Standard Mileage Rates to be reduced slightly in 2014

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. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile (see http://www.irs.gov/pub/irs-drop/n-13-80.pdf).

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 the rates 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.

Please feel free to contact us directly if you have any questions.

Here's a link to our email regarding the standard mileage rate

Key Tax Changes to note for 2013

As the year draws to a close, it is a good time to take stock of your tax situation and identify possible opportunities to minimize your tax liability. Many of the provisions associated with the American Taxpayer Relief Act of 2012 ("ATRA") became effective in 2013, which means they will have an impact on this year’s tax return.

ATRA extended numerous benefits for middle-income taxpayers that can help minimize your tax bite if you qualify. Tax benefits include many credits and benefits for families, some deductions for state and local taxes and tax credits for making energy-saving improvements to your home. If you are a higher income taxpayer, ATRA increased your need to plan to lower the impact of higher rates.

We encourage you to contact us at your earliest convenience to discuss how these laws affect your tax situation and develop a strategy that makes sense for you. Among the issues you should be considering:

Health Care Reform

The Affordable Care Act ("ACA") has generated a great deal of confusion and concern. Although no tax considerations for individuals are involved, taxpayers who don’t have health care coverage may be subject to a penalty. Even if you already have coverage, you may want to consider alternatives. We can help you assess what reform means to you and offer the advice you need to make the best choices.

New Tax Laws in Effect

·          High-income individuals will pay more in taxes under the new law in 2013.  Period.  You should consider options for minimizing this tax burden. The highest individual income tax rate rose to 39.6% in 2013 and taxpayers at this income level also saw the dividend and long-term capital gains tax rates rise from 15% to 20%. 

·          In addition, the new 3.8% net investment income tax applies to single taxpayers with adjusted gross income of $200,000 and joint filers earning $250,000. This new tax may affect the effective after-tax return on the sale of your investments, but proper planning may serve to minimize the impact.
 

·          Although the alternative minimum tax ("AMT") originally was aimed at high-income taxpayers, it increasingly has affected more and more middle-income taxpayers. ATRA indexed the AMT for inflation but the use of certain tax breaks could still subject you to the tax.

·          Phase-outs of personal exemptions and the limitation on itemized deductions have been reinstated. As a result, joint filers with adjusted gross income greater than $300,000 and single taxpayers whose adjusted gross income exceeds $250,000 will see a decrease in both of these deductions.

·          After several years of uncertainty in the estate tax area, ATRA created some permanency. The amount that an heir can inherit without owing estate tax is now set at $5 million and will be indexed for inflation in future years. In addition, the estate tax was raised to 40%.

·         Under ATRA, taxpayers age 70½ and older can once again make up to $100,000 of tax-free distributions from an IRA directly to qualified charities.

For those paying college tuition, there is some good news. Several education-related benefits were extended by ATRA, including the American Opportunity Tax Credit, which allows eligible taxpayers to claim a tax credit for some higher education expenses. Given skyrocketing tuition costs, families should not overlook these credits and deductions as they plan for college.

We can help you understand your tax situation and determine the best steps to address your tax challenges and any other financial concerns. We are also available after tax season to advise you on the financial strategies and planning decisions that will help you meet your goals. 

Please don’t hesitate to contact us today to schedule an appointment to begin discussing your options. 

Happy Thanksgiving!

Dear Friends,

In this time of gratitude, we give thanks for you!

We would like to express to you our sincere appreciation for your confidence and loyalty. We are deeply thankful and extend to you our best wishes for a happy and healthy Thanksgiving Day!

Wishing you blessings of health, happiness & success on Thanksgiving and always!

~Franty & Company, P.C.~

May your stuffing be tasty,
May your turkey be plump,
May your potatoes and gravy
have nary a lump.
May your yams be delicious,
May your pies take the prize,
and may your Thanksgiving dinner
stay off your thighs!

–Author Unknown

 

Here's a link to our full Thanksgiving message

 

A CPA's Shirt Pocket Notes - Tax News & Commentary

Year-end Section 179 Deduction Trap: The current $500,000 Section 179 deduction limit applies to tax years beginning in 2013. Under current law, the limit will be a much lower $25,000 for tax years beginning in 2014. This presents a tax trap for fiscal year pass-through entities (e.g., partnerships and S corporations) with calendar tax year owners. Assets acquired and placed in service during the year beginning in 2013 and ending in 2014 will qualify for the larger limit, but the amount passed through to the owners will be reported on their 2014 tax return, when the much lower limit applies. In this scenario the excess amount will be wasted—it cannot be deducted nor can it be carried over. Although Congress may increase the Section 179 deduction limit for tax years beginning in 2014, there's no guarantee that it will equal (or even come close to) the current $500,000 deduction limit.

