Whether you’ve been watching every debate or are waiting until the field narrows, the 2012 presidential election push has gotten underway. So what will the impact be on your business?

No denying, the economy will be a hot topic this go-around. And tax reform remains an integral part of any strategy to right the ship.  One specific target? Corporate taxes.

With good reason: The United States is well above-average in its corporate tax rates. While the international average falls around 20%, we blow that away.

But maybe not for long.

The candidates vying for the Republican presidential nomination plan to change that. Each has pushed for a flat tax approach to even things out.

Election Day will be here before we know it. Let’s take a look at what each major candidate is currently proposing to see how it would translate to your business.

Same structure, different rates

The fact that there should be a flat tax seems to be something all the top contenders in this race agree upon. Depending on who gets the Republican nod, here’s what your company would be looking at:

• Romney: A corporate tax rate of 25% is key to his 59-point jobs plan.
• Perry: A 20% corporate tax rate on domestic earnings. However, Perry wouldn’t dump the existing graduated rate system. For the time being, you’d get to choose which you went with.
• Cain: A 9%  corporate tax rate on corporate net income, under his famous 9-9-9 Plan. You’d kiss payroll taxes goodbye under Cain, too. However, you’d be saddled with a nationwide flat 9% sales tax rate.
• Gingrich: A 12.5% corporate tax rate.
• Bachmann: A 0%? Bachmann has said she’s “open” to the idea of eliminate corporate taxes all together, just like Sarah Palin was. Though she has yet to come out and officially announce this as her plan.

Only time will tell which person (and rate) will triumph. We’ll keep covering the candidates and their plans for your business. Stay tuned.

This according to Bruce Bartlett, who held a senior position in both the Reagan and George H. W. Bush administrations, balances out the potential positives of such a cut with the long-term consequences.

Proponents of the payroll tax cut argue it’ll increase spending and stimulate the economy by providing more in-pocket pay for every taxpaying employee in the U.S. On top of which, it decreases the taxes an employer has to pay on each individual employee, which – in turn – could lower the overall unemployment rate.

All of which begs the question: “If the idea has so many potential benefits, what’s the problem?”

Well, the potential problems, according to Bartlett, break down as follows:

• The tax cuts only help those who are employed. They don’t do much at all for independent contractors or those who remain unemployed.
• A lot of workers may simply pocket the additional savings, which means the cuts could wind up costing Washington without generating fiscal growth on the back end.
• Historically, employees don’t add to their spending at all if they’re only seeing an incremental increase in take-home pay. In other words, if their gross salary isn’t increasing, neither is their spending.
• A recent survey by the National Federation of Independent Business reveals 23% of businesses claim weak sales are their biggest problem, while only 4% claim it’s the cost of labor.

While a lot of what Bartlett is throwing out there is speculative at best, and almost every point has a counterargument that speaks to the greater good of the payroll tax cut, these are points that need to be considered. In the end, the key is to develop solutions that help the economy more than they hurt it. While a payroll tax cut sounds great on the surface, we need to consider whether it really serves the purpose for which it was proposed.

Source: “The Case Against a Payroll Tax Cut,” by Bruce Bartlett, New York Times, 8/30/11.

1. Mortgage loan discounts: One of the few upsides to the housing market in 2010 was that if you bought a new house, you may be able to deduct any mortgage origination fees or discount points that you paid, as these are considered prepaid mortgage interest.
2. Home energy improvements: The government is pushing energy efficiency, and as a result, any home improvements that made your house more energy efficient (e.g., weatherproofing, new windows, a new water cooler, etc.), you may be eligible to deduct as much as $1,500.
3. Expenses for volunteering/mentoring: Do you get involved with any non-profit programs, coach a little league team, support charitable causes. If so, any costs you incurred may be deductible. This includes gas, meals, hotels (if applicable), and event costs.
4. Business expenses: If you’re an entrepreneur or you do any type of freelance work, you can deduct expenses for business dinners, gas, supplies, utility bills (assuming you have receipts that prove they’re specifically related to the work you do), and several other everyday costs you incurred as a result of your business.
5. Dependent parents: If either your parents or in-laws live with you, and/or you had some hand in paying their medical expenses, you may qualify for some considerable deductions. The dividing line, according to U.S. News and World Reports, is whether you provide more than 50% of your parents’ financial support and their expenses exceed more than 7.5% of your adjusted gross income.

