Many businesses may benefit from purchasing assets by Dec. 31 to take advantage of depreciation-related deductions that are scheduled to either disappear or become less favorable in 2013:

Bonus depreciation. For qualified assets acquired and placed in service through Dec. 31, 2012, this additional first-year depreciation allowance is, generally, 50%. Among the assets that qualify are new tangible property with a recovery period of 20 years or less and off-the-shelf computer software. With a few exceptions, bonus depreciation is scheduled to disappear in 2013.

Section 179 expensing. This election allows a 100% deduction for the cost of acquiring qualified assets, and it’s subject to different rules than bonus depreciation. On the plus side, used assets can qualify for Sec. 179 expensing. On the minus side, a couple of rules may make Sec. 179 expensing less beneficial to certain businesses:

• For 2012, expensing is subject to an annual limit of $139,000, and this limit is phased out dollar for dollar if purchases exceed $560,000 for the year. So larger businesses may not benefit.

• The election can’t reduce net income below zero. So for businesses that are having a bad year, it can’t be used to create or increase a net operating loss for tax purposes.

The expensing and asset purchase limits are scheduled to drop to $25,000 and $200,000, respectively, in 2013.

These depreciation opportunities, however, bring with them a challenge: Determining whether the larger 2012 deductions will prove beneficial over the long term. Taking these deductions now means forgoing deductions that could otherwise be taken later, over a period of years under normal depreciation schedules.

In some situations, future deductions could be more valuable. For example, tax rates for individuals are scheduled to go up in 2013, which means flow-through entities, such as partnerships, limited liability companies and S corporations, might save more by deferring the deductions.

Finally, keep an eye on Congress: It’s possible the current versions of these breaks could be extended or even enhanced.

Image courtesy of freedigitalphotos.net

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’s eligible to receive tax-deductible contributions.

The IRS’s recently launched online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. The previous source for this information was IRS Publication 78, which is incorporated in the new tool.

You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Finally, in an election year, it’s important to remember that political donations aren’t tax-deductible.

The Ohio Department of Taxation has launched a tax amnesty program in effect now through June 15. During that time, the state will forgive penalties and half the interest owed on back taxes that weren’t reported or paid.

Furthermore, those who are granted amnesty and pay their bill in full won’t face future criminal or civil prosecution.

The General Amnesty Program is available to people who owed back taxes as of May 1, 2011. The types of taxes covered include:

• Individual income
  
• Individual school district income
  
• Commercial activity tax (CAT)
  
• Sales and seller’s use
• 
  Employer withholding
  
• School district employer withholding
  
• Corporation franchise
  
• Pass through entity
  
• Estate
  
• Gross Receipts of a natural gas company or a combined electric and gas company
  
• Motor fuel
  
• Cigarette or other tobacco products
  
• Dealers In intangibles

Not eligible for amnesty are any taxes for which the state has issued a delinquency notice or bill, and any taxes connected to an audit that is under way.

In addition, the Consumer’s Use Tax is not eligible for the General Amnesty Program, but may qualify under the Consumer’s Use Tax Amnesty program.

All amnesty requests that fit the criteria will be granted. Returns filed under the amnesty program will be subject to an audit just like any other return. Only taxes due as of last May are eligible.

It has been six years since a general amnesty program was last offered to Ohio businesses and individuals who were delinquent on their taxes.

State tax officials estimate the program might bring in $40 million, including $4 million in local sales tax or school-district income.

The tax department will continue to update its website at http:// tax.ohio.gov/faqs/Amnesty/ amnesty_general.stm as further information on the program becomes available.

Those who wish to receive automatic e-mail updates when new information is added may sign up for the department’s Tax Alert email notification system.

Ohio has an annual tax levied for the privilege of doing business in the state, which is called the commercial activity tax (CAT).

This tax is measured by gross receipts from business activities in Ohio, and businesses with Ohio taxable gross receipts of $150,000 or more per calendar year must register for the CAT, file all the applicable returns, and make all corresponding payments.

Firm Director Patrick McClary, who manages the tax department, advises clients not to overlook this often-missed filing requirement.

The CAT applies to most businesses, including but not limited to retail, wholesale, service, manufacturing and other general businesses regardless of the type of business entity.

For example, sole proprietorships, partnerships, LLCs, S-corporations, corporations, disregarded entities, trusts, and all other type of associations with taxable gross receipts of more than $150,000 in the calendar year are subject to the CAT.

The 2012 quarterly returns will be due on May 10 (first quarter), August 10 (second quarter), November 13, (third quarter) and February 11, 2013, (fourth quarter).

For annual taxpayers, the $150 annual minimum tax is due on May 10 with the 2011 Commercial Activity Tax Annual Return and 2012 Minimum Tax Payment Return.