tax update for scarr
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2014 Tax PrepJanuary 21, 2015
Jennifer Vacha, CPA636.email@example.com
Anne Ritter, CPA636.firstname.lastname@example.orgBrown Smith Wallace LLC 2nd largest locally owned public accounting firmStaff of over 200Range of servicesTraditional audit, accounting and tax services Family wealth and estate planning Numerous advisory serviceswww.BSWLLC.com for more info
2014 All Rights Reserved Brown Smith Wallace LLC 2OverviewSee the back cover of TPG for more details of services2Jen Vacha, CPAManager in the St. Charles office 14 yrs. experience specialize individual, small business, and NFPWork one-on-one with clients minimize tax obligations and understand current tax positionMember AICPA, MSCPA, Chair of MSCPA NFP Committee 2014 All Rights Reserved Brown Smith Wallace LLC 3Overview
3Pens for writing new sales contracts!
2014 Quick Tax FactsSee Extenders for updates!
2014-2015 Tax Planning Guide (TPG)See Extenders for updates! 2014 All Rights Reserved Brown Smith Wallace LLC 4Take Aways4Tax Changes for 2015
Schedule C Tax Deductions
Affordable Care Act Individual and Employer Mandates
2014 All Rights Reserved Brown Smith Wallace LLC 5Agenda56Tax Changes for 2015 2014 All Rights Reserved Brown Smith Wallace LLC ExtendersPassed retroactively for 2014 expired 12/31/2014 2014 201550% Bonus Depreciation* yes no Section 179*$500,000 $25,000
*These figures update the information on the 2014-2015 TPG page 11 and the 2014 Quick Tax Facts back cover.
67Tax Changes for 2015 2014 All Rights Reserved Brown Smith Wallace LLC ExtendersPassed retroactively for 2014 expired 12/31/2014 2014 2015Deduction for PMI as qualified mortgage interest yes no
Exclusion of up to $2M of discharged principal residence indebtedness yes no
78Tax Changes for 2015 2014 All Rights Reserved Brown Smith Wallace LLC New Tangible Property Capitalization and Repair RegulationsEffective 1/1/2014Change of accounting method must be filedRepairs (see 2014-2015 TPG p9):Routine maintenanceSmall business safe harborMaterials and supplies ($200)Capitalization: written policyApplicable Financial Statement $5,000No Applicable Financial Statement $500
89Schedule C Tax Deductions 2014 All Rights Reserved Brown Smith Wallace LLC Documentation/ComplianceRetirementHealth Savings AccountsMileage/Auto ExpensesMeals/EntertainmentHome OfficeOther
910Schedule C: Documentation/Compliance 2014 All Rights Reserved Brown Smith Wallace LLC The devil is in the detailsPoor documentation may cost you the deductionAccurate and useableSeparate bank account/credit cardForm 1099: Independent contractorsCommissions and referralsRent paidProfessional feesForm W2: EmployeesForms 941, 940/944 IRS and State
1011Schedule C: Retirement 2014 All Rights Reserved Brown Smith Wallace LLC Pay yourself first (TPG p12)401(k) or other employer sponsored plan$17,500 max 2014Traditional IRA or Roth IRA$5,500 max 2014 ($1,000 catch-up >50yrs)Roth MAGI income limits Joint filers: $181,000-$191,000Single filers: $114,000-$129,000SEPMax is based on compensation 2014 $52,000 max (Effectively 20% of max comp $260,000)
MAGI adj conversions, traditional IRA deductions, student loan interest, tuition and fees, DPP, FEI Excluded income, etc. 1112Schedule C: Health Savings Accounts 2014 All Rights Reserved Brown Smith Wallace LLC High Deductible Health Plans Medical IRAMax funding $3,300/$6,550 (2015 $3,350/$6,650)Catch up $1,000 if >55yrs.Nonqualified withdrawals taxableQualified withdrawals nontaxableUltimate savings vehicleSelf-employed health insurance deduction Insurance for self, spouse, and dependentsLimited to net self-employment income (TPG p11)IRS Form 1040 p1 deduction (Sch A if limited)Potential MO deduction/credit12
13Schedule C: Mileage/Auto Expenses 2014 All Rights Reserved Brown Smith Wallace LLC Business vs. personal use DOCUMENTATIONAmountTime/datePlace/descriptionBusiness purposeVehicle used Physical/manual log bookSmartphone AppsMileage Tracker $2.99 AndroidMileTracker $3.99 iPhone/iPad
TIP: Get an oil change 1/1 each year 3rd party document showing mileage1314Schedule C: Mileage/Auto Expenses 2014 All Rights Reserved Brown Smith Wallace LLC Parking fees and tollsMileage$.56/mile 2014 ($.575 2015)Personal property taxesActual expensesDepreciation or lease paymentsLimits/restrictions (luxury auto, SUV, etc. see p9 TPG)InsuranceMaintenance/repairsPersonal property taxesCannot switch from Actual Expenses to Mileage1415Schedule C: Meals/Entertainment 2014 All Rights Reserved Brown Smith Wallace LLC Ordinary and necessaryCommon and helpful and appropriateDocument who, when, where, whyDirectly-related testMain purpose active conduct of businessDid engage in business>General expectation of business benefitAssociated testAssociated with active conduct of your businessDirectly before/after substantial business discussion1516Schedule C: Meals/Entertainment 2014 All Rights Reserved Brown Smith Wallace LLC Substantial business discussionFacts basedMust show actively engaged in discussion, meeting, negotiation, etc. to get incomeMust be substantial in relation to the expense50% LimitationCountry club paymentsDues: Non-deductibleSeparately identify meals/drinks/golf feesOther limitations (skyboxes/luxury suites, etc.)
