Hi All, Here we have the new January Newsletter. 16 Tax Issues Facing Small BusinessOwners in 2014
2014 willbe a challenging tax year for businesses and higher-income taxpayers. Thefollowing issues are concerns that may impact you and your company’s tax liability in the new year.
Small Business Health Insurance Credit – The tax credit to small employers (25 or fewer equivalent full-time employees) that provide an affordable health insurance plan for their employees and supplement at least half the premiums, will increase to 50% o fthe employer’s contribution in 2014, up from 35% in 2013. For non-profit employers, the credit will be 35% in 2014.
Net Investment Income Tax – Aspart of the Patient Protection & Affordable Care Act (the new health care legislation sometimes referred to as “Obamacare”), a new tax kicked in for 2013and will continue in 2014 and beyond. It is a surtax levied on the net investment income of taxpayers in the higher-income brackets. And although itis perceived as an additional tax on higher-income taxpayers, it can affect even those who normally don’t have higher income if they have a large income from the sale of real estate, certain business assets, stocks, or other investments.This is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.
Higher Tax Rates – Prior to the increase in 2013, there were six tax brackets: 10, 15, 25, 28, 33, and35%. Beginning in 2013 and continuing for future years, a new top rate of 39.6% has been added for higher-income taxpayers.
Higher Capital Gains Rates –Beginning in 2013 and continuing for future years, the tax rate for long-term capital gains and qualified dividends has been increased to 20% (up from 15%)for taxpayers with incomes exceeding the threshold for their filing status.
Medical AGI Phase-out – Beginning in 2013and continuing for future years, a taxpayer’s medical deductions will be reduced by 10% of their adjusted gross income, up from the previous 7.5% (butthe 7.5% continues to apply to seniors through 2016).
Possibility of Lower Expensing Deductions – The Sec 179 business expensing allowance for businessequipment drops from $500,000 per year to $25,000 in 2014 unless Congress extends the more liberal amount.(1)
Bonus Depreciation Expires –Beginning in 2014, the 50% bonus depreciation for tangible business assets will expire unless Congress extends it.(1) This also reduces the first-year maximum depreciationdeduction for business autos and small trucks.
Individual Insurance Mandate –Beginning in 2014, the Patient Protection & Affordable Care Act will imposethe new requirement that U.S. persons, with certain exceptions, have minimum essential health care insurance, or face a penalty.
Large Employer Mandatory Insurance Requirement – Originally scheduled to begin in 2014 but delayed until 2015 because the government did not have the reporting mechanisms in place,large employers, generally those with 50 or more full-time equivalent employees in the prior calendar year, that:
o Do not offer health coverage for all its full-time employees,
o Offer minimum essential coverage that is unaffordable (employee contribution being more than 9.5% of the employee’s household income), or
o Offer minimum essential coverage where the plan’s share of the total allowed cost of benefits is less than 60% (i.e., less than the bronze plan coverage), will be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state or federal exchange and qualified for either tax credits or a cost-sharing subsidy.
Simplified Home Office Deduction – Effective for tax years beginning in 2013 and continuing for 2014 and beyond, taxpayers can elect a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot with amaximum square footage of 300. Thus, the maximum deduction is $1,500 per year.Eligibility qualifications are the same whether the simplified or regular deduction is claimed.
Increased Payroll and Self-Employment Tax – As part of the new health care legislation, higher-income taxpayers are faced with an additional 0.9% health insurance (HI) tax. Startingin 2013, and continuing for future years, this surtax is imposed upon wage earners and self-employed taxpayers whose wage and self-employment income exceeds $250,000 for married taxpayers filing jointly ($125,000 if filing separately) and $200,000 for all others.
Pease Limitations – The Pease limitation on itemized deductions that was reinstated in 2013 will continue for 2014. The Pease limitation phases out certain itemized deductions for higher-income taxpayers.
Phase-out of Exemptions - Thep hase-out of exemptions for higher-income taxpayers that was reinstated in 2013 continues for 2014.
Longer Depreciation Life for Leasehold and Restaurant Property – The current 15-year depreciable life will increase to 39 years in 2014.(1)
Qualified Small Business Stock Gain Exclusion – Beginning for qualified small business stock issued in2 014, the gain exclusion drops from 100% to 50%.
Qualified Real Property Expensing – Congress temporarily permitted the use of the Sec 179 expensing deduction to write off certain leasehold improvements, and restaurant and retail property improvements. Without Congressional intervention, this provision will no longer be available in 2014.
(1) Congress, a few years back, engaged in brinkmanship with last-minute tax changes. Normally, they have managed to finalize tax law byyear’s end. However, for 2013, they adjourned without addressing the issue of extending many tax breaks that were set to expire at the end of 2013. It is not known if these tax provisions will be extended or not.
