Business tax changes effective January 1, 2014

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Business tax changes effective January 1, 2014

In 1776, economist Adam Smith established these four canons of taxation—equity, certainty, convenience and economy.  Simplicity has been stated as a fifth.  Taxing the “rich” is not EQUITABLE.   Making retroactive changes to laws is not CERTAIN.  ObamaCare has not proved to be CONVENIENT—easily assessed, collected and administered.  The IRS wants more in their budget each year to enforce compliance which is not ECONOMY. At least TurboTax® has made compliance with tax reporting SIMPLE—provided you understand the patchwork of ever-changing laws and know how to apply them.

As we enter this New Year, I want to first remind you of a couple of issues that may affect your 2013 tax filings.  First, if you have been hesitant to claim a home office deduction in the past or want to simplify your record keeping, ask your tax professional about the safe harbor office-in-home deduction available beginning in 2013.  Secondly, please send a thank you note to California for continuing to not repay its federal obligation for funds borrowed to pay unemployment benefits; thus, forcing California business owners to pay an additional .9% for FUTA for 2013 payroll which is due January 31, 2014.

Here is a short list of changes effective January 1, 2014 that affect businesses:

  • Standard mileage rates for 2014 are reduced from 65.5¢ to 65¢
  • IRC §179 Election to Expense Certain Depreciable  Business Assets has decreased from $500,000 to $25,000
  • Bonus depreciation is gone
  • CA has a new reporting requirement for IRC §1031 transactions for property located out of state
  • LLCs that are created in other states may be subject to California filing and tax payment requirements—Nevada and Delaware will not necessarily shield this requirement
  • FICA wage base raised to $117,000 from $113,700 which creates another $204.60 per employee of employer tax burden
  • California minimum wage increases to $9 on July 1, 2014
  • California New Jobs Credit repealed as of January 1, 2014

Obviously, none of these changes are business friendly or promote the creation of new employment opportunities.

The last change I would like to highlight is that the IRS finalized regulations on Capitalization and Repairs.  These are complicated regulations which do affect businesses and landlords.  These regulations require a written accounting policy in place by the beginning of the tax year.  That would be January 1, 2014.  In December, my firm sent out a template of an accounting policy to my business clients to include in their policies.  This proactive approach is just one of the attributes that makes Fachner Accounting Group, Inc. Your Tax and Accounting Partners for Life.

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