Michael Gray, CPA's Tax and Business Insight
January 14, 2016
© 2016 by Michael C. Gray
ISSN 1539-395X
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.
- Business standard mileage rate decreases.
- Congress extends tax breaks.
- Tax preparation materials will soon be on the way.
- Make your tax return preparation interview appointment now.
- Fourth quarter estimated tax payment for non-corporate taxpayers 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.
- Not filing a tax return keeps statute of limitations open.
- Corinthian College students receive cancellation of debt relief.
- Does your group need a speaker?
- Please share your good experiences with Michael Gray, CPA.
- Financial Insider Weekly broadcast schedule.
- Follow me on social media!
- Do you have employee stock options?
- Do you have real estate tax issues?
- Check out my blog.
- PS Marché Aux Fleurs
- Subscribe/Remove from Michael Gray, CPA's Tax & Business Insight
Kara and Minnie Siemer stand on a petrified tree in the petrified forest near Santa Rosa, California. Happy New Year!
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.
January celebrations.
My son in law, Dan Baker, is celebrating his birthday this month. Happy birthday Dan!
Business standard mileage rate decreases.
The IRS has announced the standard mileage rate for 2016 decreased to 54¢ per mile from 57.5¢ per mile for 2015. The standard mileage rate for medical and moving expenses decreased to 19¢ per mile for 2016 from 23¢ per mile for 2015.
(Notice 2016-1, December 18, 2015)
Congress extends tax breaks.
Congress renewed the extensions for many expired tax breaks. We sent a separate notice with a few of the details. A correction for that notice is the rate for the alternative simplified method of computing the research credit was NOT increased from 14% to 20%. That provision was eliminated from the final legislation.
If you didn't receive our notice and would like to have it, please call Dawn Siemer at 408-918-3162 and she'll send it to you.
(Protecting Americans from Tax Hikes Act of 2015, part of the Consolidated Appropriations Act of 2015, P.L. 114-113, HR 2029, enacted December 18, 2015)
Tax preparation materials will soon be on the way
We are in the process of 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 at 408-918-3162.
Make your tax return preparation interview appointment now
Most personal interview appointments for preparing 2015 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, Tuesday or Thursday at 408-918-3162.
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, 2016. 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.
If you miss the January 15 deadline, making a late estimated tax payment can stop penalties from accruing.
W-2s, 1099s and DE 542 reminder.
Remember that most 2015 annual information returns, such as W-2s and 1099s, should be issued to payees by February 1 and sent to the tax authorities by February 29.
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 now 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 $105 per employee will be due with Form 940. Be sure this adjustment is done with your year-end report for 2015 using Form 940, Schedule A.
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, March 5, 2016) as distributed for a taxable year (for example 2015). The maximum federal income tax rate increasing 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 $12,300 for 2015. (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, 2016. Be sure you have installed those updates before processing your first payroll for 2016.
Not filing a tax return keeps statute of limitations open.
Michael Redstone didn't file a gift tax return when he transferred $2.5 million in corporate stock to his children during 1974. He testified that he transferred the shares voluntarily as an outright gift, not as a result of litigation. Mr. Redstone received written advice from a large CPA firm that the transfer wasn't a taxable gift and no gift tax return was required. (At about the same time, Mr. Redstone's brother transferred stock incidental to litigation.)
The Tax Court rejected Mr. Redstone's arguments that the statute limitations had closed. The statute never started to run because no gift tax return was filed.
The Tax Court also rejected the IRS's claims of negligence and fraud. Mr. Redstone had a history of filing gift tax returns and relied on the advice of a qualified tax professional when he didn't file the gift tax return for the 1974 gift.
(Redstone, TC Memo 2015-237.)
Corinthian College students receive cancellation of debt relief.
The IRS has announced that students of Corinthian College who would otherwise have had cancellation of debt income for the forgiveness of their student loans will not have to report the cancellation as taxable income. The debt was incurred as a result of fraudulent misrepresentation.
(Revenue Procedure 2015-57.)
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.
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 15, 2016, Craig Martin, CFP®, The Family Wealth Consulting Group, "Investing in turbulent times"
- January 22 and 29, 2016, Peggy Martin, ChFC, CLU, "Socially responsible and sustainable investing"
- February 5, Mark Erickson, attorney at law, "How to choose a good divorce lawyer"
- February 12, Mark Erickson, attorney at law, "Child custody in divorce"
- February 19 and 26, Mark Erickson, attorney at law, "Spousal support for California divorces"
Financial Insider Weekly is also broadcast as follows:
- Sunday at 10:00 a.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- Sunday at 1 p.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
- Monday at 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
- Monday 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
- Monday at 10:00 a.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- Tuesday at 10:30 a.m. on Comcast channel 26 in Santa Cruz County and on Charter Communications Channel 72 in Watsonville and Capitola
- 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 7:00 p.m. Pacific Time on cable channel 19 in Morgan Hill
Broadcast on the internet at the same time as streaming video at www.mhat.tv- 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
- Thursday at 10:00 a.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- 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 10:00 a.m. in San Mateo County on PenTV, Comcast Channel 26 and Astound Channel 27
- Saturday at 1:00 p.m. on Comcast channel 26 and AT&T U-verse channel 99 in Marin County
Past episodes are available at https://www.youtube.com/user/financialinsiderweek.
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!
Questions and answers
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.
Follow me on Social Media!
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Check out my blog.
I have also started a blog at www.michaelgraycpa.com. Check it out!
P.S.
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.
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Michael Gray, CPA2482 Wooding Ct.San Jose, CA 95128(408) 918-3162FAX: (408) 938-0610email: mgray@taxtrimmers.comHours: 8am - 5pm PDT Monday - Friday
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