Michael Gray, CPA's Tax and Business Insight
January 6, 2014
© 2014 by Michael C. Gray
A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!
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Table of Contents
- Happy New Year!
- January celebrations.
- Tax preparation materials will soon be on the way.
- Make your tax return preparation interview appointment now.
- More extensions are likely for 2013 income tax returns.
- Does your group need a speaker?
- Live employee stock option seminar reminder.
- Employee stock option telephone seminar reminder.
- Fourth quarter estimated tax payment due January 15.
- W-2s, 1099s and DE 542 reminder.
- Watch FUTA adjustment on year-end report.
- Estates and trusts should plan distributions.
- Remember to "reset" payroll on January 1.
- Expiring tax provisions will make tax planning uncertain for 2014.
- Annual payroll letter sent to business owner clients.
- Standard mileage rate decreases.
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly broadcast schedule.
- Visit our new article: Applied Imagination.
- Do you have employee stock options?
- Do you have real estate tax issues?
- Follow me on social media!
- Check out my blog.
- PS Marché Aux Fleurs.
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight.
Here are cousins Kyan Baker and Kara Siemer at the San Francisco Zoo.
Happy New Year!
This holiday season had unusual timing with New Year's Day falling on Wednesday. Most of the kids haven't returned to school until today, so many families took vacations through last week.
The start of a new year is traditionally a time to set goals and resolutions for the coming year. If we can be of service in that process, please call us.
One item most American families should include on their list of resolutions is to have their estate plan prepared or reviewed. There are a number of recent tax law changes, including higher income tax rates for trusts, a high estate tax exemption ($5,340,000, indexed for inflation for 2014), and portability of a deceased spouse's unused exemption that may result in changes in estate plans. If you want to discuss this further, call Michael Gray at 408-918-3161.
My son in law, Dan Baker, is celebrating his birthday this month. Happy birthday Dan!
Tax preparation materials will soon be on the way.
We are mailing instructions to our clients this week and next. If we prepared your tax returns last year and you haven't received instructions by January 20 or you would otherwise like to receive instructions, call Dawn Siemer on a Monday, Wednesday or Friday at 408-918-3162.
Make your tax return preparation interview appointment now.
Most personal interview appointments for preparing 2013 individual income tax returns will be scheduled in February. Many clients send their information without having an interview, but if you need that personal attention, you should schedule your interview appointment now. Call Dawn Siemer Monday, Wednesday or Friday at 408-918-3162.
More extensions are likely for 2013 income tax returns.
The IRS has issued final regulations for the 3.8% net investment income tax, but still hasn't issued Form 8960 and instructions for reporting the tax. They are also behind the usual schedule for being able to accept electronically filed income tax returns (accepting January 31, 2014 instead of January 21) because of the recent shutdown from the federal government sequester.
Consequently, we think it's likely there will be more extensions of time to file for high-income taxpayers for the 2013 tax year. Please don't let that delay you from sending the information to prepare your income tax returns to us as soon as possible. That would create a real logjam on April 15.
Does your group need a speaker?
We are seeking opportunities to speak before groups. Topics include recent tax developments, tax issues relating to real estate, how estate planning has changed recently, tax issues relating to alternative investments using retirement accounts, and marketing topics such as "How I created a public access television show broadcast on eleven Bay Area stations." To make arrangements, call Michael Gray at 408-918-3161.
Reminder to employees with stock options! Michael Gray will give a LIVE lunchtime seminar on January 16.
Michael Gray, CPA will give a lunchtime seminar on Thursday, January 16, for employees with stock options. The title of the seminar is "Executive Tax Planning For Employee Stock Options". The investment is $97 per person, and includes a copy of the book by the same name. The seminar will be located at the Three Flames restaurant at 1547 Meridian Ave. in San Jose, California. Lunch is included. Reservations are required. Call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays and Fridays no later than January 13, 2013.
Reminder to employees with stock options! Michael Gray will give a LIVE telephone seminar on January 17.