Source: “10 Hidden Tax Deductions Exposed,” Erik Folgate, U.S. News and World Reports, 3/11/11.

Now’s the time to start prepping if you want to take advantage of the new rules for next year.  

Here are five new tax breaks you may be able to take advantage of in 2011, by way of financial expert Tim Begany:

1. Higher standard deductions: The standard deduction for single people is $250 higher. Head of household is $50 higher. Married couples stay the same.
2. No limit on itemized deductions: This is a one-time offer, as most limits will most likely be reinstated next year. But for this tax season, there is no limit on the number of itemized or standard deductions a person can claim.
3. Higher earned income credit: This credit is meant to help low- to mid-income taxpayers who’ve been hard hit over the past few years. It’s higher than last year’s credit (up to $5,662), but can only be claimed if your gross income falls within a lower tax bracket.
4. Health insurance deductions for the self employed: A new federal tax break may be able to net you as much as 15% more in healthcare deductions, if you own your own company or work as an independent contractor (It’s a nice way to offset those 1099s).  The new law allows the self-employed to deduct healthcare expenses before adding in their self-employment taxes, which generally adds up to a much more significant deduction.
5. Tax-free employer-paid parking and transit costs: Some companies have either cut the amount they’ll contribute to employees’ parking/transit costs, or eliminated contributions altogether. With that in mind, this year the IRS offers up to $230 a month for those expenses, tax free. You may need to check to see if you qualify (and whether your employer is obligated), but if you’re paying huge monthly fees to park or travel to and from work out of pocket, this tax break could offer up to $2,700 a year in relief.

Do you know of any other new tax breaks that are available this year? Feel free to share your thoughts (or a link to other tax breaks) in the comments section below.

Source: “7 New Tax Breaks for 2011,” by Tim Begany, 10/27/10, Investopedia.

While there are countless loopholes and write-offs to consider come tax time, these two require you file the necessary paperwork before January 1st rolls around:

1. Charitable donations: They say philanthropy is the gateway to power, but it may also hold the key to a substantial write-off. Donating money or goods (e.g., a used car, land, equipment or other resources) can help taxpayers itemize their deductions. Charitable deductions are common on tax returns and – depending on just how charitable your deduction – they can provide returns in the hundreds or thousands of dollars. To wit: Donating a used car – even one in need of major repair – could provide a deduction somewhere in the neighborhood of the car’s blue book value.
2. Cashing in on losing investments: It’s never easy to admit defeat, but if you own stocks or investments that are losing money (and show no signs of stopping), now may be the best time to cut your losses and cash in your chips. Doing so frees you up to invest your money more wisely, and it also makes you eligible for a maximum reduction of $3,000 on your reported income (lower reported income often translates to a larger return).

Can you think of any other tax write-offs or deductions that require people act now? Feel free to share your thoughts in the comments section below.

Source: “Top 6 Ways to Increase Your Tax Refund Now,” by Mark Cussen, YahooFinance, 10/20/10.

The recently passed Small Business Jobs Act has some little-known provisions that directly affect your benefits and bottom line.

