Archive for the ‘News’ Category

Standard Mileage Rates go Down in 2014

December 9, 2013

Via Journal of Accountancy

Optional standard mileage rates for use of a vehicle will go down by one-half cent per mile for 2014, the IRS announced on Friday (Notice 2013-80). Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile.

For business use of a car, van, pickup truck, or panel truck, the 2014 rate will be 56 cents per mile. Driving for medical or moving purposes may be deducted at 23.5 cents per mile. Both rates are one-half cent lower than for 2013.

The rate for service to a charitable organization is unchanged, set by statute (Sec. 170(i)) at 14 cents a mile.

The portion of the business standard mileage rate that is treated as depreciation will be 22 cents per mile for 2014, down one cent from the 23 cent rate in effect in 2012 and 2013.

For purposes of computing the allowance under a fixed and variable rate (FAVR) plan, the maximum standard automobile cost for 2014 is $28,200 for automobiles (not including trucks and vans) or $30,400 for trucks and vans, increases of $100 and $500, respectively, from 2013. Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.

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Governor Signs Cutler Bills

October 7, 2013

Via Spidell Publishing

On October 4, 2013, Governor Brown signed both AB 1412 and SB 209. Because the Governor signed AB 1412 last, it will become operative.

This means that for taxable years 2008 through 2012, taxpayers may exclude 50% of the gain on the sale of small business stock.

The bill not only reinstates the exclusion on the gain of small business stock deemed unconstitutional in Cutler, but it also generally allows taxpayers who claimed the small business exclusion on the federal return to also claim an exclusion on the California return for all open years. This is because AB 1412 removes the 80% payroll and property in California requirements.

Among other things, the bill allows taxpayers 180 days from the date of enactment to file a claim for refund for the 2008 year.

Watch House Hearing on Organizations Targeted by the IRS

June 4, 2013

Today the House Oversight committee is holding hearings about the IRS targeting of exempt organizations with specific political ideology.  You can watch the hearings at this link here.

 

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Details of The Individual Mandate Under the Affordable Care Act

May 7, 2013

Introduction

Beginning January 1, 2014, the Affordable Care Act will require most individuals to have “minimum essential (health) coverage” for themselves and their dependents or pay a penalty.  The coverage requirement and penalty are collectively known as the “Individual Mandate.” Some individuals and their dependents may qualify for an exemption to the mandate, and therefore not have to carry minimum essential coverage or pay a penalty.

The Internal Revenue Service and Department of Health and Human Services recently issued proposed regulations regarding:

●   Coverage that will qualify as minimum essential coverage

●   When and how penalties will be determined and paid

●   Individuals exempt from the penalty for not carrying minimum essential coverage

●   How individuals can apply for an exemption

Background

1.  Coverage that will Qualify as Minimum Essential Coverage

An individual will be considered to have minimum essential coverage for any month in which he or she is enrolled in any of the following plans for at least one day during that month:

●   Employer group health plan

●   Individual health insurance policy

●   Student health coverage

●   State high risk pool coverage

●   Medicare Advantage Plan

●   Government plan such as Medicare, Medicaid, TRICARE or veterans coverage

●   Coverage for non-U.S. citizens provided by another country

●   Refugee medical assistance provided by the ‘Administration for Children and Families’

●   Coverage for AmeriCorps volunteers

2.  When and How Penalties will be Determined and Paid

The first penalties will be due with 2014 tax returns filed in 2015, and be determined by calculating the greater of a flat dollar amount or a set percentage of income. The annual penalties for 2014 through 2016 are outlined below.  Beginning in 2017, penalties will increase each year by a cost-of-living adjustment.

●   2014: The greater of $95 per adult and $47.50 per child under age 18 (maximum of $285 per family) or 1% of income over the tax-filing threshold.

●   2015: The greater of $325 per adult and $162.50 per child under age 18 (maximum of $975 per family) or 2% of income over the tax-filing threshold.

●   2016: The greater of $695 per adult and $347.50 per child under age 18 (maximum of $2,085 per family) or 2.5% of income over the tax-filing threshold.