Did You Fill out the Needed W-9s from your leasing Company?
ArticleHighlights:
The IRS Form W-9 is used to obtain your independent contractors’tax ID numbers.
Tax ID numbers are required when filing 1099s.
1099-MISCs must be issued to independent contractors that are paid $600 or more during the year for performing services for a trade orbusiness.If you used independent contractors to perform services for your business or trade, and you paid them $600 or more for the year, you must issue them a Form 1099-MISC to get the deduction for their labor and expenses and avoid potential penalties. (This requirement generally does not apply to payments made to a corporation. However, the corporation exception does not apply to payments made for attorney fees and for certain payments for medical or health care services.)
It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later and have the total paid him for the year exceed the $600 limit. If this happens, you may overlook the information needed to file 1099s for the year. Therefore, it is good practice always to have individuals complete and sign the IRS Form W-9 the first time you use them. This eliminates oversights and protects you against IRS penalties and conflicts.
Many small business owners and landlords overlook this requirement during the year, and only realize in January that they have not collected the required documentation to issue 1099s.
If you have not collected W-9s throughout the year, do so as soon as possible,so you will have them available when it comes time to prepare 1099s for theyear. It is sometimes difficult to acquire contractor information after the fact, especially from those contractors with no intention of reporting the income, so it’s always better to get it up front.
Form W-9 provides entries for the contractor’s name, contact information and tax ID number. It also includes a signature block for the contractor, certifying the information and insulating you against penalties if he or she provides an incorrect or phony ID number.
Click here to download the FormW-9.
If you have questions or need copies of the Form W-9, please call this office.This office can also assist you with your 1099 filing requirement next January. Maximize Your Medical Deductions .
Article Highlights
The medical deduction AGI floor has increased to 10%, up from 7.5%.
For taxpayers age 65 or older and their joint-filing spouses, the AGI floor remains at 7.5% until 2017.
For all taxpayers subject to the alternative minimum tax (AMT), the AGI floor is10%.
Beginningthis tax year, the only medical expenses that you can deduct are those inexcess of 10% of your adjusted gross income (AGI), up from the previous 7.5% AGI limitation. The limitation remains at 7.5% for taxpayersage 65 and over through 2016, unless they are subject to the alternativeminimum tax, in which case it is 10% for them as well. For joint return filersnot subject to the AMT, if either spouse is age 65 or older, the 7.5% of AGIlimitation applies to their joint medical expenses.
If you don't itemize your deductions or are nowhere near exceeding the AGIlimitation, you need not concern yourself with this deduction. On the otherhand, if you do itemize and think you might meet the AGIlimitation, then it may be worth your time to summarize your medical expensesfor the year.
Use the following checklist to help you accumulate your deductible medicalexpenses. The list is by no means all-inclusive, and some of the deductionslisted may have additional restrictions not included here.
Ambulance
Artificial Limb
Artificial Teeth
Birth Control Pills
Braille Books and Magazines
Abortion, Legal
Acupuncture
Alcoholism Treatment
Chiropractor
Christian Science Practitioner
Contact Lenses
Crutches
Dental Treatment
Drug Addiction Treatment
Drugs (Prescription)
Eyeglasses
Fertility Enhancement
Guide Dog
Hearing Aids
Hospital Services
Impairment-Related Expenses
Insurance Premiums
Laboratory Fees
Laser Eye Surgery
Lead-based Paint Removal
Learning Disability Treatment
Medicare B & D Premiums
Medical Services
Medicines, Prescribed
Mentally Retarded, Special Home for
Nursing Home
Nursing Services
Operations
Optometrist
Organ Donors
Osteopath
Oxygen
Prosthesis
Psychiatric Care
Psychoanalysis
Psychologist
SpecialSchools and Education
Sterilization
Stop Smoking Programs
Surgery
Therapy
Vasectomy
Weight-loss Program
Wig (Cancer Patient)
If you have questions related to your medical tax deductions please give this office a call.
Franklin Katz, RTRP, ATP, PA, PB
Frank's Tax & Business Service
315 E. King St.
Kings Mountain, NC28086
Local # 704-739-4039 Toll Free# 877-857-1040
E-Mail: [email protected])
Web: Kings Mountain, NC Accounting Firm | Home Page | Frank's Tax & Business Services
IRS Circular 230 Notice: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to
another party any
2014 willbe a challenging tax year for businesses and higher-income taxpayers. Thefollowing issues are concerns that may impact you and your company’s tax liability in the new year.