Specifically, regarding benefits, the law:

• Ends the requirement that cell phones meet certain heightened substantiation and depreciation rules. This change clears the way for the IRS to issue new rules about taxation of the personal use of employer-provided cell phones — rules that supposedly will ease the documentation standards companies had to meet to offer tax-free cell-phone use to employees. The change doesn’t affect the authority of the IRS to determine the appropriateness of cell phones as a tax-free working condition fringe benefit or that the personal use of such devices, provided primarily for business purposes, may constitute a tax-free de minimis fringe benefit.
• Provides that if a 401(k), 403(b) plan, or 457(b) deferred-compensation plan has a qualified designated Roth contribution program, when there is a distributable event, a distribution to an employee (or a surviving spouse) from an account under the plan that is not a designated Roth account is permitted to be rolled over into a designated Roth account under the plan for the individual.
• Provides that a plan that includes a designated Roth program is permitted but not required to allow employees (and surviving spouses) to make the rollover contribution described above to a designated Roth account. If a plan allows these rollover contributions to a designated Roth account, the plan must be amended to reflect this plan feature. The IRS will provide employers with a remedial amendment period to allow the employers to offer this option to employees (and surviving spouses) for distributions during 2010 and then have sufficient time to amend the plan to reflect this feature.

On taxes, the law:

• Temporarily puts in place for the rest of 2010 a provision that eliminates capital gains taxes on investments held for at least five years.
• Increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million.
• Extends a provision for a 50% “bonus depreciation” through 2010, meaning in 2010, small businesses can  accelerate the rate at which they deduct capital expenditures.
• Allows some self-employed to get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes.
• Temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures).
• Allows certain small businesses to “carry back” their general business credits to offset five years of taxes — while also allowing these credits to offset the Alternative Minimum Tax.
• Changes, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount to a percentage of the tax benefits from the transaction.

EPA and other federal agencies in the Nation’s Capital, including the Defense Department, have refused to pay new property taxes assessed to help fund a major stormwater cleanup effort.

The tax fight was started after EPA forced the District of Columbia to adopt tough stormwater control measures to clean up the Anacostia River, which is inundated with trash and other runoff pollutants.

To pay for this EPA-mandated stormwater program, the D.C. Water and Sewer Authority revised its fee structure to charge landowners stormwater fees based on the square footage of property, instead of assessing fees based on the number of people using a property.

As reported in the Washington Examiner, this sparked the federal agency’s anti-tax fervor, because the change turned the per-person fee structure into a property tax, and federal agencies are exempt from paying property taxes.

The Pentagon has refused to pay the tax, charging that it’s an “impermissible tax on the federal government.”

If you’re a small business owner, or even someone who handles your own taxes, here are five areas you’ll want to monitor very closely on your return:

1. Increased expenses: Most companies have tightened the belt on excess expenses, and so has the U.S. government. Be sure not to add or inflate any expenses you don’t have receipts for. It’s an instant
   red flag, especially in cases where the overall amount is significantly higher than it has been in years past.
2. Overestimating donations: Philanthropy may be the gateway to power, but it’s also something the IRS watches very closely. If the donation amounts claimed are extremely high, or — even worse — if they exceed amounts reported by a nonprofit, it could cause the IRS to question everything else on your return.
3. Miscalculations: It may sound simple, especially in the age of Turbo Tax, but be sure to double-check (or perhaps even triple-check) your math. When something doesn’t add up, it forces the IRS to dig deeper and find out where (and why) the error occurred in the first place. Besides, double-checking may reveal a miscalculation that bodes in your favor.
4. Home office deductions: More and more people are telecommuting these days, either full- or part-time. While that makes you eligible for standard deductions for costs like electricity, online access, supplies, etc., it’s also an area the IRS watches very closely, so people don’t bilk the government out of cash. Be careful not to overshoot on simple costs like stationery, phone, etc., unless you’re sure you can back them up.
5. Failing to sign the return: One of the upsides of tax services like Turbo Tax is that they ensure you go back and handle every minor detail, including approving an electronic signature, before filing your return. If you’re filing on your own (or through a third party), be absolutely sure to sign your return before filing it. It’s such a minor detail, but again … once the IRS has to follow up on an incomplete return, it only increases the chances you could be one of the unlucky taxpayers who gets audited.

The good news: Traditionally, the IRS only audits 1% of U.S. taxpayers. So the best advice is always to file promptly and honestly to avoid any type of complications.

