Tax News - October 2014 Edition

2015 Pension Plan Amounts 
The IRS published cost-of-living adjustments to various pension plans and related amounts for 2015:
(1) the benefit limit for defined benefit plans remains unchanged at $210,000;
(2) defined contribution plan limit goes from $52,000 to $53,000;
(3) compensation limit for determining benefits and contributions increases from $260,000 to $265,000;
(4) definition of a highly compensated employee increases from $115,000 to $120,000;
(5) elective deferral limit for employees who participate in 401(k), 403(b), and most 457 plans goes from $17,500 to $18,000; and
(6) limit on contributions to SIMPLE accounts also increases from $12,000 to $12,500.
News Release IR-2014-99.

Social Security Wage Base for 2015
The Social Security Administration (SSA) announced that the maximum earnings subject to the Social Security component of the FICA tax will increase to $118,500 in 2015 from $117,000 in 2014. This means, that for 2015, the maximum Social Security tax that employers and employees will each pay is $7,347 ($118,500 x 6.2%), and a self-employed person with at least $118,500 in net self-employment earnings will pay $14,694 for the Social Security part of the self-employment tax.
The Medicare component remains 1.45% of all earnings, and individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) will pay an additional 0.9% in Medicare taxes. Other 2015 cost-of-living adjustments announced by the SSA are available at http://op.bna.com/der.nsf/id/klan-9q5jfs/$File/colafacts2015.pdf .


Probable Tax Filing and Refund Delays
According to IRS Commissioner John Koskinen (resembles Elmer Fudd and you may have seen him spinnin', duckin' & dodgin' in recent congressional testimony), if 2014 tax laws aren't finalized by the end of November, the IRS may be forced to postpone the opening of the 2015 filing season and delay processing of tax refunds for millions of taxpayers. A delayed tax season would likely mean that tax filers with more complicated returns (those claiming depreciation, passive losses, and certain tax credits) will probably have to wait even longer.

Business Travel Per Diem Rates
The IRS released the 2014-2015 per diem rates for substantiating employees' business expenses under IRC Sec. 274(d) for lodging, meals, and incidental expenses incurred while traveling away from home. The Meal and Incidental Expense (M&IE) rates for the transportation industry remain unchanged at $59 for travel in the continental U.S. and $65 outside the continental U.S. The per diem for travel to high-cost localities increases by $8 to $259 ($65 for M&IE), while the rate for travel to other localities increases by $2 to $172 ($52 for M&IE). The incidental-expenses-only rate remains at $5 per day. The updated rates and list of high-cost locations apply to per diem allowances paid to employees after 9/30/14. Notice 2014-57, 2014-41 IRB .


Airline Ticket Received as Award Points Was Taxable Income
A taxpayer received "thank you" award points toward an airline ticket for setting up a bank account at Citibank, which he redeemed for a restricted coach class airline ticket. The bank issued a Form 1099-MISC reporting the $668 value of the airline ticket, which the taxpayer failed to include as income on his tax return. Bank records and a bank official's affidavit showed that the taxpayer received the award. Because the award was given in exchange for depositing money in a bank account, the Tax Court held that it should be treated like interest income. Since the taxpayer didn't show any evidence that the flight was worth less than $668, that value was the amount to be includible as income. Parimal H. Shankar , 143 TC No. 5 . (Tax Ct.).