Small Business Health Insurance Credit – The tax credit to small employers (25 or fewer equivalent full-time employees) that provide an affordable health insurance plan for their employees and supplement at least half the premiums, will increase to 50% o fthe employer’s contribution in 2014, up from 35% in 2013. For non-profit employers, the credit will be 35% in 2014.
Net Investment Income Tax – Aspart of the Patient Protection & Affordable Care Act (the new health care legislation sometimes referred to as “Obamacare”), a new tax kicked in for 2013and will continue in 2014 and beyond. It is a surtax levied on the net investment income of taxpayers in the higher-income brackets. And although itis perceived as an additional tax on higher-income taxpayers, it can affect even those who normally don’t have higher income if they have a large income from the sale of real estate, certain business assets, stocks, or other investments.This is on top of the 20% long-term capital gain tax rate now in effect for higher-income taxpayers.
Higher Tax Rates – Prior to the increase in 2013, there were six tax brackets: 10, 15, 25, 28, 33, and35%. Beginning in 2013 and continuing for future years, a new top rate of 39.6% has been added for higher-income taxpayers.
Higher Capital Gains Rates –Beginning in 2013 and continuing for future years, the tax rate for long-term capital gains and qualified dividends has been increased to 20% (up from 15%)for taxpayers with incomes exceeding the threshold for their filing status.
Medical AGI Phase-out – Beginning in 2013and continuing for future years, a taxpayer’s medical deductions will be reduced by 10% of their adjusted gross income, up from the previous 7.5% (butthe 7.5% continues to apply to seniors through 2016).
Possibility of Lower Expensing Deductions – The Sec 179 business expensing allowance for businessequipment drops from $500,000 per year to $25,000 in 2014 unless Congress extends the more liberal amount.(1)
Bonus Depreciation Expires –Beginning in 2014, the 50% bonus depreciation for tangible business assets will expire unless Congress extends it.(1) This also reduces the first-year maximum depreciationdeduction for business autos and small trucks.
Individual Insurance Mandate –Beginning in 2014, the Patient Protection & Affordable Care Act will imposethe new requirement that U.S. persons, with certain exceptions, have minimum essential health care insurance, or face a penalty.
Large Employer Mandatory Insurance Requirement – Originally scheduled to begin in 2014 but delayed until 2015 because the government did not have the reporting mechanisms in place,large employers, generally those with 50 or more full-time equivalent employees in the prior calendar year, that:
o Do not offer health coverage for all its full-time employees,
o Offer minimum essential coverage that is unaffordable (employee contribution being more than 9.5% of the employee’s household income), or
o Offer minimum essential coverage where the plan’s share of the total allowed cost of benefits is less than 60% (i.e., less than the bronze plan coverage), will be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state or federal exchange and qualified for either tax credits or a cost-sharing subsidy.
Simplified Home Office Deduction – Effective for tax years beginning in 2013 and continuing for 2014 and beyond, taxpayers can elect a simplified deduction for the business use of the taxpayer’s home. The deduction is $5 per square foot with amaximum square footage of 300. Thus, the maximum deduction is $1,500 per year.Eligibility qualifications are the same whether the simplified or regular deduction is claimed.
Increased Payroll and Self-Employment Tax – As part of the new health care legislation, higher-income taxpayers are faced with an additional 0.9% health insurance (HI) tax. Startingin 2013, and continuing for future years, this surtax is imposed upon wage earners and self-employed taxpayers whose wage and self-employment income exceeds $250,000 for married taxpayers filing jointly ($125,000 if filing separately) and $200,000 for all others.
Pease Limitations – The Pease limitation on itemized deductions that was reinstated in 2013 will continue for 2014. The Pease limitation phases out certain itemized deductions for higher-income taxpayers.
Phase-out of Exemptions - Thep hase-out of exemptions for higher-income taxpayers that was reinstated in 2013 continues for 2014.
Longer Depreciation Life for Leasehold and Restaurant Property – The current 15-year depreciable life will increase to 39 years in 2014.(1)
Qualified Small Business Stock Gain Exclusion – Beginning for qualified small business stock issued in2 014, the gain exclusion drops from 100% to 50%.
Qualified Real Property Expensing – Congress temporarily permitted the use of the Sec 179 expensing deduction to write off certain leasehold improvements, and restaurant and retail property improvements. Without Congressional intervention, this provision will no longer be available in 2014.
(1) Congress, a few years back, engaged in brinkmanship with last-minute tax changes. Normally, they have managed to finalize tax law byyear’s end. However, for 2013, they adjourned without addressing the issue of extending many tax breaks that were set to expire at the end of 2013. It is not known if these tax provisions will be extended or not.