3.  Individuals Exempt from the Penalty for Not Carrying Minimum Essential Coverage

The following individuals will be exempt from paying a penalty if they do not carry minimum essential coverage:

●   Individuals who cannot afford coverage. Coverage is considered unaffordable if an individual’s contribution toward minimum essential coverage is more than 8% of his or her annual household income. Monthly contributions are calculated at 1/12 the annual household income to determine if they exceed 8%.

●   Taxpayers with income below the tax-filing threshold.

●   Individuals who qualify for a hardship exemption. A hardship exemption is available to individuals who would otherwise be eligible for Medicaid under the expanded eligibility of provisions of ACA, but who are not eligible because their state chose not to expand Medicaid.  Also eligible for exemption will be individuals with a personal or financial hardship that prevents them from being able to afford coverage.

●   Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year.

●   Member of religious groups who object to coverage on religious principles.

●   Members of health care sharing ministries, i.e., non-profit religious organizations whose members share medical costs.

●   Individuals in prison.

●   Individuals who are not U.S. citizens.

●   Members of Native American tribes.

U.S. citizens living in a foreign country will be exempt if they meet certain requirements, such as residing abroad for an entire calendar year.  Residents of the U.S. territories of Guam, American Samoa, Northern Mariana Islands, Puerto Rico, and the Virgin Islands will automatically be deemed to have minimum essential coverage, and therefore be exempt from penalties.

4.  How Individuals Can Apply for an Exemption

Depending on the type of exemption, individuals can apply to their state’s Health Care Exchange or to the IRS when filing their tax return. If an application to an Exchange is approved, the Exchange will issue a certificate of exemption and notify the IRS.

●   Religious and hardship exemptions are only available by applying to an Exchange.

●   Individuals who cannot afford coverage, who experience short-term coverage gaps, who are not U.S. citizens, or who have household income below the tax-filing threshold may apply for an exemption through the IRS when filing their federal tax return.

●   Members of a health care sharing ministry, individuals in prison, and members of Native American Tribes may apply for an exemption through an Exchange or through the IRS when filing their federal tax return.

Small Business Health Care Tax Credit for Small Employers

May 7, 2013

Beginning 2010, eligible small employers may claim a tax credit if the employer makes non-elective contributions that pay for at least one-half of the cost of health insurance premiums for the coverage of participating employees.  For tax years 2010 through 2013, the maximum credit is 35% for small business employers and 25% for small tax-exempt employers. An enhanced version of the credit will be effective beginning January 1, 2014.  In general, on January 1, 2014, the rate will increase to 50% and 35% respectively, allowing the cost of providing insurance to be even lower for employers.

Can you claim the credit?

To be eligible, you must cover at least 50% of the cost of single (not family) health care coverage for each of your employees.  You must also have fewer than 25 full-time equivalent employees.  Those employees must have average wages of less than $50,000 a year.  Also, the amount of the credit you receive works on a sliding scale.  The smaller the business or charity, the greater the credit allowed.

Full-time equivalent employees are defined as follows: for example, if you have 50 employees that work 20 hours per a week each, this is the equivalent of 25 full-time employees.

Credit in tax years after 2013

In 2014, major provisions of the Affordable Care Act (ACA) take effect, including the establishment of Health Insurance Exchanges and, in many states, the expansion of Medicaid.  Many of these new provisions will affect small business’ approach to offering healthcare coverage to employees.

Beginning 2014 and beyond, the 50% credit for employers is the lessor of:

  1. The total amount of non-elective contributions that the employer makes on behalf of its employees during the tax year under a contribution arrangement for premiums for qualified health plans
  2. The total amount of non-elective contributions that would have been made during the tax year if each employee had taken into account (1) or had enrolled in a qualified health plan that had a premium equal to the average premium tax for the small group market in the rating area in which the employee enrolls for coverage.

Economic Forecast – 2013

January 29, 2013

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This morning, several members of Nienow & Tierney, LLP had the opportunity to attend the 14th Annual Economic Forecast Breakfast sponsored by the OC Chapter of California Society of CPA’s.  The speaker for the morning was Dr. Esmael Adibi from the Anderson Center for Economic Research at Chapman University.

Dr. Adibi presented a forecast of cautious and slow growth for 2013.  He expects the GDP for the United States to increase by 2.1% in 2013.  This was following a 2.4% increase in 2012.

