Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
Summertime means cleaning out those often neglected spaces such as the garage, basement, and attic for many of us. Whether clothing, furniture, bikes, or gardening tools, you can write off the cost of items in good condition donated to a qualified charity. The deduction is based on the property's fair market value. Guides to help you determine this amount are available from many nonprofit charitable organizations.
Do you plan to travel while doing charity work this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year:
A vacation home can be a house, apartment, condominium, mobile home or boat. If you rent out a vacation home, you can generally use expenses to offset taxable income from the rental. However, you can't claim a loss from the activity if your personal use of the home exceeds the greater of fourteen days or 10% of the time the home is rented out. Watch out for this limit if taking an end-of summer vacation at your vacation home.
Two key tax incentives for acquiring qualified business property have either expired for property placed in service in 2014 or have been greatly reduced. The additional first year “bonus” depreciation provision for qualified property expired at the end of 2013 and is not currently available for business equipment purchased in 2014.
The election to expense the cost of qualifying property under Section 179 is still available for property placed in service in 2014, but the deduction is limited to $25,000 of qualifying property, as long as the qualifying property placed in service by the business during the year is $200,000 or less. The deduction is reduced dollar for dollar as the amount of qualifying property placed in service in 2014 exceeds $200,000 and is completely phased out if the amount of qualifying property placed in service during the year exceeds $225,000.
The Section 179 election to deduct the cost of equipment placed in service during a year has been one of the most useful tax deductions available for small business. The Senate Finance Committee approved the Expiring Provisions Improvement Reform and Efficiency Act of 2014 on April 3, 2014, which extends the $500,000 Section 179 limit of recent years for tax years 2014 and 2015. It also allows businesses to use Section 179 to deduct the cost of off-the-shelf software and the costs of improvements to certain leased business properties. At this time, it is unclear whether this bill will be passed by Congress and signed by the President before December 31, 2014.
When you travel away from home, you may deduct your travel expenses – including airfare, train, bus, taxi, meals (generally limited to 50%), lodging – as long as the primary purpose of the trip is business-related. You might have some downtiem relaxing, but spending more time on business activities is critical. Note that the cost of personal pursuits is not deductible.
If you treat a client to a round of golf at the local club or course, you may deduct qualified expenses – such as green fees, club rentals, and 50% of your meals and drinks at the nineteenth hole – as long as you hold a "substantial business meeting" with the client before or after the golf outing. The discussion could take place a day before or after the entertainment if the client is from out of state. For information on what does and does not qualify,please contact us.
Home office expenses are generally deductible if part of a business owner's personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS recently provided an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. Starting in 2013, the new rules allow you to deduct $5 per square foot of home office space (up to 300 square feet). In addition, deductions such as interest and property taxes allocable to the home office are still permitted as an itemized deduction for taxpayers using the safe harbor.
It’s summertime! And although that means vacations and tans for many of us, it may also mean for students that it’s time to get a summer job. Whether your student finds work mowing lawns, babysitting or working in a restaurant, there are some things they should be aware of. If it’s their first job, it gives them a chance to learn about the working world – and that includes taxes!
The Internal Revenue Service has put together a list of eight things that students who take a summer job should know about taxes:
1. Don’t be surprised when your employer withholds taxes from your paychecks. That’s how you pay your taxes when you’re an employee. If you’re self-employed, you may have to pay estimated taxes directly to the IRS on certain dates during the year. This is how our pay-as-you-go tax system works.
2. As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer will use it to determine how much federal income tax to withhold from your pay.
3. Keep in mind that all tip income is taxable. If you get tips, you must keep a daily log so you can report them. You must report $20 or more in cash tips in any one month to your employer. And you must report all of your yearly tips on your tax return.
4. Money you earn doing work for others is taxable. Some work you do may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to your work. You may be able to deduct (subtract) those costs from your income on your tax return. A deduction may help lower your taxes.
5. If you’re in ROTC, your active duty pay, such as pay you get for summer camp, is taxable. A subsistence allowance you get while in advanced training isn’t taxable.
6. You may not earn enough from your summer job to owe income tax. But your employer usually must withhold Social Security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count toward your coverage under the Social Security system.
7. If you’re a newspaper carrier or distributor, special rules apply. If you meet certain conditions, you’re considered self-employed. If you don’t meet those conditions and are under age 18, you are usually exempt from Social Security and Medicare taxes.
8. You may not earn enough money from your summer job to be required to file a tax return. Even if that’s true, you may still want to file. For example, if your employer withheld income tax from your pay, you’ll have to file a return to get your taxes refunded.
Contact your CPA or visit IRS.gov for more about the tax rules for students.
If you are a business owner who collects and pays Sales Tax or you are a consumer or business owner paying Use Tax to the state on your purchases that did not include Colorado sales tax, we want you to be aware that the service fee is changing.
The service fee (also known as the Vendor’s Fee or discount fee) has been restored to a rate of 3.33% for returns filed timely on or after July 1, 2014.