For those who can't come to the in person seminar on January 16, Michael Gray will give a telephone seminar covering the same information, "Executive Tax Planning For Employee Stock Options", at 1 p.m. Pacific Time. The investment is $97 per person plus any telephone long distance charges (not a collect call nor 800#), and includes a copy of the book by the same name. Call Dawn Siemer at 408-918-3162 on Mondays, Wednesdays and Fridays for reservations no later than January 13, 2013.
Fourth quarter estimated tax payment for non-corporate taxpayers is due January 15.
The final estimated tax payment for individuals and calendar-year estates and trusts is due January 15, 2014. Remember California taxpayers with taxable income of $1 million or more must pay their estimated taxes using the current year's facts. California passed a retroactive tax increase in the last election. There is no penalty for not paying the additional tax with your 2013 estimated tax payments, but you might want to do it for a deduction on your 2013 federal income tax return. Watch the alternative minimum tax. See your tax advisor.
W-2s, 1099s and DE 542 reminder.
Remember that most 2013 annual information returns, such as W-2s and 1099s, should be issued to payees by January 31 and sent to the tax authorities by February 28.
Amounts paid using a credit card should not be included on Form 1099. Those amounts are being reported by the merchant companies.
Also remember that Form 542, Report of Independent Contractors, should also be submitted for ongoing independent contractor arrangements by January 20. The due date is the earlier of 20 days after the date $600 or more of payments have been made to the independent contractor or the date a contract has been entered for $600 or more of services during a calendar year.
Although requirements for real estate operators to issue Forms 1099 were repealed, real estate operators that are real estate professionals should prepare them anyway. Some taxpayers who weren't concerned about qualifying as real estate professionals will want to for 2014 to avoid the Medicare tax for investment income. See your tax advisor for details.
Watch FUTA adjustment on year-end report.
California, among other states, has a cutback in its state credit for federal unemployment taxes. That means additional payments of up to $63 per employee will be due with Form 940. Be sure this adjustment is done with your year-end report for 2013.
Estates and trusts should plan distributions.
An election is also available to treat distributions made during the first 65 days of the following year (for example, January 31, 2014) as distributed for a taxable year (for example 2013). The increase in the maximum federal income tax rate to 39.6% and the 3.8% tax on net investment income hit estates and trusts especially hard. They apply when the undistributed trust income exceeds $11,950. (The income of some trusts is automatically considered distributed. See your tax advisor.) The beneficiaries should be involved in this decision and be informed about the additional income to be reported on their income tax returns (in writing) and to avoid unpleasant surprises.
Remember to "reset" payroll on January 1.
Software providers will issue updates including the new payroll tax tables as of January 1, 2014. Be sure you have installed those updates before processing your first payroll for 2014.
Expiring tax provisions will make tax planning uncertain for 2014.
Many tax benefits enacted to help taxpayers during the "Great Recession" and for other purposes have expired as of December 31, 2013. Examples include a higher ($500,000) limitation for expensing depreciable business property, 50% bonus depreciation for new depreciable business property, the research credit, the exclusion for cancellation of certain mortgage indebtedness for a principal residence, the tax deduction for state and local general sales taxes, tax-free direct distributions of up to $100,000 from individual retirement accounts to charities, higher exclusion for certain sales of qualified small business stock, a reduction in the time during which the built-in gains tax applies for shareholders of S corporations, and many more.
Last year, Congress enacted extension legislation on January 1 to keep these provisions in place. This year, there is no "fiscal cliff" incentive for Congress to take quick action. The provisions can be extended up to the end of the year.
Congress is also debating tax reform legislation to reduce the maximum federal income tax rate and eliminate many tax incentives.
I don't expect to see a conclusion on these issues until late in 2014. That will make it hard to do tax planning this year.
Annual payroll letter sent to business owner clients.
Each year we write a letter summarizing the payroll tax rates and payroll tax deposit requirements for the coming year. We also describe when Forms 1099 are required to be prepared for payees. If you would like to have a copy of the letter, please call Dawn Siemer at 408-918-3162.
Standard mileage rate decreases.
The IRS has announced the optional business standard mileage rate will decrease from 56.5¢ per mile for 2013 to 56¢ per mile for 2014. The rate for medical and moving expenses is 23.5¢ per mile and the charitable rate is 14¢ per mile.
