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Form 1120 CPA discusses Tax Positioning for C Corporations before 2013

Form 1120 CPA discusses C Corporation tax positioning before 2013

Gary Bode, CPA: end of year tax postioning for C Corporations is especially important in 2012. (910) 399-2705.

Most Form 1120 CPAs provide tax positioning advice for C Corporation in December. For example we extrapolate the expected Form 1120 in December and run alternate scenarios for the shareholders. So, here’s a partial list of issues to consider before 2013. You should talk these over with you C Corporation CPA before implementing them. Consider your C Corporation’s unique fact pattern; all tax strategies and positioning need to make overall sense. Taxes are just one part of the big picture.

C Corporation Dividends

Qualified dividends are taxed at 15% now. In 2013, dividends get taxed as ordinary income. Plus they could incur the 3.8% new Medicare tax. Talk to your Form 1120 CPA about taking dividends in 2012. Why? Here’s one potential scenario:

  • Let’s say the C Corporation needs to keep funds for expected expenses for 2013.
  • In this example the C Corporation has no surplus funds for dividends, at least from a conventional perspective.
  • You could take C Corporations dividends on 12/31 and pay the 15%.
  • And then loan the C Corporation those same funds on January 1st, 2013.
  • In some cases this can save 28.4% of tax on the 2012 dividends as it’s repaid as loans in 2013. Yes, 28.4%.

Bye Bye to Bonus Depreciation, Hello to Section 179 Limits

Buying qualified assets in 2012 allows you to deduct the entire price of the asset in 2012, at least up to $139,000. In 2013 it’s $25,000.

Again consult with your Form 1120 CPA to see if accelerated depreciation makes sense given your C Corporation’s circumstances. For example, if the C Corporation finances the asset, accelerated deprecation is fantastic in 2012. But there’s  no deduction except the loan interest in 2013. So, cash flow and financial discipline are considerations.

Hiring a Vet

The Wounded Warrior and Returning Heroes Work Opportunity Tax Credits (WOTC) end in 2012. If you’ll need an employee in 2013 consider hiring a Vet in 2012. You’ll get part of the WOTC on the 2012 Form 1120, and rest on the 2013 Form 1120.

Consult with your CPA first. There’s a cash flow trap. Most folks think WOTCs are directly deductible during the payroll cycle. Not true. You pay full employment taxes with ongoing payroll. Later you claim the WOTC as a General Business credit on Form 1120.

We’re a proactive CPA with a virtual office to serve your C Corporation wherever it’s located. If you don’t have a Form 1120 CPA, or just like what you read, call (910) 399-2705 for a free phone consult.


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