News & Resources

11.12.2014 Tax by Michael

Standard Mileage Rates Issued for 2015

The Internal Revenue Service on Wednesday, December 10th, issued the standard mileage rates for business use of an automobile, and for driving for medical or moving purposes, for 2015. The business use rate will go up from the 2014 rates, while the medical and moving rate is going down.

For business use of a car, van, pickup truck, or panel truck, the 2015 rate will be 57.5 cents per mile, slightly higher than the 56 cents per mile rate that applies for 2014. Driving for medical or moving purposes may be deducted at 23 cents per mile, which is one-half cent lower than for 2014.

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

10.12.2014 Tax by Libra

Year-End Tax Planning for Businesses

 While the fate of several business-related tax extenders such as R & D credits, bonus depreciation, and Section 179 expensing that expired at the end of 2013 is uncertain, there are still a number of end of year tax strategies businesses can use to reduce their tax burden for 2014.

Purchase New Business Equipment

Section 179 Expensing. Business should still take advantage of Section 179 expensing this year for a couple of reasons. First, is that in 2014 businesses can elect to expense (deduct immediately) the entire cost of most new equipment up to a maximum of $25,000 for the first $200,000 of property placed in service by December 31, 2014. Keep in mind that the Section 179 deduction cannot exceed net taxable business income. In addition, unless Congress reauthorizes it, the first-year bonus depreciation deduction expired at the end of 2013 and is not available for 2014.

While most businesses follow a calendar year, for those that don’t there is an exception to the $25,000 cap that allows those business to take advantage of the $500,000 Section 179 benefit. However, only businesses whose calendar year begins in 2013 and ends in 2014 can take advantage of this special provision.

Qualified property is defined as property that you placed in service during the tax year and used predominantly (more than 50 percent) in your trade or business. Property that is placed in service and then disposed of in that same tax year does not qualify, nor does property converted to personal use in the same tax year it is acquired.

Note: Many states have not matched these amounts and, therefore, state tax may not allow for the maximum federal deduction. In this case, two sets of depreciation records will be needed to track the federal and state tax impact.

Please contact our office if you have any questions regarding qualifying property or the Section 179 deduction.

Timing. If you plan to purchase business equipment this year, timing is an important consideration. You may be able to increase your tax benefit depending on when in the fiscal year you buy new equipment. Here’s a simplified explanation:

Conventions. The tax rules for depreciation include several “conventions” or rules for figuring out how many months of depreciation you can claim. There are three types of conventions.

  1. The half-year convention: This convention applies to all property except residential rental property, nonresidential real property, and railroad gradings and tunnel bores (see mid-month convention below) unless the mid-quarter convention applies. All property that you begin using during the year is treated as “placed in service” (or “disposed of”) at the midpoint of the year. This means that no matter when you begin using (or dispose of) the property, you treat it as if you began using it in the middle of the year.

Example: You buy a $40,000 piece of machinery on December 15. If the half-year convention applies, you get one-half year of depreciation on that machine.

  1. The mid-quarter convention: The mid-quarter convention must be used if the cost of equipment placed in service during the last three months of the tax year is more than 40 percent of the total cost of all property placed in service for the entire year. If the mid-quarter convention applies, the half-year rule does not apply, and you treat all equipment placed in service during the year as if it were placed in service at the midpoint of the quarter in which you began using it.
  2. The mid-month convention: This convention applies only to residential rental property, nonresidential real property, and railroad gradings and tunnel bores. It treats all property placed in service (or disposed of) during any month as placed in service (or disposed of) on the midpoint of that month.

If you’re planning on buying equipment for your business, call us first. We’ll help you figure out the best time to buy it to take full advantage of these tax rules.

Read more
10.12.2014 Tax by Libra

Year-End Tax Planning for Individuals

 Once again, tax planning for the year ahead presents more challenges than usual, this time due to the numerous tax extenders that expired at the end of 2013.

These tax extenders, which include nonbusiness energy credits and the sales tax deduction that allows taxpayers to deduct state and local general sales taxes instead of state and local income taxes, may or may not be reauthorized by Congress and made retroactive to the beginning of the year.

More significant however, is taxable income in relation to threshold amounts that might bump a taxpayer into a higher or lower tax bracket, potentially subjecting taxpayers to additional taxes such as the Net Investment Income Tax (NIIT) or an additional Medicare tax.

In the meantime, let’s take a look at some of the tax strategies that you can use right now, given the current tax situation.

Read more
09.12.2014 Tax by Libra

Tips for Self-Employed Taxpayers

If you are an independent contractor or run your own business, there are a few basic things to know when it comes to your federal tax return. Here are six tips you should know about income from self-employment:

  • Self-employment income can include income you received for part-time work. This is in addition to income from your regular job.
  • You must file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with your Form 1040.
  • You may have to pay self-employment tax as well as income tax if you made a profit. Self-employment tax includes Social Security and Medicare taxes. Use Schedule SE, Self-Employment Tax, to figure the tax. Make sure to file the schedule with your tax return.
  • You may need to make estimated tax payments. People typically make these payments on income that is not subject to withholding. You may be charged a penalty if you do not pay enough taxes throughout the year.
  • You can deduct some expenses you paid to run your trade or business. You can deduct most business expenses in full, but some must be ‘capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  • You can deduct business costs only if they are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and proper for your trade or business.

Questions? We have answers. Give us a call!

09.12.2014 Tax by Libra

Tips for Taxpayers with Foreign Income

If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship. If you’re a taxpayer with foreign income, here’s what you should know:

1. Report Worldwide Income. The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. Review the Foreign Earned Income Exclusion. Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $99,200 of their wages and other foreign earned income they received in 2014. Please contact us if you have any questions about foreign earned income exclusion.

3. Don’t Overlook Credits and Deductions. Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.

4. File Required Tax Forms. In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms with the Treasury Department such as Form 8938, Statement of Specified Foreign Financial Assets or FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts (“FBAR”). Please contact us if you’re not sure which forms you need to file.

5. Report Foreign Accounts and Assets. Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Read more