Did You Fill out the Needed W-9s from your leasing Company?
ArticleHighlights:
The IRS Form W-9 is used to obtain your independent contractors’tax ID numbers.
Tax ID numbers are required when filing 1099s.
1099-MISCs must be issued to independent contractors that are paid $600 or more during the year for performing services for a trade orbusiness.If you used independent contractors to perform services for your business or trade, and you paid them $600 or more for the year, you must issue them a Form 1099-MISC to get the deduction for their labor and expenses and avoid potential penalties. (This requirement generally does not apply to payments made to a corporation. However, the corporation exception does not apply to payments made for attorney fees and for certain payments for medical or health care services.)
It is not uncommon to have a repairman out early in the year, pay him less than $600, then use his services again later and have the total paid him for the year exceed the $600 limit. If this happens, you may overlook the information needed to file 1099s for the year. Therefore, it is good practice always to have individuals complete and sign the IRS Form W-9 the first time you use them. This eliminates oversights and protects you against IRS penalties and conflicts.
Many small business owners and landlords overlook this requirement during the year, and only realize in January that they have not collected the required documentation to issue 1099s.
If you have not collected W-9s throughout the year, do so as soon as possible,so you will have them available when it comes time to prepare 1099s for theyear. It is sometimes difficult to acquire contractor information after the fact, especially from those contractors with no intention of reporting the income, so it’s always better to get it up front.
Form W-9 provides entries for the contractor’s name, contact information and tax ID number. It also includes a signature block for the contractor, certifying the information and insulating you against penalties if he or she provides an incorrect or phony ID number.
Click here to download the FormW-9.
If you have questions or need copies of the Form W-9, please call this office.This office can also assist you with your 1099 filing requirement next January. Maximize Your Medical Deductions .
Article Highlights
The medical deduction AGI floor has increased to 10%, up from 7.5%.
For taxpayers age 65 or older and their joint-filing spouses, the AGI floor remains at 7.5% until 2017.
For all taxpayers subject to the alternative minimum tax (AMT), the AGI floor is10%.
Beginningthis tax year, the only medical expenses that you can deduct are those inexcess of 10% of your adjusted gross income (AGI), up from the previous 7.5% AGI limitation. The limitation remains at 7.5% for taxpayersage 65 and over through 2016, unless they are subject to the alternativeminimum tax, in which case it is 10% for them as well. For joint return filersnot subject to the AMT, if either spouse is age 65 or older, the 7.5% of AGIlimitation applies to their joint medical expenses.
If you don't itemize your deductions or are nowhere near exceeding the AGIlimitation, you need not concern yourself with this deduction. On the otherhand, if you do itemize and think you might meet the AGIlimitation, then it may be worth your time to summarize your medical expensesfor the year.
Use the following checklist to help you accumulate your deductible medicalexpenses. The list is by no means all-inclusive, and some of the deductionslisted may have additional restrictions not included here.
Ambulance
Artificial Limb
Artificial Teeth
Birth Control Pills
Braille Books and Magazines
Abortion, Legal
Acupuncture
Alcoholism Treatment
Chiropractor
Christian Science Practitioner
Contact Lenses
Crutches
Dental Treatment
Drug Addiction Treatment
Drugs (Prescription)
Eyeglasses
Fertility Enhancement
Guide Dog
Hearing Aids
Hospital Services
Impairment-Related Expenses
Insurance Premiums
Laboratory Fees
Laser Eye Surgery
Lead-based Paint Removal
Learning Disability Treatment
Medicare B & D Premiums
Medical Services
Medicines, Prescribed
Mentally Retarded, Special Home for
Nursing Home
Nursing Services
Operations
Optometrist
Organ Donors
Osteopath
Oxygen
Prosthesis
Psychiatric Care
Psychoanalysis
Psychologist
SpecialSchools and Education
Sterilization
Stop Smoking Programs
Surgery
Therapy
Vasectomy
Weight-loss Program
Wig (Cancer Patient)
If you have questions related to your medical tax deductions please give this office a call.
Franklin Katz, RTRP, ATP, PA, PB
Frank's Tax & Business Service
315 E. King St.
Kings Mountain, NC28086
Local # 704-739-4039 Toll Free# 877-857-1040
E-Mail: [email protected])
Web: Kings Mountain, NC Accounting Firm | Home Page | Frank's Tax & Business Services
IRS Circular 230 Notice: Unless expressly stated otherwise in this
transmission, any tax advice contained herein, forwarded with or attached to this message was not and is not intended to be used, nor may it be relied upon or used, by any taxpayer for the purpose of (1) the avoidance of any tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions, or (2) promoting, marketing or recommending to
another party any