Write Down Your Odometer Reading

Tonight or tomorrow morning, write down the odometer reading for cars used for business purposes in 2013. Place a copy in each of your 2013 and your new 2014 tax file. This will document the ending and beginning mileage use of your personal vehicle for your business tax deductions.

Another great idea is to go get your oil changed! This will provide you with 3rd party odometer documentation. If something happens to your other documentation, you can always retrieve these from your service & repair shop.

The business mileage deduction rate for 2013 is $0.565/mile.

The NEW business mileage deduction rate for 2014 is $0.560/mile.
Other new 2014 rates:
Charity $0.140/mile
Medical $0.235/mile
Moving $0.235/mile

Hope you have a safe and Happy New Year! For more information contact us today.

Upcoming Requirements of the Healthcare Reform Act for Employers

 

As part of the PPC Healthcare Reform Guide, we are providing guidance for the upcoming Notice of Availability of State Insurance Marketplaces.  The required written notices must be provided to the employees by October 1, 2013.

 

Employers must notify all employees (a) of the existence of an insurance marketplace, (b) that the employee may be eligible for premium assistance and a subsidy under the marketplace, and (c) that if the employee purchases a policy through the insurance marketplace, he or she may lose the employer contribution to any health benefits offered by the employer.

· October 1, 2013 (for employees employed before October 1, 2013)

. On date of hiring, for employees hired on or after October 1, 2013. However, for 2014, a notice provided within 14 days of an employee's start date will be considered provided at the time of hiring.

  

Employers (including those who do not offer health coverage to their employees) must distribute the appropriate notice to all employees (regardless of plan enrollment status or part-time or full-time status). For all employees who are employed before October 1, 2013, the notice must be provided by October 1, 2013. For employees hired after September 30, 2013, the notice must be provided at the time of hiring; however, for 2014, a notice provided within 14 days of an employee's start date will be considered provided at the time of hiring (EBSA Technical Release 2013-02). Informally, the Department of Labor (DOL) has indicated that for October-December 2013, new employees should receive the notice as soon as possible but no longer than 14 days after their start date. A separate notice does not need to be provided to employees' dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees. The DOL issued two model notices in May 2013 that may be used for current and new employees. One model is for employers who offer employer-provided health insurance coverage to some or all of their employees and the other model is for employers who do not offer employer-provided health insurance coverage.

The model notices must be revised by employers to include identifying and contact information. In addition, employers who offer health insurance coverage must provide information on which employees are offered coverage, eligibility requirements, and a statement as to whether the coverage meets the minimum value standard and whether the cost of the coverage to the employee is intended to be affordable based on the employee's wages.

Most employers will be required to provide the notice because it applies to employers covered by the FLSA. In general, the FLSA applies to employers that have (a) one or more employees who are engaged in commerce and (b) gross annual sales of $500,000 or more. The FLSA is enforced by the Department of Labor (DOL), which has guidance relating to the applicability of the FLSA in general including a compliance assistance tool to determine applicability of the FLSA at:

www.dol.gov/elaws/esa/flsa/scope/screen24.asp.

Contact David A. Scotch, CPA to answer any questions or concerns you may have, or to look into hiring us on as your one-stop CFO shop!

Payroll Taxes For S Corporations

With tax reform on the horizon, Congress is looking into payroll tax reduction (or avoidance) that brings popularity to the S-Corporation status. After numerous court cases resulting in rulings favorable for the IRS about unreasonably low compensation, we may be seeing a change in tax law regarding S-Corporations.

For those that may be drawing a blank when it comes to S-Corporations, it is clearly defined by the IRS as “corporations that elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.” S-Corporations therefore avoid the so-called “double taxation” of dividends.

While this may seem easier for shareholders of S-Corporations, it also brings about a strong temptation to pay a lower salary and a higher profit distribution, because shareholder-employees receive both wages and profits from the S-Corporation.

