Our First Issue. In This Issue. Tax Rules for Holiday Gifts

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1 Newsletter Volume 1 December 2014 Our First Issue Our newsletter for tax and planning ideas is a quarterly publication brought to you by the dedicated professionals right here at our office. We are excited to bring to you the first issue which highlights tax and compliance issues that may be of interest to individuals, businesses, employers, and employees. In this issue, we provide an update on income tax topics for year-end planning, a tax deadline calendar, and go over some changes you ll see in this coming year. You'll read about new legislation passed in 2014, extender bill provisions, the individual mandate for health coverage, and a new state tax credit. We hope you enjoy our newsletter and look forward to it in coming years as we do. For questions and suggestions of topics you would like us to cover please don t hesitate to contact us. For helpful tips and updates all year long follow us on our new Facebook and Linked In pages. Tax Rules for Holiday Gifts If you will be giving business gifts this holiday season it is important to keep in mind the following rules: The most you can deduct is $25 a year per individual, gifts given to a company for use in the business are not subject to the limit. You can deduct the cost of wrapping and mailing gifts. You must document the cost, date acquired, recipient, and business relationship to the person receiving the gift. You cannot deduct packaged food baskets as a meal expense. They also are subject to the $25 limit. If you gift tickets to an event (that you do not attend with the client) you can chose to deduct as a gift or an entertainment expense. If you have any questions please contact our office. In This Issue Affordable Care Act Quickbooks Tips & Tricks Mandatory Paid Sick Leave 2014 Tax Extenders Revised Repair and Capitalization Rules CA College Access Tax Credit IRA Contribution Limits Upcoming Tax Deadlines

2 Quickbooks Tips QuickBooks is a great program and we love to give new shortcuts to help our clients navigate more efficiently in the program. Below are just a few tips that we think may be helpful to you. 1. Open Windows List helps navigate efficiently between windows (View > Open Windows List to enable it) Affordable Care Act As of January 1, 2014, the Affordable Care Act requires all individuals to carry health insurance or make a shared responsibility payment, unless exempt. For many, employer-provided health insurance will satisfy the individual mandate. Others will satisfy the individual mandate if they are covered by Medicare or Medicaid. Individuals who are not exempt will need to make a shared responsibility payment when they file their 2014 returns in Generally, the shared responsibility payment amount is either a percentage of the individual's income or a flat dollar amount, whichever is greater. The amount owed is 1/12th of the annual payment for each month that a person or the person's dependents are not covered and are not exempt. For 2014, the payment amount is the greater of: 1 percent of the person's household income that is above the tax return threshold for their filing status; or a flat dollar amount, which is $95 per adult and $47.50 per child, limited to a maximum of $285. The individual shared responsibility payment is capped at the cost of the national average premium for the bronze level health plan available through the Marketplace in Change dates forward or backwards is easy with the + or key. Plus, there are numerous keyboard shortcuts that can improve efficiency when working with dates and many other things search for keyboard shortcuts in QuickBooks Help for a complete list. 3. Built in Calculator in an amount field, using the =, +, * or / keys will bring up a calculator. 4. On any transaction, hit Control+Y to see the journal entry for the transaction. This is especially helpfully in QuickBooks Pro since the Journal button is not available. As a courtesy to our clients, Croce & Co. offers a free QuickBooks class semi-annually for beginners and intermediates. These classes are very informative and interactive so if you have never attended or would just like a refresher, please consider attending one of our classes. We will notify interested clients in the near future of our 2015 class dates. The lack of health insurance does not automatically mean an individual must make a shared responsibility payment. The types of exemptions are broad. For example, an individual may have no affordable coverage options because the minimum amount he or she must pay for the annual premiums is more than eight percent of household income. An individual also may have a hardship that prevents him or her from obtaining coverage. Some seven million individuals have obtained health insurance through the Affordable Care Act Marketplace. Many qualified for a special tax break to help offset the cost of coverage (the Code Sec. 36B credit) and many took advance payments of the credit. In these cases, individuals must reconcile the amount paid in advance with the amount of the actual credit computed when they file their tax returns. Life changes in 2014 may impact the final credit amount.

