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Individual & Business Tax Update
| Date post: | 13-Dec-2014 |
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Individual & Business Tax Update
“The Hardest Thing in the World to Understand is Income
Taxes.”- Albert Einstein
Today’s Topics
American Tax Payer’s Relief Act of 2012
California Proposition 30
Hot IRS Audit Areas for Individuals & Small Businesses
Questions
American Taxpayer’s Relief Act of 2012 Individuals
o 39.6% tax rate for top earners
o Top capital gains rate – 20%
o Payroll tax back up to 6.2%
o AMT Exemption made permanent
o Certain Individual Credits – Ext’d
American Taxpayer’s Relief Act of 2012 AMT Exemption permanent –
indexed for inflation
o Single: $50,600
o MFJ: $78,750
American Taxpayer’s Relief Act of 2012 Individual Credits – Ext’d thru 2017
o American Opportunity
o Enhanced Child Credit
o Enhanced EITC
American Taxpayer’s Relief Act of 2012 Business
o 50% bonus & $500k §179
o Other provisions
American Taxpayer’s Relief Act of 2012 Bonus & §179 (for 2012 & 2013)
o $500,000 §179
o Qualified real estate - §179 and 15
year depreciation
o Bonus at 50%
California Proposition 30
Income Tax increases (retro. 2012)
Up to 12.30%
Sales tax Statewide rate to 7.50%
(Increase of .25%)
Hot IRS Audit Areas Schedule C
o Reasonable & justifiable
o Underreporting income
o Overreporting deductions
o Continuous losses year over year
o Consider the benefits of
incorporating
Hot IRS Audit Areas Home office deduction
o Beg. 2013 – optional safe harbor
method
• Pass one of the home office tests
• $5 per sq. ft. up to 300 ft. (max.
$1,500 deduction)
• $5 in lieu of other expenses
Hot IRS Audit Areas Pay S corporation Wages
o No one works for free
o IRS - Pay yourself a salary, pay payroll
taxes on that salary
o “Reasonable salary”
Hot IRS Audit Areas Employee vs. Contractor
o Do you instruct or supervise the
person while he or she is working?
o Can the worker quit or be
discharged (fired) at any time?
o Is the work being performed as a
part of your regular business?
Hot IRS Audit Areas Other Areas:
o Large charitable contributions
o Business meals, travel and ent.
o 100% business use of a vehicle
o Passive losses
Questions / Comments