Please share your good experiences with Michael Gray, CPA.
As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm. Some of the sites where you can share your experiences include yelp.com, siliconvalley.citysearch.com, and Google+.
Financial Insider Weekly broadcast schedule for January and February.
Financial Insider Weekly is broadcast in San Jose and Campbell on Fridays at 8:00 p.m., Pacific Time. You can watch it on Comcast channel 15 for San Jose and Campbell. The show is broadcast as streaming video at the same time at www.creatvsj.org.
Here are the scheduled interviews for January and February:
- January 10, 2014, Hilary Martin, CFP®, The Family Wealth Consulting Group, "Planned saving to reach your financial goals"
- January 17, 2014, Lori Greymont, CEO, Summit Assets Group, "Residential real estate investing in Atlanta, Georgia and Birmingham, Alabama"
- January 24, 2014, Lori Greymont, CEO, Summit Assets Group, "Different ways to invest in real estate"
- January 31, 2014, Raymond Sheffield, attorney at law, Sheffield Law Office, "Charitable remainder trusts"
- February 7, 2014, Raymond Sheffield, attorney at law, Sheffield Law Office, "Estate tax planning for retirement accounts"
- February 14, 2014, Raymond Sheffield, attorney at law, Sheffield Law Office, "Handling retirement accounts after a death"
- February 21, 2014, Professor Patricia Cain, Santa Clara University School of Law, "Tax issues for same sex couples"
- February 28, 2014, David Howard, attorney at law, Hoge, Fenton Jones & Appel, "Tax reporting of foreign bank and investment accounts for individuals"
Financial Insider Weekly is also broadcast as follows:
- Monday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- Monday at 4:00 p.m. and 7:00 p.m. Pacific Time on cable channel 19 in Morgan Hill and broadcast on the internet at the same time as streaming video at www.mhat.tv
- Mondays at 6:30 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton
- Monday at 7:30 p.m. on Comcast channel 15 in Saratoga
- Tuesday at 2:30 a.m. and 12:30 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton
- Tuesday at 4:00 p.m. and 7:00 p.m. Pacific Time on cable channel 19 in Morgan HillBroadcast on the internet at the same time as streaming video at www.mhat.tv
- Wednesday at 6:00 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
- Wednesday at 8:00 p.m. on Comcast channel 28 in Hayward, Alameda and Fremont and on AT&T U-Verse Channel 99, Hayward public access TV 28 in California
- Friday at 2 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
- Friday at 1:30 p.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- Friday at 3:30 p.m. on KCAT, Comcast channel 15 in Los Gatos
- Friday at 4:00 p.m. on KMTV cable channel 15 in Cupertino, Los Altos and Mountain View
- Friday at 6:00 p.m. on Comcast and Astound channel 29 in San Francisco. Online streaming video at www.bavc.org, "public access TV"
- Friday at 8:00 p.m. on Comcast channel 28 in Hayward, Alameda and Fremont and on AT&T U-Verse Channel 99, Hayward public access TV 28 in California
- Saturday at 9:00 a.m. and 6:00 p.m. on Midpeninsula Media Center, Comcast Channel 28 in Palo Alto, East Palo Alto, Stanford, Menlo Park & Atherton
- Saturday at 1:00 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County
Past episodes of Financial Insider Weekly are posted on YouTube. One way to watch them is to go to our web site, www.financialinsiderweekly.com, and click on "Past Episodes."
Let me know any ideas that you have for topics or guests. Guests will usually have to be located in or near the Silicon Valley in California.
Hope you can watch or record the show. Please tell your friends about it!
Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.
For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.
Visit our new article!
- Applied Imagination Book Review at www.profitadvisors.com/imagination.shtml
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For details, visit www.realestatetaxletter.com
Check out my blog.
I have also started a blog at michaelgraycpa.com. Check it out!
My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.
Michael Gray, CPA2190 Stokes St. Ste. 102San Jose, CA 95128(408) 918-3162FAX: (408) 998-2766email: email@example.comHours: 8am - 5pm PDT Monday - Friday