3 Mandatory Paid Sick Leave On Sept. 10, 2014, Gov. Jerry Brown signed the Healthy Workplaces, Healthy Families Act of 2014 (Assembly Bill 1522), implementing paid sick leave state-wide. The Particulars The law takes effect July 1, 2015 A qualified employee is any employee who has worked in California for at least 30 days during the preceding year All qualified employees will accrue paid sick leave at the start of employment and at a rate no less than one hour for every 30 hours worked An employee can begin using their paid sick leave beginning on the 90th day of employment Accrued paid sick days carry over to the following year of employment; however, an employer may limit an employee s use of paid sick days to 24 hours or three days in each year of employment Employees can use their accrued sick leave to care for themselves, their sick children, sick grandchildren, sibling, parent, spouse or domestic partner Employers must display a poster (not yet available), notifying employees of their rights under the law Employers are not required to provide compensation to an employee for accrued, but unused sick leave. Employers cannot discriminate, retaliate or harass an employee based on their use of, or request to use, paid sick leave Our consulting department at Croce & Company will be able to assist you to ensure that you are in compliance with this new law. Just contact our office with any questions or concerns Tax Extenders Prospects for permanent extension of many of the so-called tax extenders appear dim before year-end. However, there will likely be an extension of the extenders, probably for two years. That means extension will be retroactive to January 1, 2014 because many of the extenders expired after December 31, For planning purposes, individuals should consider their tax strategies under one scenario that includes extension of the extenders and another that does not. Keep in mind that some of the extenders impact other provisions of the Tax Code. For example, there is no double dipping with education tax incentives. The list of expired extenders is long. Among the more popular are: State and local general sales tax deduction Higher education tuition Teachers classroom expense deduction Qualified charitable distributions from IRAs Charitable contributions of real property for conservation purposes Mortgage insurance premium deduction. Some extenders were made permanent in an earlier bill. They include the student loan interest deduction, special enhancements to the earned income tax credit, the child tax credit and the child and dependent care credit as well as special enhancements to the adoption credit and adoption assistance programs. Any news about the fate of the extenders will likely not come until late in 2014 or even in early The House and Senate have taken very different approaches to the extenders. The House has passed several extenders in stand-alone bills. The Senate has taken the traditional approach of wrapping all the extenders in a comprehensive bill (called the EXPIRE Act). As lawmakers return to work after the November elections, the leaders of the House and Senate are expected to confer about how to move the extenders before year-end.

4 Revised Repair and Capitalization Rules The IRS recently issued long-awaited comprehensive final rules on the treatment of payments to acquire, produce or improve tangible property. Starting January 1, 2014, businesses must use these new rules in determining whether they can deduct their costs as repairs under Code Sec. 162(a) or must capitalize the costs, to be recovered over a period of years under Code Sec. 263(a). Generally, the final regulations apply to tax years beginning on or after January 1, Among the significant provisions in the final regulations are the following: Materials and Supplies The threshold for deducting materials and supplies was increased from $100 to $200. Materials and supplies include many items that are expected to be consumed in 12 months or less, or that have an economically useful life of 12 months or less. De Minimis Safe Harbor The final regulations eliminate a controversial ceiling on the use of this safe harbor. Taxpayers with financial statements can apply the safe harbor to an item that costs $5,000 or less. The regulations extend the safe harbor to taxpayers without a financial statement, but only for property that costs $500 or less. Taxpayers must have written book policies in place at the beginning of the 2014 year to use this safe harbor. Routine Maintenance and Improvements The final regulations retain controversial unit of property rules that apply the rules for real property to eight separate building systems, as well as to the overall structure. However, the rules do provide some relief by extending the routine maintenance safe harbor to real property and by providing a new safe harbor for small taxpayers. While the routine maintenance safe harbor usually looks at whether taxpayers will have recurring maintenance over the class life of the property, the regulations limit the measuring period to 10 years, rather than the 40-year class life, for real property. Capitalization election The final regulations allow taxpayers to capitalize repair and maintenance costs if they are capitalized for financial accounting purposes. This is a significant simplification over the temporary regulations. As you can see, the repair regulations are extensive and complex. Determining whether particular costs should be deducted or capitalized will be challenging, especially with the end of the year looming. This firm stands ready to help you digest and understand the regulations, determine what accounting policies you may need, and make appropriate elections to comply with the regulations. Please contact our firm so that we can help you address these rules. Bonus Depreciation and Code Sec. 179 Expense Deduction The 2012 Taxpayer Relief Act extended the additional 50 percent bonus depreciation allowance for one year to apply to qualifying property acquired and placed in service before January 1, 2014 (or before January 1, 2015, in the case of property with a longer production period and certain noncommercial aircraft). There was no limit on the total amount of bonus depreciation that may be claimed. For tax years beginning in 2012 and 2013, the 2012 Taxpayer Relief Act increased the Code Sec 179 dollar limit to $500,000 and the investment limit to $2 million. For purposes of Code Sec. 179, qualifying property is depreciable tangible property that is purchased for use in an active trade or business. This includes off-theshelf computer software placed in service before A taxpayer may also elect to treat qualified real property as Code Sec. 179 property. However, only $250,000 of the cost of qualified real property may be expensed. Qualified real property generally consists of qualified leasehold improvements, qualified retail improvement property, and qualified restaurant improvement property. Both bonus depreciation and the increases in the Code Sec. 179 expense deduction and investment limits were meant to provide temporary incentives for business investment and expired at the end of Unless there is further legislative action, the deduction limit is set at $25,000, and the investment limitation is set at $200,000 for tax years beginning in 2014.