1617Schedule C: Home Office 2014 All Rights Reserved Brown Smith Wallace LLC Office used exclusively, regularly for businessi.e. not the kitchen table
Full home office deductionPartial mortgage interest, R/E taxes, insurance, utilities, depreciation, etc.Some normal itemized deductions
Safe harbor deduction$5 per square foot, limited to 300 sq. ft.
TIP: Take photo of home office 1/1 if audited, may be some proof the home office existsTIP: Keep HO calendar with notes HO Research; HO writing contracts; etc.1718Schedule C: Other 2014 All Rights Reserved Brown Smith Wallace LLC Gifts limited $25 per person/yearAdvertising print/online/business cardsOffice suppliesComputer equipment (depreciable)Supplies paper, staples, etc.PostageTrade magazine subscriptionsBusiness insuranceProfessional fees legal/accounting
1819Schedule C: Other 2014 All Rights Reserved Brown Smith Wallace LLC Continuing education Professional organization duesDedicated home telephone/long distanceEmployer reported expenses Items withheld from your commission checks
Best practice dont spend money on itemsjust for a tax deduction IRS may not consider it to be a necessary expense. Good businessmanagement > tax driven choices.
1920Affordable Care Act 2014 All Rights Reserved Brown Smith Wallace LLC ACA or Obamacare Individual MandatesEffective 1/1/2014Report on 2014 tax returnForm 8962Shared responsibility paymentNo minimum essential coverage; greater of:1% household income or $95/adult $47.50/child Max $285 for 2014Payment amount increases annually
2021Affordable Care Act 2014 All Rights Reserved Brown Smith Wallace LLC ACA or Obamacare Employer MandatesNot offering minimum essential coverageTo at least 70% FTE (95% in 2016)At least 1 FTE obtains premium tax creditPenalties are non-deductibleEffective 1/1/2015 > 100 FTEEffective 1/1/2016 50-100 FTEExempt < 50 FTEFTEs Full time equivalents
2122Materially Participating Real Estate Professional 2014 All Rights Reserved Brown Smith Wallace LLC RequirementsMaterially participate >750 hours/year in real property trades/businesses>50% personal services performed in all trades/ businesses were in real property trades/ businesses in which you materially participateAdvantagesRental activities are not passive; thus losses not subject to PAL limitationsIncome not subject to new 3.8% NIIT (Net Investment Income Tax)2223Resources 2014 All Rights Reserved Brown Smith Wallace LLC www.IRS.gov IRS Publication 463Travel, Entertainment, Gift and Car ExpensesIRS Publication 535Business ExpensesIRS Reg. Section 1.469-5TMaterial participation test and passive activity rulesBrown Smith Wallace2014-2015 Tax Planning Guide - PDF2015 Quick Tax GuideLeave a business card to receive
2324Follow Up Items 2014 All Rights Reserved Brown Smith Wallace LLC Questions?
Next StepsLook over your prior year returnsStart pulling 2014 recordsPrepare for 2015
24To ensure compliance with requirements imposed by the IRS, we are required to inform you that any U.S. federal tax advice contained in this communication (including attachments and handouts) is not intended or written to be used, and cannot be used, for the purpose of:
1) Avoiding penalties under the Internal Revenue Code or
2) promoting, marketing, or recommending to another party any transaction or matter addressed herein.
25Circular 230 Disclosure 2014 All Rights Reserved Brown Smith Wallace LLC 25Visit our website, follow Brown Smith Wallace on LinkedIn and Twitter or Like us on Facebook!26
Thank You!6 CityPlace Drive, Suite 900 St. Louis, Missouri 63141 314.983.1200 1520 S. Fifth St., Suite 309 St. Charles, Missouri 63303 636.255.3000 2220 S. State Route 157, Ste. 300 Glen Carbon, Illinois 62034 618.654.3100 1.888.279.2792 bswllc.com 2014 All Rights Reserved Brown Smith Wallace LLC 26