2014 Filing Season Delayed: The IRS has announced that the start of the 2014 tax season will be delayed by approximately one to two weeks to allow for adequate time needed to program and test tax processing systems following the 16-day government closure. The original tax season start date was set for 1/21/14, but the IRS now plans to start accepting and processing 2013 tax returns no earlier than 1/28/14 and no later than 2/4/14. Acting IRS Commissioner Werfel said the agency is exploring options to shorten the delay and will announce the final decision on the start of the 2014 filing season in December. However, the 4/15/14 tax deadline will not be affected (i.e., extended) by the delay. 

Speaking of Social Security (See yesterday's post), a new report from the Congressional Research Service ("CRS") projects exhaustion of Social Security trust funds in 2033. At that time, it is projected the program would have enough income from taxes to pay 77% of scheduled benefits until 2087, when that number would fall to 72% of benefits. The CRS reports that the Social Security Act does not stipulate what would happen to benefit payments when the funds run out, but anticipates that either full benefit payments would be delayed or reduced benefits would be paid on time. See www.fas.org/sgp/crs/misc/RL33514.pdf for the full report.

IRS Contractors Owe Millions: Employees of the IRS are required to file tax returns on time and pay any federal income tax owed. A recent report from the Treasury Inspector General for Tax Administration ("TIGTA") points out that contract employees are not being held to the same standard. TIGTA found that as of 6/14/12, 691 (5%) of the 13,591 IRS contract employees reviewed had $5.4 million in Federal tax debt. Of these, 319 still had staff-like access to IRS facilities even though they were not on a payment plan. Weaknesses in the IRS's existing practices were cited as allowing occurrences of noncompliance to go undetected after access was initially granted. The IRS only reviews contractor compliance every five years, whereas employees are continuously monitored. Recommendations in the report include further evaluation of contractor employees that TIGTA identifies as potentially noncompliant and bringing those individuals into compliance or removing their IRS contracts. 

IRS Paying Fraudulent Tax Refunds: In 2012, TIGTA reported that its analysis of Tax Year 2010 returns identified almost 1.5 million tax returns that were not detected by the IRS as potentially fraudulent. These tax returns were not detected despite having the same characteristics as identity theft fraudulent tax returns, and represented the payment of potentially fraudulent tax refunds totaling more than $5.2 billion. The common characteristic of these tax returns was that the income and withholding reported on the tax returns were false. A new TIGTA report concludes that the current income and withholding verification process "is not always effective in stopping the issuance of fraudulent refunds." However, the IRS is developing a new system, the Return Review Program, which is scheduled to be phased in beginning in 2015.

IRS Paying Improper Earned Income Credits: TIGTA also reports that the IRS is NOT in compliance with an executive order requiring a reduction in the number of improper Earned Income Tax Credit (EITC) payments. The TIGTA reported that an estimated 21%–25% of the EITC payments made in fiscal year 2012 were paid in error and that, between fiscal years 2003–2012, over $110.8 billion in improper EITC payments have been made. Main factors cited in the report for the number of incorrect payments are the "complexity of the EITC program as well as the need to balance the reduction in improper payments while still encouraging individuals to use the credit." The report recommends that the IRS develop processes to identify improper payments of high-dollar amounts and report that information quarterly to the TIGTA.

News You Can Use - 2014 Social Security & Medicare Stuff

The Social Security wage base will increase in 2014 to $117,000, a $3,300 bump over the current level of $113,700.  The OASDI tax rate, or FICA tax rate, paid by both employers and employees will stay at 6.2%.  The Medicare tax rate will also remain stable in 2014 at 1.45% (paid both by employers and employees); there is no cap on the medicare tax (it's paid on all employee wages).

In addition, the 0.9% Medicare surtax kicks in on single taxpayers with wages exceeding $200,000 and married wage earners with compensation over $250,000.  While the surtax is not matched by employers it is required to be paid by self-employed persons with earnings at the above limits.

Social Security benefits will be increases by 1.5% in 2014; the increase is slightly less than the bump that Social Security recipients saw for 2013.

Earnings limits for Social Security recipients will go up in 2014.  People who turn 66 next year will NOT lose any benefits if they earn less than $41,400. Also in 2014, Individuals between the ages of 62 and 66 can make up to $15,480 before they lose any of their Social Security benefits.  There is no earnings cap once a recipient turns 66 years of age.

