It is a little-known fact to most accountants that businesses leave money on the table by 1) paying taxes before they have to, and 2) by not identifying deductions in a timely manner that may be accelerated. At AAFCPAs, we regularly identify opportunities for clients that may yield new avenues for them to qualify for deductions or tax credits where they previously did not.
Accelerate Deductions with Tangible Property Regulations
The tangible property regulations and provisions, issued in 2014, are complex to many business leaders as well as many tax practitioners due to the need to consider individual facts and circumstances when assessing the regulations’ impact. AAFCPAs works with clients to leverage these complex rules within the confines of the tax law to accelerate deductions and generate cash.
We first look to see if a property expenditure is done for the betterment of, restoration of, or replacement of a piece of property—and this is not always straight-forward. For example, a client might need to repair a roof, and if the roof simply needs a new top layer, the assumption is that it should be automatically capitalized. In light of the new regulations however, we must ask “is it being repaired (brought back to its original status), or is it being transformed into something new?” If it can be considered a repair, it may be expensed.
We are now in our third tax year of leveraging these repair regulations for our clients, and are uniquely qualified to demystify the tangible property regulation misconceptions. CFOs or finance managers who are currently confused by the definition of a property repair, as it pertains to taxes, are seeing the benefit of our assistance by establishing an accelerated write-off.
Re-Consider Looking into the Research & Development Tax Credit
Beyond the tangible property regulations, AAFCPAs also encourages clients to evaluate the evolving state and federal requirements for realizing Research & Development tax credits. Many states offer the R&D tax credit, which generally follows the federal regulations and IRS guidance. In addition, there are cases when IRS regulations consider process and development as Research & Development, and therefore businesses may unknowingly qualify for credits. For example, the development of technology that helps improve a business’s efficiencies can actually be considered Research & Development, which isn’t commonly known by most business owners.
For business owners and financial officers who are unsure if they have missed out on an opportunity to capitalize on new regulations, we advise that you:
- Get a better understanding of these regulations through research, and/or contacting your AAFCPAs partner
- Think strategically about purchases and repairs
- Be proactive in talking to AAFCPAs about purchases, repairs, pending developments and other decisions that may have tax implications so that you may proceed with an optimal outcome in mind
- Make tax planning a year-round effort
We continuously remind our clients that tax planning is truly an ongoing discipline, and waiting for year-end means missing out on real opportunities. With proactive planning and a complete picture of long-range goals, businesses may be able to take advantage of regulatory changes that enable them to execute a more favorable, strategic tax planning effort.