General

Filing Deadline for Form 1040

April 15 is, of course, the due date for filing Form 1040. In 2012, however, the deadline for filing your 2011 1040 is moved to April 17, a Tuesday, to accommodate a weekend and a holiday in the District of Columbia.

What is the Alternative Minimum Tax?

The AMT is designed to ensure that certain taxpayers pay a minimum amount of tax. When the AMT is triggered, some tax advantages are recaptured and a two-tiered tax rate (a flat tax, in the case of corporations) applies to ordinary income above a certain exemption amount. Although tax planning aims to minimize your tax liability by taking advantage of various beneficial provisions, claiming tax breaks without also planning for their impact on AMT may end up triggering a significantly larger tax bill.

A certain amount of income is exempt from the AMT. The exemption amounts for individuals and other non-corporate taxpayers are not indexed for inflation, but Congress has consistently increased the exemption amounts through legislation. The current political climate is unpredictable, however, and unless Congress acts before Dec. 31, 2012, the exemption amounts will decrease to their pre-2001 thresholds.

You may wonder why your estimated tax payments for 2012 are significantly higher. That is because until Congress approves the AMT indexing proposal for 2012, the law requires that estimates be made under the law as it stands, meaning a higher AMT for many.

S Corporation Built-in Gains

The built-in gains tax applies to S corporations that have converted from a C corporation. The tax applies to certain property held by the S corporation at the time of the conversion. If the property is sold less than 10 years after the conversion, the S corporation must pay a tax on the gain (net recognized built-in gain) equal to 35 percent (the highest corporate tax rate).

For tax years beginning in 2011, no tax is imposed on an S corporation’s net built-in gain if the asset has been held for at least five years. The recognition period is scheduled to reset to 10 years for tax years beginning in 2012.

Benefit: It lowers the tax burden on S corporation shareholders.

Net Operating Losses

When a business’s deductions exceed its income, a net operating loss (NOL) arises, which may be carried either back or forward to offset gain in past or future years. Significant planning is required to maximize an NOL. Factors that must be taken into account include the business’s tax liability in past years, anticipated gains in future years, the expected tax rates in future years, whether the entire NOL will be used before it expires in 20 years, and whether the business is, or will be, subject to the AMT.

Additionally, a decision may need to be made about whether to take the Section 179 expense deduction or to generate an NOL. The Section 179 deduction cannot create an NOL and cannot be carried back to prior years in some cases, it may be advantageous to instead depreciate the relevant cost and create an NOL carryback.

The decision to claim bonus depreciation may be affected by the presence of NOLs. If an NOL carryforward is about to expire, it may be beneficial to forgo bonus depreciation in favor of the regular depreciation rules. State tax laws add an additional layer of complexity to this decision, because some states have more restrictive NOL carryover rules.

Do I Need to Report My Foreign Assets? Why You Need to Care

If you own a bank account, real estate, business or other similar asset located in a foreign country, and you have not disclosed your ownership to the IRS, you may be subject to onerous penalties. A CPA will help you come into full compliance and may be able to limit any applicable penalties.

Future Planning

• Have I created the most tax efficient type of business? For example, does it make sense to be a C Corp instead of an LLC if higher income tax rates are enacted next year?
• What is the best way to save for retirement that minimizes my taxes?
• What does the IRS consider a reasonable salary?
• I may expand my business across state lines — what do I need to consider about multi-state taxes?
• How do I eventually leave my business to a family member and avoid a huge tax bill?

Obtain Professional Advice

When the right tax and financial advice is essential, talk to someone with an unmatched level of knowledge, experience and education. A CPA understands the business of taxes and finance, and can provide trusted advice and services during the tax season – and throughout the calendar year.