The service fee will be effective for:
• State Sales Tax
• State Retailer’s Use Tax
• Aviation Sales Tax
• RTD/CD (Denver metro area)special district taxes
The service fee rates for state-collected local jurisdictions are not part of this change, however they may change periodically.
If you have received pre-printed sales tax forms from the State, the rate of .0222 (2.22%) should be changed to the new rate of .0333 (3.33%) for timely filed returns. The new forms for the July 2014 to December 2014 period will have the new service fee rate printed on the return.
Please contact us with any questions at (719) 630-1186.
Summer should be a time for new adventures, but the excitement and energy surrounding this season can quickly turn south as working parents begin to wonder how they will ensure their child is cared for and entertained during the summer months. While many parents use
child care year-round, summertime can offer unique opportunities and challenges.
The costs can certainly add up, but you may qualify for a federal tax credit that can lower your taxes. The IRS has put together some facts you should know about the Child and Dependent Care Credit.
1. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify. For more about this rule see Publication 503, Child and Dependent Care Expenses.
2. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
3. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return.
4. As a rule, if you’re married you must file a joint return to take the credit. But this rule doesn’t apply if you’re legally separated or if you and your spouse live apart.
5. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.
6. The credit is a percentage of the qualified expenses you pay. It can be as much as 35 percent of your expenses, depending on your income.
7. The total expense that you can use for the credit in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
8. Some exclusions to note: Overnight camp or summer school tutoring costs do not qualify. You can’t include the cost of care provided by your spouse or your child who is under age 19 at the end of the year. You also cannot count the cost of care given by a person you can claim as your dependent. Special rules apply if you get dependent care benefits from your employer.
9. Keep all your receipts and records. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your tax return.
10. Remember that this credit is not just a summer tax benefit. You may be able to claim it for care you pay for throughout the year.
These tips are taken from IRS Special Edition Tax Tip 2014-16
The Financial Accounting Standards Board (FASB) has issued new guidance that permits private companies following Generally Accepted Accounting Principles (GAAP) to, in some circumstances, elect not to consolidate the financial reporting from variable interest entities (VIEs) that lease property to them. It may apply in situations where an owner of a private company is also an owner of a second business entity that leases property to the company.
The guidance, Accounting Standards Update (ASU) 2014-07, Consolidation (Topic 810): Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements, is a consensus of the Private Company Council (PCC). It’s intended to improve private company financial reporting regarding consolidation of lessors.
The Financial Accounting Foundation, FASB’s parent organization, established the PCC in May 2012. Its purpose is to improve the process of setting accounting standards for private companies that prepare their financial statements in accordance with GAAP.
Among other things, the body was tasked with working with FASB to determine whether alternatives to existing GAAP standards can ease the burden on private companies of preparing GAAP-compliant financial statements while better addressing the needs of users of those financial statements. Earlier this year, FASB issued the first two private-company GAAP alternatives, ASU 2014-02 and ASU 2014-03, addressing goodwill and interest rate swaps, respectively. ASU 2014-07 is the third private company alternative that FASB has issued.
Under GAAP, a company must consolidate the financial reporting from an entity in which it has a controlling financial interest. Two models are typically used to determine whether a company has a controlling interest in an entity: the voting interest model or the VIE model.
Under the VIE model, a company is deemed to have a controlling financial interest in an entity when it has 1) the power to direct the activities that most significantly affect the entity’s economic performance, and 2) the obligation to absorb losses, or the right to receive benefits, of the entity that could potentially be significant to the entity. To determine whether the VIE model applies, a company must determine whether it has an explicit or implicit variable interest in the entity and whether that entity is a VIE.
An explicit variable interest stems from contractual, ownership or other financial interests in the entity that directly absorb or receive the variability of the entity. An implicit variable interest involves the absorbing or receiving of variability from the entity indirectly. The identification of such interests is a matter of judgment based on the relevant facts and circumstances.
A VIE generally is a corporation, partnership or any other legal structure that is used for business purposes and either doesn’t have equity investors with voting rights or has equity investors that don’t provide sufficient financial resources for the entity to support its activities.
The new guidance specifically applies to leasing arrangements. Private companies commonly lease facilities from separate lessor entities owned by one of the company’s owners. The lessor entity usually is established for tax, estate planning or legal liability purposes — not to structure off-balance sheet debt arrangements. Typically, the lessor entity’s only asset is the leased facility, and the lease is the only contractual relationship between the lessee company and the lessor entity.
Existing GAAP guidance requires the lessee company to determine whether it holds a variable interest in the lessor entity (for example, a guarantee of the lessor’s debt). If it does, and the lessor is a VIE, the lessee company must assess whether it holds a controlling financial interest in the lessor under the VIE model. If the entities are under common control, the lessee generally must consolidate the financial reporting from the lessor.