Do you have any actionable advice for people who are trying to avoid being audited? Any other red flags we missed? Your own audit nightmare story?

Feel free to share your thoughts in the comments section below.

Source: ”Avoid an Audit:  Red Flags You Should Know,” by Glen Curtis, Investopedia, 2/10/10

1. Gas: We all remember the dog days of $4 a gallon. It wasn’t a pleasant time. But it forced people (and companies) to consider other options like carpooling, public transportation and telecommuting. For that reason an increased gas tax could become a very real possibility, with the government claiming it’s a tax consumers can avoid if they minimize their gas usage.
2. Online: With so many consumers doing their shopping online these days, the notion of adding an “online sales tax” has been proposed several times. It’s a dicey proposition, as there’s so much to regulate, and it could end up having a negative overall impact for online retailers, but it’s another “avoidable” tax a lot of taxpayers wouldn’t be subject to. The catch: As online shopping continues to gain popularity, the return from this type of tax would increase substantially.
3. Energy: Energy taxes are being sold to the public under the guise that “we’re all in this together.” In other words, we can all help make things better by contributing just a little bit more. Meanwhile, individual taxpayers and businesses can minimize the blow by taking measures to cut down on electricity and other energy sources.
4. Alcohol and tobacco: “Sin taxes” are the easiest for politicians to sell because they’re levied against people who choose to spend money on vices. Proponents of such taxes actually help make the argument by telling those affected by them, “If you don’t like it, quit.”
5. Corporate: The unemployment rate is brimming, and that means a ton of unemployment insurance claims, the majority of which are funded by business taxes. In order to keep replenishing that pot, the government could end up imposing additional “unemployment” taxes on businesses. It’s a bait-and-switch tactic that ultimately penalizes consumers, who wind up paying for the increases via lower wages and other cuts.

So what do you think? Would you consider any of these cuts a worthwhile alternative to increasing taxes on everyone? Are there any areas we missed here? We’d love to read what you think in the comments section below.

Source: “8 Sneaky Ways to Raise Taxes,” by Rick Newman, U.S. News and World Report, 2/2/10

Total: $30,379,000  (and counting)

To donate (or to find out more), click here.

Source: “Companies give $30 mil for Haiti,” by Ari Weinberg, 1/15/10

IRS is now claiming the right to seize deposits for seat licenses a company may hold at stadiums and similar venues in order to recover outstanding tax liabilities. That’s the latest according to a legal memorandum. IRS says it has the right to grab those funds through a levy.

In the same ruling, IRS floats the idea that it may also have the ability to seize a company’s renewal rights for sporting events. But the legal ground here is shakier, and even IRS admits it would only be possible in case where the team allows its ticket holders to transfer rights and renewals.

If your organization is still hoping to take advantage of the slew of
small-business tax breaks that went into effect in February, you’ll need to get moving.

We’re more than halfway through the year, and Obama’s stimulus package benefits expire when 2009 does.

Even IRS recently reminded taxpayers of all they stand to gain, courtesy of The American Recovery and Reinvestment Act.

Here’s a recap of all the breaks available.

You may have to work fast to capitalize on some of these, but it could be well worth it:

Special Depreciation Allowance
Any room left in the ’09 budget for new property or equipment? Your company can take the 50% bonus depreciation as long as you put that equipment into service by year-end.

Section 179 Deduction
You can still deduct up to $250,000 of the cost of that machinery, equipment, furniture, etc. (The deduction was supposed to drop to $133,000.)

Expanded Net Operating Loss Carryback
If your business is in the unenviable position of having its expenses exceeding its income last year, here’s some consolation.

As long as you have an average of no more than $15 million in gross receipts in a three-year period and have been profitable in the past, you can claim a special refund.  But act fast: You have until Sept. 15 to file a claim.

Note: There are also some small biz breaks for individuals involving estimated taxes and the sale of stock.

Go here for tons of guidance on Recovery Act-related tax breaks and other possible financial advantages.