The basic Medicare Part B premium will remain $104.90 per month in 2014 but upper-income seniors (defined as couples with modified adjusted gross income ("MAGI") over $170,000 or singles with MAGI over $85,000) STILL have to pay higher Part B and D premiums (I know, Bummer).

A little accounting lingo here for you, folks: MAGI is Adjusted Gross Income plus any tax exempt interest, EE Bond Interest used for educational purposes and excluded foreign earned income. Doesn't affect a lot of folks.

The Part B surcharge for 2014 won't change and the Part D charge will rise slightly.  Total surcharges on upper income earners can be as high as $300.10 per month.

Give us a call if you are concerned about these changes.  We can help!

Sung to the tune of "Mama's don't let your babies grow up to be Cowboys"

We are actively involved, both professionally and personally, with a number of local high school sports booster groups.  Accordingly, we pay attention to some of the actions taken by IRS with respect to those groups.

In a recent Tax Court ruling (Capital Gymnastics, TC Memo. 2013-193), a group lost their tax exempt status. This group permitted the individual fundraising activities of its booster members to lower their individual membership dues.

The gymnastics club encouraged the parents of its student-athletes to form a Booster Group to help pay for the Club’s entrance fees and coaches’ travel costs.  Parents of the gymnasts could also lower their dues by selling gift cards, cookie dough and gift wrap to raise funds for the Boosters, and about half of the Booster members did so (and about half did not raise funds and they paid the full membership cost).  The Club offset the fundraising parents’ dues, in whole or in part, for each parent’s fundraising effort.  

After an examination, the IRS determined that the fundraising credits each parent received were an impermissible private benefit.  The Tax Court agreed and the Booster Club’s tax exempt status was revoked.

So, Booster Groups, don’t let your Boosters offset dues by selling Hoagies.

Flash Flooding in McMurray, PA

Our thoughts go out to those affected by today's flash flooding.  Be careful, be safe and Let's all pray that the damage is minimal.

Summer Newsletter is out!

Hey Friends, out latest newsletter is available.  You can read it here:

http://www.franty.com/news/jun13.pdf

“Summer afternoon—summer afternoon; to me those have always been the two most beautiful words in the English language.” ~Henry James

Let us know what you think!!  Enjoy YOUR Summer.

Happy Valentine's Day, Friends!

It's difficult to celebrate today while we’re in the midst of a heavy tax season but here's a fun (and true) little story about love, romance, marriage & monogamy:

When President Calvin Coolidge and his wife Grace were being given simultaneous but separate tours of a prominent chicken farm, the First Lady asked her guide whether the rooster copulated more than once a day. “Dozens of times,” she was told. 

Armed with this juicy little tid-bit, Mrs. Coolidge said to her guide: “Tell that to Mr. Coolidge.” 

Feeling a bit uncomfortable, the tour guide approached the President to inform him of Mrs. Coolidge’s revelation.  When told, President Coolidge hesitated for a moment and then asked the guide:  “Same hen every time?” 

When the guide said, “No Sir. A different hen each time,” the President responded: “Tell that to Mrs. Coolidge.”

Sorry, I couldn't resist.  Hope you enjoyed that fun (and true) little story.

Voice Mail? Who needs voice mail!!

Hi All,

There was a severe storm that rolled through our area on Wednesday and, as a result, our office building has suffered some electrical damage.  Our power was out for a few hours and the internet connection was down for about 24 hours, but we’re back in business now.

It’s pretty reassuring to know that surge protectors work and, at the same time, it’s pretty alarming to learn that when surge protectors get fried they don’t protect the things that they are meant to protect!  Fortunately for us, we’ve only lost a network adapter and the voice mail component to our phone system (plus, of course, a few fried surge protectors).

The network adapter has been replaced and our voice mail system is in the process of being replaced.  If you happen to call our office, you won’t be able to leave any voice messages until the problem is fixed.  

What’s even more unfortunate for us is that it appears that our ten year old office phone number may have been someone else’s before it was assigned to us!!  If you call here and don’t get an answer, you will be confronted with the following message:

“The voice mail box for New Castle Recycling is full.  Please try your call again later.”

New Castle Recycling? Really!?! That’s not even close!  We’re trying to get the phone company to change that message but it’s been a 10 year battle and we don’t think it’ll be resolved anytime soon.

Accordingly, we wanted to let you know that your best bet to reach us after hours in the next week or so would be by email.  Here is a link to all of our email addresses:

http://www.franty.com/contact.html

Thanks very much for your patience.  Best regards,