Accounting & Tax News

 

Publication 17
Tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions and using IRAs to save for retirement


Max Allowable Company Sponsored Retirement Plan Contribution Increased For 2015

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will be increased from $17,500 to $18,000. The catch-up contribution limit for employees aged 50 and over who participate in these plans will also increase from $5,500 to $6,000.
  • Unfortunately, the limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples the income phase-out range will be $98,000 to $118,000, up from $96,000 to $116,000.
  • Additionally, the AGI phase-out range for taxpayers making contributions to a Roth IRA will be $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range will be $116,000 to $131,000, up from $114,000 to $129,000.

Please contact us if you have any questions about these retirement plan contribution rules and how they apply to you at your earliest convenience.

Posted 25 October, 2014 /wittenbergcpa.com/

Wills, Trusts And Beneficiary Designations

It’s typically not on the top of anyone’s “to do” list, but if you either don’t have a will in place, or haven’t reviewed and updated your will in a while, it’s really a good idea to take care of it right away. The best approach to accomplishing this is to meet with a qualified attorney, because your will should be tailored to your needs and requirements, however there are also some “do it yourself” options out there on the web. The main thing is that you establish a current will in order to take care of the details of what will happen to your assets, your children, as well as your medical requirements, upon your demise or incapacitation. Another consideration is for you to set up a “living trust”, otherwise known as revocable trusts, which can be very useful in transferring one’s assets to beneficiaries, while avoiding the hassle and publicity of the probate process. Probably the simplest, and also one of the most important and often overlooked tasks, is to review the “beneficiary designations” on your retirement plans, whether company sponsored, or in your personal name, to make sure you have the correct beneficiaries set up as the owners of these plans upon your death. Please contact us if we can answer your questions, or help you sort out what needs to be done under your specific circumstances, as well as to assist you and/or your attorney in completing these extremely important legal and financial tasks.

Posted Oct. 2, 2014/wittenbergcpa.com

Home Office Deduction

The rules allowing a home office deduction if you’re self-employed generally require that the space be used regularly and exclusively —

  •     as a principal place of business,
  •     as a place to meet or deal with clients and customers in the normal course of business, or
  •     “in connection with” the business if the space is a separate structure from the residence (e.g., a barn or detached garage).

In our always-connected, always-on business environment, it isn’t unusual for employees to work from home on a regular basis too.

When you’re an employee (rather than self-employed), you have to meet one of the above requirements and the so-called employer convenience test. This test is hard to satisfy, unless your employer doesn’t provide you with an appropriate space in which to get your work done.

If you are regularly working from home because your employer doesn’t provide you with appropriate space from which to perform your job, and you are not currently claiming a home office deduction, we should talk. It could be that you’re entitled to some substantial additional itemized deductions!

Posted Sep. 4, 2014/wittenbergcpa.com

Leverage Standard Deduction by Bunching Deductible Expenditures

Are your 2014 itemized deductions likely to be just under or just over the standard deduction amount? If so, consider the strategy of bunching together expenditures for itemized deduction items every other year, while claiming the standard deduction in the intervening years. The 2014 standard deduction is $12,400 for married joint filers, $6,200 for single filers, and $9,100 for heads of household filers.

For example, say you’re a joint filer whose only itemized deductions are about $4,000 of annual property taxes and about $8,000 of home mortgage interest. If you prepay your 2014 property taxes by December 31 of this year, you could claim $16,000 of itemized deductions on your 2014 return ($4,000 of 2014 property taxes, plus another $4,000 for the 2015 property tax bill, plus the $8,000 of mortgage interest). Next year, you would only have the $8,000 of interest, but you could claim the standard deduction.

Following this strategy will cut your taxable income by a meaningful amount over the two-year period (this year and next). You can repeat the drill all over again in future years. Examples of other deductible items that can be bunched together every other year to lower your taxes include charitable donations, and medical expenses.

Posted Sep. 3, 2014/wittenbergcpa.com