The PCC found that, despite the cost and complexity of applying the GAAP VIE guidance in such a case, most users of private company financial statements consider the consolidation of the lessors under common control irrelevant. These users tend to focus on the cash flows and tangible worth of the stand-alone lessee entity, not the cash flows and tangible worth of the consolidated group presented under GAAP.
Moreover, consolidation of the lessor distorts the lessee’s financial statements. As a result, users who receive consolidated financial statements often request a consolidating schedule that they can use to reverse the effects of consolidation.
Under ASU 2014-07, a private company lessee can elect an alternative not to apply the GAAP VIE guidance to a lessor if:
In addition, if the private company explicitly guarantees or provides collateral for any obligation of the lessor related to the asset leased by the private company, the principal amount of the obligation at inception can’t exceed the value of the asset leased by the private company from the lessor.
If a private company elects to apply the accounting alternative, it should apply the alternative to all current and future leasing arrangements satisfying the above conditions.
Electing the alternative would also free a private company from providing GAAP-compliant VIE disclosures about the lessor entity. The private company won’t be totally off the hook, though. It must disclose the following information:
These disclosures are required in combination with the other GAAP-required disclosures about the private company’s relationship with the lessor entity, such as those for guarantees, leases and related party transactions.
A private company that elects the accounting alternative must apply it retrospectively to all periods presented on financial statements. The alternative will be effective for annual periods beginning after Dec. 15, 2014, and interim periods within annual periods beginning after Dec. 15, 2015. Early application is permitted for any period for which the company hasn’t yet issued financial statements.
If you have questions regarding how this guidance affects the preparation of your financial statements, please give us a call. We’d be happy to answer your questions.
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You may not be aware of some of the services local CPA firm, Stockman Kast Ryan and Company of Colorado Springs provides that could benefit you and your business. Here is just a partial list:
The IRS has released its long-awaited final regulations implementing the Affordable Care Act’s (ACA’s) employer shared-responsibility — also known as “play or pay” — provision that applies to “large” employers, including for-profit, nonprofit and government entities. These regulations are effective January 1, 2015. The final regs push out one year, from 2015 to 2016, the risk of play-or-pay penalties for eligible midsize employers that otherwise would be considered large employers under the ACA. They also provide other significant relief for 2015 and clarify certain aspects of the play-or-pay provision.
The play-or-pay provision imposes a penalty on large employers that don’t offer “minimum essential” health care coverage — or that offer coverage that isn’t “affordable” or doesn’t provide at least “minimum value” — to their full-time employees (and their dependents) if just one full-time employee enrolls in a qualified health plan through a government-run health insurance exchange and receives a premium tax credit.
Under the ACA, a large employer is one with at least 50 full-time employees or a combination of full-time and part-time employees that’s equivalent to at least 50 full-time employees. This involves totaling part-time employees’ monthly hours and dividing that figure by 120 to calculate full-time equivalent employees (FTEs). That figure is then added to the total number of actual full-time employees. A full-time employee generally is someone employed on average at least 30 hours a week, or 130 hours in a calendar month.
Under the final regs, eligible midsize employers will not be subject to the play-or-pay provision until 2016.
To qualify for the midsize-employer penalty relief, an employer must:
Be aware that these employers will still be subject to the ACA’s large-employer information-reporting requirements in 2015.
Under the ACA, large employers that don’t offer at least 95% of their full-time employees minimum essential health coverage will be assessed a penalty if one of their full-time employees receives a premium tax credit when buying health care insurance from an insurance exchange. The annual penalty is $2,000 per full-time employee in excess of 30 full-timers.
The final regs provide that large employers that don’t qualify for the midsize-employer penalty relief in 2015 can avoid the penalty for not offering minimum essential coverage by offering such coverage to at least 70% of their full-time employees (and their dependents.) The 95% requirement will apply in 2016 and beyond.
The final regs extend and expand transitional relief in other ways as well, such as the following:
The IRS indicated it will consider whether it’s necessary to extend any of this transitional relief beyond 2015.
Generally, if an employee’s share of the premium would cost that employee more than 9.5% of his or her annual household income, the coverage isn’t considered affordable. Because an employer generally won’t know an employee’s household income, the proposed regulations provided safe harbors under which an employer can determine affordability. The final regs maintain the proposed safe harbors with some minor changes.
Under these safe harbors, affordability can be determined based on:
If the employer meets the requirements of a safe harbor, the offer of coverage will be deemed affordable.
The final regs allow employers to use an optional look-back measurement method to determine whether employees with varying hours and seasonal employees are full time for purposes of determining large employer status. They also clarify the application of the look-back and alternative monthly methods of determining full-time status.
Additionally, the final regs clarify whether certain types of workers will be considered full time. For example, bona fide volunteer hours worked for government or tax-exempt entities won’t cause the volunteer to be considered a full-time employee.
The IRS is expected to soon issue final regulations that will substantially streamline information-reporting requirements related to the play-or-pay provision. We’ll keep you apprised of the relevant changes. In the meantime, if you have questions on how these or other ACA provisions may affect your company, please contact us.