|
|
|
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
The Internal Revenue Service has recently simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.
The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.
The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.
"We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. "This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers."
Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.
As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.
The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.
For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.
Further details on this change can be found in Notice 2015-82, posted on IRS.gov.
We will soon request that our clients update their existing capitalization policy if they want to increase it to the new $2,500 limit. Please watch for more direct communications from us.
 Contact: Jeff Dvorachek, CPA
jdvorachek@hawkinsashcpas.com
920.684.2545
|
Are You Subject to Form-1095C Under the Affordable Care Act? |
 Adding one more thing to your year-end to-do list, the Affordable Care Act (ACA) requires some employers to file the specialized Form 1095 for the 2015 filing year. The due date for filing these forms is February 1, 2016, but planning needs to happen now.
Make your organization's 1095 reporting easy. Let our team of ACA professionals help check this off your list of year-end reporting.
Our ACA Reporting Service includes:
- Assistance determining which version of the Form 1095 is necessary for your organization.
- Criteria for you to determine which employees need to receive a Form 1095.
- A spreadsheet and instructions to collect employee data used to properly prepare the required forms.
- Proper preparation of forms with codes and requirements based upon provided information.
- Electronically filing the forms on your behalf.
- The necessary reports for your employees in pre-labeled and packaged envelopes.
Greg Kenworthy
608.793.3141
gkenworthy@hawkinsashcpas.com | Lance Campbell
507.252.6674
lcampbell@hawkinsashcpas.com | Jeff Uhlir
920.684.2550
juhlir@hawkinsashcpas.com | Matt Eckelberg
715.384.1995
meckelberg@hawkinsashcpas.com |
|
Get the New Year Off to a Great Start
|
 |
Year-End Update
The complimentary Year-End Update session will address major changes affecting the close of 2015 and beginning of 2016.
Date and Time: Dec. 15, 2015 | 8:30 a.m. - 10:00 a.m. |
|
Year-End Seminar
The Year-End Seminar is a comprehensive three-hour session that will provide an in-depth look at compliance issues of year-end payroll processing, fringe benefits, multi-state issues and independent contractor issues.
Date and Time: Dec. 10, 2015 | 8:30 a.m. - 11:30 a.m. Cost: $30.00
Sessions are lead by Cindy Randall, a Certified Payroll Professional with more than 20 years of experience. Attendees of each session will receive information on the new 1095 reporting required under the Affordable Care Act. |
|
|
| What You Should Know About Capital Gains and Losses |
When you sell a capital asset, the sale results in a capital gain or loss. A capital asset includes most property you own for personal use (such as your home or car) or own as an investment (such as stocks and bonds). Here are some facts that you should know about capital gains and losses:
- Gains and losses. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
- Net investment income tax (NIIT). You must include all capital gains in your income, and you may be subject to the NIIT. The NIIT applies to certain net investment income of individuals who have income above statutory threshold amounts - $200,000 if you are unmarried, $250,000 if you are a married joint-filer, or $125,000 if you use married filing separate status. The rate of this tax is 3.8%.
- Deductible losses. You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
- Long- and short-term. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.
- Net capital gain. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.
- Tax rate. The capital gains tax rate, which applies to long-term capital gains, usually depends on your taxable income. For 2015, the capital gains rate is zero to the extent your taxable income (including long-term capital gains) does not exceed $74,900 for married joint-filing couples ($37,450 for singles). The maximum capital gains rate of 20% applies if your taxable income (including long-term capital gains) is $464,850 or more for married joint-filing couples ($413,200 for singles); otherwise a 15% rate applies. However, a 25% or 28% tax rate can also apply to certain types of long-term capital gains. Short-term capital gains are taxed at ordinary income tax rates.
- Limit on losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
- Carryover losses. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year's tax return. You will treat those losses as if they happened in that next year.
 Contact: Lance Campbell, CPA507.252.6674
lcampbell@hawkinsashcpas.com
|
| 2015 Year-End Tax Planning Guide |
This guide covers many of the tax issues higher-income taxpayers will encounter in 2015-2016.
