None of us likes this time of year--the letdown from the holidays, the dreary weather, the short, dark days and the long, unfunny award shows. And then of course there are taxes. If you're a business owner, you're already thinking about this year's tax season. Your returns are likely due on March 15. You're closing out the books and putting together the files for your accountant. And you're dreading to find out what you'll ultimately owe. But don't dread. Be happy. In fact...enjoy it. Because this tax season will probably be your best ever. Why?
Here are five reasons to do a happy dance:
1. Big deductions were extended.
In late December, Congress extended a bunch of 2014 tax deductions and credits that will benefit your business. Better late than never, right? For example, you can still accelerate depreciation on many assets you bought last year, and you can also take advantage of the research and development credit. Enjoy those benefits because, like always, they were only extended through the end of 2014. Although there's talk in DC about tax reform, who really knows? I guess if the Carolina Panthers can make the NFL playoffs with a 7-8-1 record then anything can happen. But Congress seems to talk about these things every year and there's just as much chance that they could permanently go away as much as stick around in the future. So enjoy those deductions now, my fellow small-business owners. It could be the last of them.
2. The IRS has less money.
If you've paid attention to the news recently, you'll know that, as Federal News Radio reports, Congress in December "approved a $10.9 billion budget for the IRS in fiscal year 2015--$1.2 billion short of what it was in 2010--leaving a $346 million cut that the agency must absorb during the remaining nine months of the year. In addition, the agency has 13,000 fewer employees than it did in fiscal 2010. IRS commissioner John Koskinen said the agency has no choice but to reduce its level of service to 50 percent for the remainder of FY 2015--meaning one in every two callers to the IRS will not get through to a live operator." OK, so there will be less customer service. But on the good side, there's bound to be fewer audits, yes? Heaven forbid if I were to insinuate that my clients take a few liberties with the tax rules, and I am in no way encouraging business owners to do anything illegal. It's just that I've seen many clients who have dutifully and properly filed their returns over the years still get selected and have their businesses turned upside down by an audit, only to have the investigators find nothing. Hopefully this latest budget cut will incentivize the IRS to figure out creative ways to go after the bad guys while leaving more of the honest ones alone. Whatever the case, I'm betting the audit pressure will be lower, and for that you can say, "Phew."
3. The health care law doesn't really kick in for us until next year.
Starting this year, two very important things are happening that will definitely increase life expectancy. People living in New York State will no longer be allowed to take selfies with live tigers. And businesses with over 100 full-time equivalent employees must provide affordable health care insurance to their full-time employees or face a penalty. The health care law is administered and audited by the IRS and is causing many accountants reporting headaches. But be happy now! That's because starting next January (2016), that rule gets adjusted down and will affect businesses with more than 50 people--which probably means you. So enjoy this year's tax season because next year may find you with more reporting and financial requirements dictated by the law than now. And don't forget that, as an individual, you're subject to the mandate in which you're required to have health insurance or pay a penalty. You're on the honor system when reporting this to the IRS on your tax return. Don't lie. But if you do, this year may be your best chance of not getting caught. That's because as more employers report their insurance information to the IRS, it will be harder to lie about your coverage. It's just another reason to appreciate this tax season.
4. Our national debt is now $18 trillion.
And our annual deficits are almost half a billion. And that doesn't include the almost $100 billion paid into (and spent by) the Treasury from the printing of new money by the Federal Reserve. This year, no one seems to care because the economy is good and the country has been distracted by immigration reform, threats of terrorism, and Bill Cosby. Oh, and interest rates are so artificially low because of the Fed's actions that we can also borrow money for next to nothing to pay off our liabilities. But sometime in the next few years reality will hit us hard: the economy will turn south, our government will face enormous debts, and it will finally dawn on everyone that Bill Cosby was never that funny. Ever. And to try and fix these problems, our government will need to rein in spending and increase taxes. It's simple math and most business owners I speak to know it. So celebrate this year's relatively low tax rates. Compared to what you'll be paying down the road, this is nothing!
5. Finally, there's a movement in the Senate to allow the IRS to regulate tax preparers.
If this happens, then in future years the person who does your taxes could be subject to mandatory testing and continuing education requirements in order for them to provide this service. While this is being done to protect consumers and force your tax preparer to question why he or she chose such a miserable occupation, it is also intended to provide small-business owners and individuals with more educated professionals. Unfortunately, it will likely also increase the professionals' cost of doing business and therefore increase your fees too. And you love paying tax preparation fees, don't you? Well, love it or not, appreciate them this year because they'll likely be going up in the future.
See? No one likes this time of year. No one likes paying taxes. No one cares about what celebrities have to say about Afghanistan or how J-Lo looked at the Golden Globes (she looked great, by the way). But take a moment, stop and look around. Appreciate the beauty of winter. Enjoy the chance to start afresh. Soak it all in. And then, give thanks for this tax season. Because it will likely be the best one for a long time to come.