While many tax rules are automatic, there are a number of instances in which owners can choose their tax treatment. Here's a listing of some elections available, the advantages and disadvantages to making them, and when they have to be made:
|Description of options||Pros and cons||When to make the election|
|S corporation status (instead of a C corporation)||Pro: Pass-through tax treatment eliminates double taxation.
Con: Cannot take advantage of many fringe benefits
|For current-year election: within two and a half months of start of year|
For next-year election: any time within the current year
|Expensing of business equipment (up to $19,000 in 1999) (in lieu of depreciation)||Pro: Immediate deduction for entire cost (up to dollar limit)
Con: May not have sufficient income to use expensing
|Due date of tax return for year in which equipment is placed in service (including extensions)|
|Amortization (AMT) of business start-up expenses over 60 months or more (instead of recovering capitalized costs upon a future sale)|| Pro: Deductions for costs over five years.
|Due date of tax return for first year of business (including extensions); corrective election on amended return filed within six months of original due date (plus extensions)|
|Waiver of net operating loss (NOL) carryback (in favor of only carrying the loss forward)||Pro: May gain greater tax benefit in future years (if future tax bracket is higher)
Con: Lose out on immediate tax refund
|Due date of tax return for the year in which the NOL arises (including extensions)|
|Figure depreciation of tangible personal property for AMT purposes using 150% over the regular tax recovery periods (instead of using longer AMT class lives)*|| Pro: Eliminates any AMT adjustment (and related record keeping)
Con: Smaller depreciation write-offs
|Due date of tax return for year in which property is placed in service (including extensions)|
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