Contents include:
- Year-to-date review
- Executive compensation
- Investing
- Real estate
- Business ownership
- Charitable giving
- Family & education
- Retirement
- Estate planning
- Tax Rates
|
| Providing Tax-Free Fringe Benefits to Employees |
One way you can find and keep valuable employees is to offer the best compensation package possible. An important part of any compensation package is fringe benefits, especially tax-free ones. From an employee's perspective, one of the most important fringe benefits you can provide is medical coverage. Disability, life, and long-term care insurance benefits are also significant to many employees. Fortunately, these types of benefits can generally be provided on a tax-free basis to your employees. Let's look at these and other common fringe benefits.
Medical Coverage
If you maintain a health care plan for your employees, coverage under that plan isn't taxable to them. Employee contributions are excluded from income if pretax coverage is elected under a cafeteria plan; otherwise, such amounts are included in their wages, but are deductible on a limited basis as itemized deductions.
Caution: Employers must meet a number of new requirements when providing health insurance coverage to employees. For instance, benefits must be provided through a group health plan (either fully insured or self-insured). Reimbursing an employee for individual policy premium payments can subject the employer to substantial penalties.
Disability Insurance
Your disability insurance premium payments aren't included in your employee's income, nor are your contributions to a trust providing disability benefits. The employees' premium payments (or any other contribution to the plan) generally are not deductible by them or excludable from their income. However, they can make pretax contributions to a cafeteria plan for their disability benefits; such contributions are excludable from their income.
Long-term Care Insurance
Plans providing coverage under qualified long-term care insurance contracts are treated as health plans. Accordingly, your premium payments under such plans aren't taxable to your employees. However, long-term care insurance can't be provided through a cafeteria plan.
Life Insurance
Your employees generally can exclude from gross income premiums you pay on up to $50,000 of qualified group term life insurance coverage. Premiums you pay for qualified coverage exceeding $50,000 is taxable to the extent it exceeds the employee's contributions toward coverage.
Retirement Plans
Qualified retirement plans that comply with a host of requirements receive favorable income tax treatment, including (1) current deduction by you, the employer, for contributions to the plan; (2) deferral of the employee's tax until benefits are paid; (3) deferral of taxes on plan earnings; and (4) in the case of 401(k) plans and SIMPLE plans, the employee's ability to make pretax contributions.
Dependent Care Assistance
You can provide your employees with up to $5,000 ($2,500 for married employees filing separately) of tax-free dependent care assistance during the year. The dependent care services must be necessary for the employee's gainful employment.
Adoption Assistance
Generally, in 2015, employees can exclude from income qualified adoption expenses of up to $13,400 for each eligible child paid or reimbursed by you under an adoption assistance program.
Educational Assistance
You can help your employees with their educational pursuits on a tax-free basis through educational assistance plans (up to $5,250 per year), job-related educational assistance, and qualified scholarships.
Benefits Provided to Self-Employed Individuals
Generally, different and less favorable tax rules apply to certain fringe benefits provided to self-employed individuals, including sole proprietors (including farmers), partners, members of limited liability companies (LLCs) electing to be treated as partnerships, and more-than-2% S corporation shareholders. However, except in the case of a more-than-2% S corporation shareholder, if the owner's spouse is a bona fide employee of the business, but not an owner, the business may be able to provide tax-free benefits to the spouse just like any other employee.
 Contact: Greg Kenworthy, CPA608.793.3141
gkenworthy@hawkinsashcpas.com
|
| Education Planning: It's Best to Start Early |
The increasing costs of higher education have made education planning an important aspect of personal financial planning. However, because the actual expenditure will not be incurred for many years, it is often given a low current priority. Also, some parents are counting on scholarships to cover the cost of their children's education. Unfortunately, this tendency to postpone the issue may eliminate several education planning strategies that must be implemented early to be effective.
Escalating Costs
Although the increase in the cost of attending college has slowed down to its lowest escalation rate in years, the College Board reports that 2014-2015 tuition and fees continue to rise at a rate faster than the consumer price index (www.collegeboard.com). All told, the cost of a college education is staggering, and this is unlikely to change.
