The CPA Desk

A Thought Leader Production by PKFTexas

A Holiday Poem From PKF Texas

At our Holiday Cheer celebration yesterday, our Director of Entrepreneurial Advisory Services, Byron Hebert recited a poem he wrote for the season. We’d like to share this with you. Happy Holidays from PKF Texas!

‘Twas the week before Christmas and all through PKF
Not one single prospect was allowed to rest

I, in my suit and my associate, old sport
Had just printed our list and we started to sort

The A prospects, B prospects, the Cs and the Ds
Which company do you think we can earn the best fees?

We worked the list hard, it was more than a hunch
We called them, we wrote them, we took them to lunch!

Then what to my wandering ears do I hear?
But the phone, it was ringing and they want to come here!

So we met with the prospect, engagement letter in hand
We have a new client, strike up the band!

Then I heard as my new client disappeared out of sight
Happy Holidays to PKF, where the fit is just right!

Why you should make annual exclusion gifts before year end

The 2014 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free without using up any of your lifetime gift tax exemption. If you and your spouse “split” the gift, you can give $28,000 per recipient.
The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can avoid gift and estate taxes.

The exclusion is scheduled to remain at $14,000 ($28,000 for split gifts) in 2015. But that’s not a reason to skip making annual exclusion gifts this year. You need to use your 2014 exclusion by Dec. 31 or you’ll lose it.

The exclusion doesn’t carry from one year to the next. For example, if you don’t make an annual exclusion gift to your daughter this year, you can’t add $14,000 to your 2015 exclusion to make a $28,000 tax-free gift to her next year.
We can help you determine how to make the most of your 2014 gift tax annual exclusion.

Accelerating deductions to save taxes

Smart timing of deductible expenses can reduce your tax liability, and poor timing can unnecessarily increase it. When you don’t expect to be subject to the alternative minimum tax (AMT) in the current year, accelerating deductible expenses into the current year typically is a good idea. Why? Because it will defer tax, which usually is beneficial.

One deductible expense you may be able to control is your property tax payment. You can prepay (by Dec. 31) property taxes that relate to this year but that are due next year, and deduct the payment on your return for this year. But you generally can’t prepay property taxes that relate to next year and deduct the payment on this year’s return.

Don’t forget that the income-based itemized deduction reduction returned last year. Its impact should be taken into account when considering timing strategies.

Not sure whether you should prepay your property tax bill or what other deductions you might be able to accelerate into 2014? Contact us. We can help you determine what steps to take before year end to reduce your 2014 tax bill.

How much time is left to make donations you can deduct on your 2014 return?

To take a 2014 charitable donation deduction, the gift must be made by Dec. 31, 2014. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?
The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

  • Check. The date you mail it.
  • Credit card. The date you make the charge.
  • Pay-by-phone account. The date the financial institution pays the amount.
  • Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2014 tax bill.

Changes for The BusinessMakers Show

Karen: This is PKF Texas, Entrepreneurs Playbook, and I’m Karen Love, the host and co-founder. Today I’m turning the tables in interviewing Russ Capper, the co-host of the BusinessMakers show. Welcome to the Playbook, Russ.

Russ: It’s great to be here, Karen, on the longest lasting thought leader vignette probably in the country.

Karen: Well, thank you for sharing that. I want to know what’s happening with that vignette, the BusinessMakers show. What’s going on?

Russ: Okay. Well, for your audience that watches the videos and listens to the radio, probably noticed that we’re not on News 92 FM anymore.

Karen: I noticed that.

Russ: We just couldn’t adjust to classic hip-hop.

Karen: Well, that makes sense.

Russ: I think we could, but I just don’t think our audience would be there with us.

Karen: I agree with that.

Russ: So, now we’re at KNTH 1070 AM, this week, the first show. We’re pleased to be there and they are very welcoming of us being there, and I’m excited.

Karen: Well, I’m excited, too. I want to know about how long you’ve been doing this, because it seems like a long time.

Russ: It is. In fact, we are probably only about three to four weeks away from our 500th episode of The BusinessMakers show.

Karen: Wow. And I can say, “We were there with you.”

Russ: Well, you were. In fact, I did a little research before I came in, and we’re probably six episodes ahead of you because for the first six episodes we didn’t have an Entrepreneurs Playbook, and then you kicked in and you’ve been with us the whole way, and it’s been wonderful.

Karen: Well, it has been for us, as well. I know that our audience has really liked it. We have evidence of that. So, thank you for sharing that with us. And we hope that you’ll come back and talk to us again as things progress.

Russ: Absolutely. We’d love to.

Karen: Fantastic. Thank you very much.

Russ: You bet.

Karen: Well, this is another thought leader production brought to you by PKF Texas Entrepreneurs Playbook. So, tune in next week for another chapter.

Are You TPR Ready?

In September 2013, the IRS issued final guidance regarding capitalization of expenditures related to tangible property for final regulations that became effective Jan. 1, 2014. The gist of guidance seems to indicate all expenditures should be capitalized unless there is an exception or de minimis safe harbor rule to follow.