Dr Adibi also indicated that he expects consumer spending to increase by 1.8% in the United States for 2013.

In California, Dr. Adibi projects about 225,000 new jobs being produced and with 25,000 of those occurring in Orange County.   He also estimated that housing prices will increase by 6.8% in California.

It was a pleasure to hear Dr. Adibi’s forecast and we hope for an above average increase to our clients in 2013.

CPA Day at the Capital

January 27, 2013

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On January 23rd, CPA’s from all around the State of California converged on our state capital in Sacramento as a part of the annual CPA Day at the Capital.

Meetings were scheduled with each state Senator and Assemblymen/women.  It was an opportunity for the CPA profession to voice a united opinion on the topics which affect our profession and also the taxpayers for whom we prepare tax returns and financial statements.

This year, Stephen Tierney took part in this opportunity to share with our state legislature the issues which we feel are important to clients such as yourself.

We specifically called upon the legislature to forego any effort to impose sales tax on service organizations.  As a profession, we feel that this tax would provide an unfair advantage to service based business owners located outside of the state.  This additional tax would also cause increased costs to our clients for tax preparation services.

As we met with the state representatives, we also promoted a financial literacy program which is sponsored by the California Society of CPA’s.  This program is designed to educate individuals on basic financial issues such as maintaining a budget and how to save for future expenses.  These programs are provided free of charge by CPA’s around the State of California.

Stephen loved the opportunity to meet with our state representatives and participate in helping promote issues for our clients and our profession.  He looks forward to participating in this event in future years.

FTB Installment Payment Error

January 18, 2013

On December 28, the Franchise Tax Board (FTB) computer system failed to post around 25,000 installment agreement payments.  This error only relates to payments that were made by automatic withdrawal for installment agreements that taxpayers had with the FTB.  This computer error did not impact payments made through the web payment system for estimated tax or prior liabilities.

If you are currently set up for automatic withdrawal, you should check to see if the funds have been withdrawn from your account for December.  The FTB has sent a letter to the taxpayers who would have been impacted by this error.  The FTB is requesting that the taxpayers impacted resubmit the payment.  If the payment is received within 10 days of the letter, then the payment will be applied effective December 28, 2012.

As always, please contact us if you have any questions.

2012 OC Economic Forecast

February 8, 2012

On January 24th, Dr. Esmael Adibi presented the 2012 Economic Forecast at the California Society of CPA’s event in Orange County.  Dr. Adibi is the director of the A. Gary Anderson Center for Economic Research at Chapman University. 

His presentation projected a positive but small growth in the economy in 2012 and mild improvements in consumer spending. 

One of the main area’s that Dr. Adibi focused on was job growth.  He indicated that it is taking so much longer for our country to break out of the recession because there is less job creation than at the end of previous recessions.  There have been 11 recessions in the US since World War II and this recession is one of the longest because there are no new jobs to boost the economy.  He mentioned that presidents are irrelevant when it comes to our economic growth but new jobs are the key. 

Dr. Adibi projected mild increases in auto sales and consumer spending in 2012.  One encouraging sign for the US is that Canada and Mexico are both growing.  These countries are the leading export for the US.

Dr. Adibi concluded that consumer’s personal income should rise by 5.4% in 2012 but that the housing market will still remain flat with only a .2% increase in the current year.

$1,000 retained worker credit

January 20, 2012

In 2010, Congress passed the HIRE Act which included a credit for businesses that hired unemployed workers.  If the new employee had been out of work for 60 days prior to hiring, the business was allowed a “payroll tax holiday” on the Social Security tax for that eligible employee.  This credit was available on wages paid from February 3, 2010 through December 31, 2010.  The credit was claimed on the employers payroll tax returns.

Along with the “payroll tax holiday”, if the same worker is retained for 52 consecutive weeks, the employer is allowed a credit equal to the lesser of $1,000 or 6.2% of the workers wages.  The employees wages in the second 26 weeks of employment need to be 80% of the first 26 weeks of employment.

Since the HIRE Act was passed in 2010, the first time the $1,000 credit would be available is on the 2011 business  tax return, 52 weeks later.  The credit will be claimed on Form 5884-B.