by Chris Frye, CPA
Tax Manager

With 2013 now in the rearview mirror, some small businesses can breathe a brief sigh of relief.  Whether or not the past year was a success, failure, or a little bit of both, it is important to learn from the past while laying the groundwork for a solid future.  While many of us learned a lot about ourselves and our businesses in 2013, there are still issues looming that will rear their ugly head in 2014 and beyond.  So unless you have the proverbial crystal ball, it will be up to you and your team to monitor the pulse and potential impact of these items going forward.

Health Care Reform

This coming March, it will be four years since the Affordable Care Act (ACA) was signed into law.  You would be hard-pressed to find a more hotly debated and controversial topic over the past decade.  Many of the ACA’s reforms have already been put in place.  The rollout of the Federal and state-run health insurance exchanges has been far from glamorous.  Confusion and uncertainty remains within the small business community regarding health insurance options and how we can educate our workforces on their responsibilities and alternatives.  Most businesses were pleased to receive a one-year reprieve from the employer mandate.  This potentially widespread and costly provision has now been delayed until 2015.  Nevertheless, we must start proactively planning and budgeting for the implications well in advance of the effective date.  Organizations that stay ahead of the curve will be well-positioned to avoid the pitfalls this massive legislation could bring about.

Economic Recovery

Many people will debate as to the true extent of the economic recovery.  Most would agree that things are in better shape than four or five years ago, but a far cry from being ideal.  Different industries have been impacted in different ways.  Some are seeing incremental growth while others are still treading water.  The stock market ended the year at record highs and 2013 returns were as good as they have been in fifteen years.  Is this a springboard to continued growth in 2014, or are we being set-up for an epic fail?  That is the million dollar (or maybe trillion dollar) question.  The housing market appears to be stabilizing and unemployment on the decline.  Still, interest rates have been fragile and quick to move as markets gauge the course of action of the Federal Reserve and its potential tapering program.  Small businesses should proceed with cautious optimism and be ready to swiftly adapt to market changes.  Balancing growth and anticipating the optimal workforce composition will be key.

Tax Reform and Expiring Provisions

2013 provided a host of new tax provisions, many of which the full wrath may not be seen until the filing deadline in April 2014 and beyond.  The new 3.8% and 0.9% Medicare tax were brought about in conjunction with the Affordable Care Act.  A new 39.6% top tax bracket and potential 20% rate on capital gains and qualified dividends for high income individuals was spurned from the American Taxpayer Relief Act of 2012.  These taxes will ultimately impact the owners of many small businesses, and could play a major role in whether or not capital for expansion and growth is deployed in 2014.  The provision for special bonus depreciation expired at the end of 2013, and the generous $500,000 limitation for Section 179 depreciation has reverted to $25,000.  Eyes will be closely watching Congress in early 2014 to determine if these items will be retroactively extended.  Businesses must monitor this and be ready to react and adjust accordingly.

What lies ahead in 2014 is anyone’s guess.  Any organization and leader worth their salt must be ready to adapt to change on the fly.  While we must be cognizant of the obstacles and issues that could bring us down, we should attack each day with a positive attitude and entrepreneurial spirit, seeking to make ourselves and those around us better.  Never be afraid to fail.  “Failure is not fatal, but failure to change might be” (John Wooden).