Under the guidance, material and supplies expenditures will need to be analyzed to determine if the expenditures are below the thresholds for capitalizing. If they are not, an accounting method change (Form 3115) will need to be filed along with the determination of a 481(a) adjustment. Routine maintenance expenditures will need to be analyzed as well to determine if the safe harbor rules are met for expensing and an annual election will need to be filed each year the safe harbor rule applies. Repair costs will also need to be analyzed against the BAR (Betterment, Adaptation or Restoration) test to determine if the cost can be expensed or capitalized.

The guidance set safe harbor thresholds of $5,000 or $500 for acquisition or production of units of property. For taxpayers with an applicable financial statement (generally, an audited financial statement) and a written capitalization policy in place at the beginning of the year, the units of property acquired or produced for $5,000 or less can be expensed; taxpayers without an applicable financial statement have a $500 threshold.

Under the final regulations, a partial disposition of a unit of property can now be deducted in the year of disposition. For example, if a taxpayer replaces the roof of their building, they can deduct the remaining tax basis of the original roof in the year of replacement instead of continuing to depreciate the original roof cost over the life of the building.

In order for taxpayers to be compliant with the final regulations, they will need to analyze their tangible property expenditures against the final regulations as well as determine if their 2014 tax return should include a safe harbor election, a change of accounting method Form 3115, or both.

 

Social Security Tax Wage Base 2015

The Social Security Administration announced the 2015 maximum amount of earnings subject to Social Security tax has increase to $118,500, up from $117,000 in 2014.

FICA percentages will remain the same as last year: 6.2% Social Security; 1.45% Medicare on first $200,000, increasing to 2.35% on further earnings.

Click here for more 2015 cost of living adjustments.

Career Considerations for Young Professionals

Jen: This is the PKF Texas Entrepreneur’s Playbook, I’m Jen Lemanski, this week’s guest host and today we’re telling the stories of PKF Texas means to our people. Emily Smikal is a tax manager here and she’s gonna share her story with us Emily, welcome to The Playbook.

Emily: Thanks for having me Jen.

Jen: You know, recruits have told us that our people are really our greatest strength and it allows them to get to know PKF Texas, and kind of prove that we are who we say we are. So you know with that, how did you get to PKF Texas?

Emily: Well I was recruited directly off campus, I came in through the internship program here my last summer before I graduated and then was offered a full-time job so came back in the fall of ’09 and have come up the ranks ever since.

Jen: So what’s your role with PKF Texas?

Emily: I’m a manager on in the tax department.

Jen: Okay, cook, now what made you choose PKF Texas?

Emily: I think a lot of things but one of the big ones is I connected with the people but you’ll hear that a lot and then I was excited about the variety of work that I would get here. I think most importantly was really just that I felt I could really contribute and make a difference. PKF uses its people really well to do a lot of different trainings and recruiting and I knew I could contribute in that area.

Jen: And have you done any of those special kind of things?

Emily: Yes, I’m very involved in training and recruiting and a lot of things we call task forces here to make decisions.

Jen: Oh cool, cool, now so what advice would you give a recruit going through the recruiting process?

Emily: You know I think you should look for a place that you want to have a career and not just a job, you know look for things that will fit for you and not just follow the trends of everyone else and you know you might not be the happiest person on earth every day at work but you want to have joy in doing it. So I think look for those things.

Jen: Perfect, perfect, well thanks so much for being here today, we really appreciate it.

Emily: Thanks for having me.

What Students Should Look for in an Accounting Firm

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s guest host, and today we’re telling the stories of what PKF Texas means to our people. Jake Morris is an audit manager, and he’s here to tell his story. Welcome to the Playbook Jake.

Jake: Hi, thanks Jen. I’m glad to be here.

Jen: Now recruits tell us that people are really one of our biggest strengths, and that you know that’s how they get to know PKF Texas, that’s how that we prove we are who we say we are. Tell us how did you get to PKF Texas?

Jake: I came from Baylor, and I interned here, and then started a couple of years after I interned. I think the first big thing coming out of college when you go through the recruiting process is to decide if you want to go big four, or middle market. It’s a pretty big decision. A lot of the professors in universities push a little bit harder towards big four, and it’s a great option for some people, but I decided that I was more interested in the middle market just based on some of the experience; life/work balance, some of the other differences between big four. Once I was geared towards middle market, I started looking around, and just tried to find a fit culturally, and going out to the dinners, and some of the social events, and everything I really felt that I connected with PKF’s people the best. Just doing auditing, doing accounting in general you look at numbers all day, so it’s really important to enjoy the people that you work with, and work around. It really makes for a good experience to come to work every day, because we’re going to spend as much or more time with these people than our family at home.

Jen: So was there anything in particular that made you choose PKF Texas over a different middle market firm, or was it -

Jake: Really just my connection with the people that I interviewed with, and talked to at the socials, and everything. I really just felt that we are a cultural fit. They really seem to enjoy themselves, and we just kind of connected personally.

Jen: Now so beyond choosing between big four, middle markets, what other advice would you give to a candidate going through the recruiting process?

Jake: Like I was pointing to, just the people are really important. So I would just say go in with an open mind, and get to know the people as well as you can. It’s a difficult process, and I’m sure it’s a little nerve racking going through everything, but really just try to be yourself, and get to know the firms, and go with a clear mind, and just figure out the firm that fits culturally with you the best.

Jen: Perfect, well thank you so much for being here today. We really appreciate it.

Jake: Sure.