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Expiration of accustomed tax credits is challenge for businesses

Whatever the subject, consistency and predictability are vitally important for effective planning.

To be sure, there are always contingencies in life and many changes, when they come, are desirable. But uncertainty about changes in the tax code makes it very difficult for both individuals and businesses to make key decisions that affect their tax obligations.

In this post, let's look at how small businesses are faring with some of the latest changes in tax law.

There are numerous time-limited tax deductions that Congress has not acted to keep in place. These business tax deductions are sometimes called "extenders," because Congress typically writes them into the tax code so that the deductions periodically expire and require extensions to remain effect.

Some of these deductions are of particular use to small business owners. Consider, for example, the research credit. This credit gives a tax break for money spent by businesses on research-and-development initiatives intended to improve their businesses.

Another example is the Work Opportunity Tax Credit. This is a tax credit that applies to a designated portion of the wages of new hires from particular social groups, such as veterans of military service.

In the past, Congress has tended to extend tax credits involving business expenditures without all that much discussion. This year, however, the constant pressure to find new revenue to bring down the federal budget deficit has kept Congress from its accustomed pattern of extensions.

The lack of action to extend the "extenders" affects nearly 50 different types of particular tax credits. Congress could still reinstate some or all of the affected tax credits. For now, however, many tax credits that expired at the end of last year have run out. And that poses a planning challenge for businesses that have come to rely on those credits.

Source: The New York Times, "For Small Businesses, a Road Map Without a Map," Conrad De Anelle, Feb. 7, 2014

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