- February 18 – Deadline for providing 2013 Forms 1099-B and 1099-S to recipients.
- February 28 – Payers must file 2013 information returns (such as 1099s) with the IRS. (Electronic filers have until March 31 to file.)
- February 28 – Employers must send 2013 W-2 copies to the Social Security Administration. (Electronic filers have until March 31 to file.)
- March 3 – Farmers and fishermen who did not make 2013 estimated tax payments must file 2013 tax returns and pay taxes in full.
- March 17 – 2013 calendar-year corporation income tax returns are due.
Each year the IRS adjusts certain tax numbers for inflation and tax law changes. Here are some of the adjusted numbers you’ll need for your 2014 tax planning:
In recent years, businesses could expense up to $500,000 of equipment purchases in the year of purchase, with a $2,000,000 annual purchase limit. In addition, bonus depreciation was allowed for new equipment purchases.
Because Congress did not extend these provisions for 2014, businesses can now only expense $25,000 of new or used equipment purchases. The deduction is reduced dollar-for-dollar when total asset purchases for 2014 exceed $200,000. Also, the 50% bonus depreciation that applied in 2013 is no longer available.
Congress may extend these provisions, or they may not. Check with us for the latest when you're making equipment purchasing decisions this year.
You now have a choice in how you deduct the expense of a home office. Starting with your 2013 tax return, you can either deduct the actual expenses connected with your home office, or you can use the simplified method of deducting $5 per square foot of the part of your home used for business, up to a maximum deduction of $1,500.
Remember, the deduction isn't available just because you do work at home; you must use part of your home regularly and exclusively as your principal place of business or where you meet customers, clients, or patients in the normal course of business.
The new IRS regulations on capitalization vs expensing are complex. But the part of the regulations that concerns most small businesses makes it easier for them to comply.
Here's an overview of the safe harbor rules for small businesses. If your average annual gross sales are $10 million or less, you may choose to write off the cost of improvements made to an "eligible building." An "eligible building" is one that is owned or leased by the qualifying taxpayer and the unadjusted basis of the building is $1,000,000 or less. Also, to be able to deduct the expenditures on your current-year's tax return, the yearly total paid for repairs, maintenance, and improvements cannot exceed the lesser of $10,000 or 2% of the building's unadjusted basis.
As with any part of the tax law, there are many details to be followed for the best tax treatment. Please contact us if you would like more information on these new tax regulations.
The health insurance premium credit for small businesses has been available since 2010. According to a recent report, many businesses that qualify for this credit have failed to take it.
Even if your business hasn’t taken this credit in the past, you may want to look into it this year. For 2014, the credit increases from 35% to 50%. When you qualify, you can use the credit to offset your federal income tax liability by up to 50% of the cost of health insurance premiums you pay for employees.
Three general tests for eligibility are:
Each test has specific requirements. For example, you may qualify for the credit, in full or in part, when you have more than 25 employees. That’s because “full-time equivalent” is based on hours your employees worked during the year.
In addition, some employees aren’t counted for purposes of the credit, such as seasonal staff who were on the payroll for less than 120 days. Other excluded workers are sole proprietors, owner/employees, and shareholders who own more than 2% of the stock of an S corporation.
For assistance in reviewing your eligibility for the credit, contact our office.
If you own foreign investments, you may have an additional federal tax form to file this year.
Form 8938, “Statement of Specified Foreign Financial Assets,” is due April 15, 2014, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements.
What are the reporting requirements? They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2013. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2013 was more than $100,000, or if the value exceeded $150,000 at any time during the year.
Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies.
You’ve probably noticed the reporting requirements are similar to the “Report of Foreign Bank and Financial Accounts” (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30, 2014.
Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us so we can help you evaluate your filing requirements for foreign investments.
Every week reporters publish stories about companies that have lost thousands, even millions of dollars because of fraud. They recount the dreadful details of business owners who learned – too late – that a lack of basic controls left their companies vulnerable to pilferage, embezzlement, and other types of misappropriation.
How do these lessons apply to small businesses? After all, small firms generally can't afford to hire internal auditors or set up separate divisions to break up incompatible duties. While it's true that a small company can't always protect itself in ways larger firms might, management can establish controls in certain high-risk areas, such as the following:
Cash disbursements. If at all possible, the owner/manager should sign checks. This control has a dual purpose: management sees how the company is spending its money, and the cash disbursement function is kept separate from bookkeeping or accounting. If the same person signs checks and enters disbursement transactions in the accounting records, embezzlement is harder to prevent. Requiring two signatures on checks above a certain amount also provides greater control.
Customer collections. Consider having the owner/manager open the mail, especially if customer collections are a regular part of your business. Alternatively, you might ask someone separate from the accounting function to open the mail and prepare the deposit slip. Of course, the practice of making daily deposits is also a good control.
Personnel practices. By taking care to perform background checks before hiring key employees, especially those who will be handling cash or other high-risk assets, you can prevent problems later on. Of course, financial pressures, addictions, and other factors can corrupt even good employees. That's why managers might consider discreetly monitoring employee lifestyles (without invading anyone's privacy, of course). An observant manager might note that certain lower-level employees are living well beyond their means, or that warehouse staff are carrying off company materials to remodel personal residences.
Perhaps a small business's greatest control is the "tone at the top." If management sets a high standard, employees generally follow. However, if a manager is perceived as lax – for example, he or she doesn't respond quickly when evidence of misappropriation surfaces – employees might conclude that theft isn't such a big deal.
Remember this: A company that fails to establish minimum controls is providing a golden opportunity for fraud. If you'd like help reviewing your firm's controls, give us a call.
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