Preparing for the 2017 Tax Season
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April 17 may still be months away, but the time to begin preparing for tax season is now. Every tax season presents significant changes in the tax code. However, with the change in administration in the White House, tax changes for 2017 hold the potential to be even more significant than usual. By beginning to prepare now, you’ll be ready to maximize your tax breaks while minimizing your tax burden.
Energy Related Tax Credit Extensions
Energy related tax credits provide an incentive for environmentally minded homeowners to install energy efficient appliances and indoor comfort systems. These systems also provide a potential additional income stream for HVAC contractors who install and maintain these products and services. Unfortunately, many energy related tax credits are set to expire at the end of 2016. However, tax credits for solar powered energy systems have been extended through December 31, 2021. The credit remains at 30% of the cost for eligible systems through December 31, 2019 and decreases to 26% for 2020 and decreases again to 22% for 2021. There is no upper limit for this credit.
PATH Act and other Tax Break Extensions
One of the most significant tax break extensions associated with The Protecting Americans from Tax Hikes (PATH) Act of 2015 is that Code Sec. 179 has been retroactively and permanently extended. Under Code Sec. 179, taxpayers may claim deductions of up to $500,000 on equipment purchases of less than $2 million. Items must be placed into service the same year as they are purchased, and used at least 50 percent of the time for business related purposes.
The PATH act also extended the 50% first-year bonus depreciation allowance for property acquired and placed into service between 2015 and 2017. The bonus depreciation decreases to 40% in 2018 and 30% in 2019. It is presently set to expire in 2020.
The Work Opportunity Tax Credit was also extended through 2019. The extension adds a 40% credit to the first $6,000 in wages paid to eligible workers, including military veterans, who have been unemployed for at least 27 weeks. Finally, adjustments to the Research and Development Tax Credit allow eligible businesses with annual revenues below $50 million to apply the credit toward Alternative Minimum Tax (AMT) or payroll tax obligations.
Tax Filing Deadline Changes
The standard deadline for filing federal income tax returns is April 15. However, because April 15 falls on a Saturday in 2017, the deadline is extended to April 17. However, Depending on the structure of your business, this deadline may not apply. In addition, the filing deadline for 2017 may be earlier or later than in previous years. The list below provides 2017 deadlines for regular return filing and extension filing for various business structures.
| Business Structure | Fiscal Year End Date | Regular Filing Deadline | Extended Filing Deadline |
| Sole Proprietorship | December 31 | April 17 | October 16 |
| Single Member LLC | December 31 | April 17 | October 16 |
| Partnership (on form 1065) | December 31 | March 15 | September 15 |
| Partnership (on form 1065) | Varies | 15th day of 3rd month after fiscal year ends | 6 months after filing deadline |
| Multiple Member LLC | December 31 | March 15 | September 15 |
| S-Corporation | December 31 | March 15 | September 15 |
| C-Corporation | December 15 | April 17 | October 16 |
| C-Corporation | Varies | 15th day of 4th month after fiscal year ends | 6 months after filing deadline |
Payroll Tax Income Cap Adjustments
Whether you have employees or operate as a sole proprietorship, payroll taxes are a fact of life. Another change in the federal tax code for 2017 raises the cap on wages that are subject to Social Security and Medicare taxes from $118,500 to $127,200. Wage earners would still pay 7.65 percent as wage deductions, while employers would pay 7.65 percent on wages up to the $127,200 limit. Self employed workers would be responsible for the entire 15.3 percent in payroll taxes on income up to the $127,200 limit.
Potential Upcoming Changes
The incoming Trump administration promises to impose significant changes on the tax code for both individuals and business owners. Two of the most significant potential changes are projected for the Affordable Care Act and the corporate income tax rate. The Republican Congress is primed to ignorantly alter or repeal the ACA in early 2017. A significant reduction in the corporate income tax rate from its current 35% is another distinct possibility.
While it’s too soon to make substantive adjustments, it is a good idea to maintain a watchful eye on news developments. It’s also advisable to discuss possible strategies with your company’s financial advisors – or to seek professional advice.
Disclaimer: This article is a general discussion of changes in the federal income tax code for 2017. It is not intended to provide financial or legal advice. Please consult with a legal or financial professional in your area with specific tax-related questions concerning your company and its financial circumstances and policies.
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