5 What is the California College Access Tax Credit? Governor Jerry Brown recently signed SB798 which creates a program called the College Access Tax Fund. Individuals and Companies that contribute to the newly formed College Access Tax Fund can take a tax credit for 60% of their donation in 2014, 55% in 2015, and 50% in The donation is also deductible as a charitable contribution on their federal tax return. The College Access Fund will raise money for California s Grant B program, that provides assistance to low income college students. Donors must apply for the credit and get certified before they can make a donation. The application is available at The application must be received by the CEFA by December 31, INDIVIDUAL RETIREMENT 2014 ACCOUNT TAX LIMITS IRA Contribution Limits: $5,500 (Traditional & Roth) 2015 Payroll Tax Rates Federal: Social Security Tax (Employee/ Employer): 6.2% Social Security Wage Base Limit: $118,500 Medicare Tax (Employee/ Employer): 1.45% Add l Medicare Tax (Employee only-withheld when wages reach $200,000): 0.9% California: SDI Withholding: $0.9% Employee Training Tax: 0.1% SUI Rate: 3.4% for new employers (See EDD letter for your rate) Employee Training Tax/SUI Wage Base: $7,000 Catch-up (over age 50): $1,000 additional ($6,500 total) Income Phaseouts for Traditional IRAs Covered by Employer's Plan? Phase-out Income Deductible: Income: Income Not Deductible: For additional assistance preparing or advising your business with payroll contact our office. MFJ, both covered $1- $96,000- $116,000 + $95,999 $116,000 MFJ, one covered $1- $181,000- $191,000 + $181,000 $191,000 S, covered: $1- $60,000- $70,000 + $59,999 $70,000 Income Phaseouts for Roth IRAs: Married Filing Jointly: $181,000-$191,000 Single: $114,000-$129,000

6 January 15 February 2 March 2 March 16 April 15 UPCOMING TAX DEADLINES 4th Installment of 2014 Estimated Tax Due 1099 s, W-2 s (Due to Recipients) Quarterly Payroll and Sales Tax Returns Due Individual Farmer Returns Due Corporate and S-Corporate (Calendar Year End) Returns Due Individual, Partnership, Fiduciary, & Gift Tax Returns Due Contact Us Give us a call for more information about our services. Croce & Company 501 W. Weber Ave, Suite 500 Stockton, CA P.O. Box 1607 Stockton, CA Phone: (209) Fax: (209) To receive this newsletter by contact: marketing@croceco.com Visit us on the web at: For useful updates & reminders follow us on: Croce and Company P.O. Box 1607 Stockton, CA 95201