2012 returns.
- The ATRA retroactively raised Section 179 deduction limits back up to $500,000. Originally, the limit was set to drop down to $139,000 in 2012, but the previous limit of $500,000 has been extended through 2013. So investments in vital assets like equipment and software up to $500,000 might qualify for a Section 179 deduction.
If a business was planning on buying some pricier items in 2013, now is the year to do it since there is no guarantee that the $500,000 will be extended again.
- The ATRA also extended the Research and Experimentation Tax Credit, which originally ended in 2011, through to 2013.
- The Patient Protection and Affordable Care Act, which was passed back in 2010, has a few provisions that are going into effect in 2013 that may impact payroll withholdings, depending on how much an employee makes.
If there is an employee with a wage above $200,000 for a single filer, or $250,000 for a married filer, any income in excess of those two lower limits is subject to an Addition Medicare Tax of 2.35% - .9% more than the standard Medicare withholding of 1.45%. However, there are no matching requirements for that additional .9%, so employers still just pay the 1.45% regardless of their employee’s income.
- Finally, the ATRA does raise the tax rate for anyone making more than $400,000 as a single filer, or $450,000 as a married filer, to 39.6%. However, as mentioned above, this will not impact most small business owners.