credit reduction - Linkenheimer LLP CPAs & Advisors

The Tax Rules For Deducting The Computer Software Costs Of Your Business

Do you buy or lease computer software to use in your business? Do you develop computer software for use in your business, or for sale or lease to others? Then you should be aware of the complex rules that apply to determine the tax treatment of the expenses of buying, leasing or developing computer software.

Purchased software

Some software costs are deemed to be costs of “purchased” software, meaning software that’s either:

Non-customized software available to the general public under a non-exclusive license or
Acquired from a contractor who is at economic risk should the software not perform.

The entire cost of purchased software can be deducted in the year that it’s placed into service. The cases in which the costs are ineligible for this immediate write-off are the few instances in which 100% bonus depreciation or Section 179 small business expensing isn’t allowed or when a taxpayer has elected out of 100% bonus depreciation and hasn’t made the election to apply Sec. 179 expensing. In those cases, the costs are amortized over the three-year period beginning with the month in which the software is placed in service. Note that the bonus depreciation rate will […]

By Linkenheimer LLP|2020-09-29T16:50:49+00:00September 29th, 2020|business, credit reduction, depreciation, expensing|0 Comments

FUTA Tax – Credit Reduction for 2012

For the second year running, California is a credit reduction state. This means “we” have taken loans from the federal government to meet state unemployment benefit liabilities and have not repaid those loans within the allowable time frame.

The result of being an employer in a credit reduction state is higher tax due on the Form 940. For the year ended December 31, 2012, the calculation results in $42 per employee as additional FUTA liability, bringing total FUTA tax per employee to $84 for the year. The increased liability is considered incurred in the fourth quarter and is due by January 31 (with other annual payroll report filings). For those filers that we process, explanation is provided with their reports. Those who run reports off Quickbooks are often puzzled that the balance due with Form 940 is so much higher than last year. Help them not to be puzzled.

As a practical matter, there is no predicting whether CA will be a credit reduction state again in 2013 (any bets on whether “we” repay those loans in the coming months?).

In 2011, the credit reduction liability resulted in an additional $21 per employee.
For 2012, the hit is […]

By Linkenheimer LLP|2020-09-03T20:05:52+00:00January 11th, 2013|2012, 2013, ca, credit reduction, employer, FUTA, new tax|0 Comments