7 Tax Planning Tips for CNC Machine Shops
As the new Congress takes shape there will likely be a number of tax issues that will be impacted by legislation. Like it or not, new tax laws and extensions or curtailments of existing programs may affect your manufacturing business. It’s best to keep in close contact with your trusted tax advisor as you move into 2015. Here are 7 important areas to keep an eye on:
- Deductions & Incentives Changes: For 2014 the Section 179 asset deduction was cut back to $25,000 from a high of $500,000 during the Great Recession and various financial incentives for such things as reducing energy costs and hiring veterans also expired. Congress may extend $85 billion in tax breaks like these into 2015, and if the Tax Extender bill passes, you may have greater resources to apply to upgrading equipment and facilities.
- Tax Rate Changes. Many of the new members of the House and Senate campaigned, in part, on a promise to reform the tax code. If they are successful some corporate entities may see a reduction in their taxes as many feel that the current corporate tax rates restrict growth. However if the new Congress does roll back corporate tax rates, the change may impact various types of corporate structures (“C” corps, “S” corps, LLCs, etc.) differently. Check with your tax advisor to learn how it will affect your company.
- The Affordable Care Act. With the GOP controlling both the House & Senate, there are sure to be efforts to change some of the Act’s key provisions including a business’s obligations and associated penalties under the current plan. Again, you need to keep a close eye on what happens and how it may affect your operating costs in 2015 and beyond.
- Record Keeping. All businesses, and especially smaller ones, need to make sure they have adequate documentation for all deductions and well-maintained financial records. News reports suggest the IRS has been taking a more aggressive stand on accurate record keeping and is more likely to disallow deductions for businesses with sloppy paperwork habits.
- Form 1099-MISC. Another area tax preparers warn about is the failure to issue a 1099-MISC form for any independent (non-employee) service provider to whom you paid $600 or more in a tax year. The IRS can levy serious fines on employers who don’t comply. You are not required to issue a 1099-MISC for outside corporations who provide services, however.
- Internet Purchases. If you buy a substantial amount of equipment, raw materials or supplies online, check with your tax advisor about your sales and use tax obligations. Without a standardized national policy on Internet sales tax collection, each state sets its own rules and may or may not aggressively enforce them.
- Professional Tax Planning & Preparation. Federal, state and local tax codes have become so complex it pays to engage a qualified professional to prepare your tax reports and to help you take advantage of any beneficial changes and prepare for any negative ones. Just as you’re an expert in CNC machining, these professionals stay on top of the myriad changes in the tax codes.