According to the College Board report, for one year of full-time study, private four-year colleges rose 3.7% (to an average cost of $31,231) from 2013-2014 for tuition and fees alone. Average total charges with room and board are $42,419. Public four-year colleges are up 2.9% (to an average of $9,139) from last year for in-state tuition and fees - room and board adds on another $9,804. Public four-year colleges are up 3.3% (to an average of $22,958) from last year for out-of-state tuition and fees. Average total charges with room and board are $32,762. Even tuition and fees at public two-year schools are up 3.3% (to an average of $3,347).
The report indicates that the subsidies provided to full-time undergraduates at public universities through the combination of grant aid and federal tax benefits averaged $6,110 in 2014-2015 -far below the actual cost of attending.
Six Methods to Pay for College
In general, the six basic methods of paying for a child's higher education include a child working his or her way through school; obtaining financial aid (scholarships and federal loans); paying college expenses out of the parents' current income or assets; using education funds accumulated over time; obtaining private loans; and grandparents (or others) paying college costs.
The first method (child pays) can work, and many successful persons have obtained a good education while working to pay their way. But this often limits the student's choice of schools and can adversely affect grades. Planning to rely on financial aid (the second method) is risky, and the family may not qualify for enough. The third method (parents paying out of current income or assets) works for some, but many parents will not know if their current income and/or assets will be sufficient until it is too late. In addition, this method is not as tax-efficient as some strategies used to accumulate separate education funds (the fourth method). However, these strategies are not without risks. Poor investment choices could prove costly. The fifth method (private loans) can result in a serious debt burden. Obviously, the sixth method detailed below is ideal, but it is not available to many.
How Grandparents Can Help
Grandparents, as well as other taxpayers, have a unique opportunity for gifting to Section 529 college savings plans by contributing up to $70,000 at one time, which currently represents five years of gifts at $14,000 per year. ($14,000 is the annual gift tax exclusion amount for 2015.) A married couple who elects gift-splitting can contribute up to double that amount ($140,000 in 2015) to a beneficiary's 529 plan account(s) with no adverse federal gift tax consequences. As an added feature, money in a 529 plan owned by a grandparent is not assessed by the federal financial aid formula when qualifying for student aid.
The key to effective education planning is to start planning and saving early to create future options. In addition, the use of tax-sheltered investment and savings vehicles like a 529 plan can help ensure adequate funds are available when a child enters college.
 Contact: Steve Albers, CPA920.337.4520
salbers@hawkinsashcpas.com
|
| Seniors Age 70.5 Take Your Required Retirement Distributions Before Year-End |
The tax laws generally require individuals with retirement accounts to take annual withdrawals based on the size of their account and their age beginning with the year they reach age 70.5. Failure to take a required withdrawal can result in a penalty of 50 percent of the amount not withdrawn.
If you turned age 70.5 in 2015, you can delay your 2015 required distribution to 2016. Think twice before doing so, though, as this will result in two distributions in 2016 - the amount required for 2015 plus the amount required for 2016, which might throw you into a higher tax bracket or trigger the 3.8 percent net investment income tax. On the other hand, it could be beneficial to take both distributions in 2016 if you expect to be in a substantially lower bracket in 2016.
 Contact: Doug Wendlandt, CPA715.384.1971
dwendlandt@hawkinsashcpas.com
|
| Earn 5 Percent or More on Liquid Assets |
Yes, that is too good to be true, but we got your attention. As you are painfully aware, it is extremely difficult to earn much, if any, interest on savings, money market funds, or CDs these days. So, what are we to do? Well, one way to improve the earnings on those idle funds is to pay down debt. Paying off a home loan having an interest rate of 5 percent with your excess liquid assets is just like earning 5 percent on those funds. The same goes for car loans and other installment debt. But, the best return will more likely come from paying off credit card debt! We are not suggesting you reduce liquid assets to an unsafe level, but examine the possibility of paying off some of your present debt load with your liquid funds. Paying down $100,000 on a 5 percent home loan is like making more than $400 per month on those funds.
 Contact: Steve Overly, CPA920.337.4525
soverly@hawkinsashcpas.com
|
|
|
|
|
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
|
|
|