According to the AICPA Insights article titled Another Lesson on Unreasonably Low Compensation, there have been several recent court cases dealing with business owners claiming lower wages to save the 7.65% FICA and Medicare taxes on those unreported wages. This is somewhat of a loophole in the tax system.

One example was Herbert v. Commissioner, where the primary issue was whether the $52,600 petitioner Patrick Herbert received in 2007 from a subchapter S-Corporation should be treated as additional wages subject to employment taxes. Herbert was found to have under-reported his wages due to not having a proper set of books and record keeping.

The IRS is fully aware of these scenarios and is actively seeking out S-Corporations paying out below-average wages. They have continually said that S-Corporations must pay their shareholder-employees a “reasonable compensation” for services.

Benefits of Hiring An Outsourced CFO

At times businesses may need an extra hand to help handle all of their accounting needs. For a small to mid-size business the costly price tag for a top tier CFO may not be the best solution. Outsourcing a CFO is a growing trend in the accounting industry and should be considered when making strategic business decisions.

Many businesses miss out on what a CFO can bring to the table due to their budget and other concerns. The business owners try and handle all the finances themselves along with daily tasks. There is so much that goes into operating a business that no one person could possibly do it all effectively. That’s where an outsourced CFO like David Scotch comes in.

David’s expertise in providing a strategic outsourcing solution stems from many years of experience in the role of Financial Controller. Developing a business plan, budgeting and forecasting, obtaining financing, developing management information systems and managing working capital are just some of the roles a CFO can fill as well as:

·      Business Analysis

·      Creative Insight

·      Experience and Knowledge

All companies no matter the size could benefit from an outsourced CFO. All companies have the same needs for business and financial management, but sometimes smaller companies can’t afford a full-time CFO. Instead of ditching one altogether, look into hiring a part-time CFO for specific needs.

Contact David A.Scotch, CPA to answer any questions or concerns you may have, or to look into hiring us on as your one-stop CFO shop!

Change on the Homefront

Possible Reform Of U.S. Mortgage Interest Deduction Into Tax Credit

If there is anything that keeps Americans on their toes, it’s change. A total tax reform on the U.S. tax code is a hot topic for 2013 with talk about altering the mortgage interest deduction that costs the federal government at least $70 billion a year.

According to the Internal Revenue Code, the U.S. currently allows a home mortgage interest deduction, meaning it allows home-owning taxpayers to reduce their taxable income by the amount of interest paid on their loan. While intended to encourage homeownership, the deduction is highly geared towards Americans who need little assistance affording a home rather than helping the struggling homeowners.

The Center on Budget and Policy Priorities (CPBB) said in 2012, 77 percent of the benefits went to homeowners with incomes above $100,000, while middle- and lower-income families receive little to no benefit from the deduction.

Recent proposals offer the idea of converting the deduction into a tax credit for mortgage interest.

“A tax credit is a much fairer way to help homeowners, especially those that need it, like lower income families,” said Will Fischer, a senior policy analyst at The CPBB.

While it is one of the largest expenditures in the tax code and its removal could help the U.S. budget, some still fear taking it away would harm the economy and reverse the slowly recovering housing market.

“Home prices, particularly in high cost areas, could decline 15 percent if recommendations to convert the mortgage interest deduction to a tax credit are implemented,” said the National Association of Realtors.

This in turn could slow the housing market and increase the numbers of renters than homeowners due to buyers knowing ahead of time that they won’t get that benefit each year.

Things are still up in the air right now, but we can expect to see some movement with the tax code soon.

House Ways and Means Committee Chairman Dave Camp (R-Mich.) said he would like to see a total tax reform package before the end of 2013.

Those trying to change the mortgage deduction will not find it easy, but many hearings are scheduled through summer and fall to get things moving.

“You can’t say for sure what will happen in Congress, but I think there’s a lot of momentum to finally change the mortgage interest deduction,” said Fischer.

David A. Scotch P.C., CPA