Tax Changes Anticipated By Year End
As you know, towards the end of 2014 many commonly used income tax deductions and credits were retroactively re-instated to the beginning of 2014, only to expire again as of December 31, 2014. 50% bonus depreciation for qualifying new assets, increased section 179 first year write-off, as well as the credit for increasing research and development, railroad track maintenance credits, and many other credits and deductions that are not as commonly utilized were included in the retroactive tax law.
For all of 2015, there has been no action on extending these or making them permanent. But as we approach the end of the year, the same experts that predicted extension at the end of 2014 are now indicating that these credits and deductions, or at least the ones mentioned above, will again be retroactively extended or perhaps even made permanent. This makes it very difficult to plan for year end, especially for Subchapter T Cooperatives that have 8 ½ months after year end to calculate patronage and other items and also difficult if you are a fiscal year cooperative.
Do you calculate patronage assuming deducting bonus depreciation for that portion of your year that ended December 31, 2014? If so, what happens if subsequent to your calculations, bonus deprecation is extended? In this case, we will generally stick with our calculations and will not adjust for the extended bonus depreciation – which is what we did last year as well.
Our feeling is that even if these tax credits and deductions are expected to be extended, we have to go with the law as it is when making these calculations. Meaning that we cannot assume a tax law will be extended when making year-end calculations. Even if all the experts are saying these tax laws will be extended, we should not make calculations based on these assumptions. We need to proceed with the law as it is at the time these calculations are made.
Should these credit and deductions be extended – we will let you know immediately. Until then, the safe bet is to continue operating on the law as it currently is. Please contact Chuck or Cristina in the Des Moines office (515) 270-1446 if you have any questions.
1099’s coming soon….
As a quick refresher – 1099 forms including 1099-MISC and 1099-PATR are issued based on calendar year business even if your cooperative or business has a fiscal year end. These forms are generally due to the recipient by January 31, (2106 for 2015 1099 forms) and then due to the government by February 29, 2016.
Now would be a good time to review your vendor and patron files to make sure you have the appropriate information to properly complete a 1099. Generally this information is contained on form W-9. Should you determine that you are missing the appropriate form W-9 now is a good time to obtain it from your vendor. Remember that a vendor/patron that refuses to provide a legible, signed form W-9 is subject to mandatory back up federal withholding. Please call Chuck or Cristina in Des Moines (515 270-1446) should you have any questions regarding 1099/W-9 issues
