2014 Year-end Payroll tax information and 2015 updates
Dec 16, 2014
Social Security and Medicare withholding The employee’s and employer’s portion of social security taxes withheld has remained unchanged (6.2%). The wage base for 2014 is $117,000. In 2015 the wage base will increase to $118,500.
For 2014 and 2015 the Medicare tax calculation rates are unchanged. The employee’s and employer’s Medicare tax remains at 1.45% with no wage limits. Earners making more than $200,000 in a year are subject to an extra 0.9% Medicare tax. The extra 0.9% tax is not matched by the employer like the 1.45% Medicare tax.
940 FUTA Unemployment tax The 2014 and 2015 FUTA rate remains at 0.6%. This rate includes the 5.4% credit for State Unemployment paid. There are still credit reduction states published by the IRS and listed on Schedule A (Form 940). A “credit reduction state” is a state that has borrowed money from the federal government to pay unemployment benefits and has not yet repaid this money. In 2014, there are 7 states listed on this credit reduction list. Some of the state changes include:
- Ohio – .012
- Indiana .015
- New York – .012
- North Carolina – .012
This means that instead of paying the 0.6% in 2014, there is an additional 1.2 % added (or 1.5% for IN), for a total of 1.8% for Ohio. The credit reduction will add up to approximately $84- $126 of extra tax liability per employee for this year. Each year the % will increase another .003 until the state is no longer on the list published by the IRS each fall. Line 11 of the 2014 940 Form is where the amount from Schedule A, calculating your state credit reduction amount is entered. The extra 940 deposit will need to be paid thru EFTPS.gov by January 31, 2015.
1099 Misc forms These forms are the most common. They are issued to independent contractors who received $600 or more for their services in the calendar year. Make sure you have their address and social security/Federal ID number and any DBA company name in your software. Now is the time to contact the vendors for any missing information and ask them fill out a W-9 form with their current information. If you have any other questions with other 1099 forms, please contact our company.
Sandra Stone, Accountant
Categories: Uncategorized
Hello New Year, Good Bye Tax Provisions!
Dec 13, 2014
When the clock strikes midnight on New Year’s Eve, not only will we be welcoming 2014, but we will also be saying goodbye to certain income tax provisions. I’m sure while you are wishing your friends and family a Happy New Year, you will not even give this a second thought. However, now is a good time to look into your position and see if you are in the group of individual taxpayers affected by these changes.
Teachers listen up! As of now, 2013 will be the last year to take advantage of the educator’s expense deduction. For the 2013 tax year, teachers can deduct up to $250 in unreimbursed expenses that they accumulated for school supplies or classroom items. With this nice perk expiring, teachers should try and move any potential 2014 expense into the current year if they haven’t maximized their $250 limit as of yet.
Charitable intent Taxpayers’ who are 70½ or older must take required minimum distributions from their IRA. In 2013, if a taxpayer would prefer, he or she can directly transfer their RMD to a charity, up to $100,000. This distribution will not be a deductible charitable donation, but it also will not count as income, and the really great part is that it does satisfy the required distribution. It helps keep taxable income down and helps taxpayers avoid other phase out regulations that could affect them if their income is high.
Consumer Benefit Taxpayers can usually deduct on their Schedule A income taxes paid to state or local governments. However, a few states do not have income tax or the amount paid is not a significant benefit to the taxpayer. I am in Ohio, so I of course do not know what that is like! For the last couple years, taxpayers could deduct sales tax amounts paid if they are higher than income taxes paid. Starting in 2014, this benefit will also go away.
Relief for Debt Forgiveness When a debt is forgiven, the amount forgiven in most cases will result in taxable income to the borrower. However, in 2013, taxpayers can exclude up to $2,000,000 of forgiveness of debt income if their principal residence is foreclosed on. Certain rules apply to this relief and it may not benefit everyone, but it’s definitely worth considering if you are in this situation.
There are other items set to expire at the end of 2013 for both individual taxpayers and businesses. With December being the heart of tax planning, contact your tax professional to discuss your personal situation and to discuss if deductions that benefit you the most will expire at the year’s end.
By: Jill Blakeman, CPA
Categories: Uncategorized
How Long Does It Take?
Dec 13, 2014
The question came up recently at a cost accounting course that Tara and I were teaching concerning the length of time it would take to implement a new standard cost system. This attendee had recently taken over the assignment for a closely held company of creating then implementing an entire cost accounting model for this family owned manufacturing business. This person had been working on the assignment for nearly a year and was by her estimation, not nearly complete.
As you might guess, she was getting pressure from the management team to complete the assignment so that they might begin managing with accurate and timely cost information. The real concern was not only how much time it had taken thus far to make the progress that she has made, but really a far greater concern was what she thought it was going to take to finish the assignment and fully implement the model.
We never discussed the actual progress she had made or how much was left to do but I believe her question revolved around from an overview, how long should it take from start to finish?
As you might guess my experience in dealing with the timing associated with implementation of a new system varies radically from company to company. This is due to the commitment of the management team; both with financial resources and talent available. It also depends on the complexity of the implementation. It has also been our experience that initial estimates as to the time it takes to implement such a system are usually very, very light.
There are problems associated with the time and availability of the individuals involved. There are also many technical issues associated with developing standards or rates or reporting problems, etc. These can never fully be anticipated at the start of the project. Even if there is a clear commitment by senior management to make the changes happen and adequate resources to complete them in a timely fashion, it can still take time. Many times the technical barriers that are uncovered related to gathering data and solving problems are large and require substantial effort to overcome.
We’ve had very sophisticated clients with dedicated implementation teams that we would have expected would be done in no time. In these situations implementation has been accomplished in 6 to 9 months which, of course, was far in excess of what we estimated it might be. We have had other examples with companies with significant talent and resources where the implementation has taken several years and perhaps longer for a full implementation of all the features.
There will most likely always be issues, but my estimate of how long it takes is variable depending on the assignment. I would say it is very difficult to do one in under six months unless huge amounts of talent and resources can be committed and then maintained on the project. This would also assume the number of technical problems that are uncovered is relatively small. If adequate talent and resources can not be focused on the issue until the completion of the project, then the entire implementation process increases exponentially and it becomes very tough to estimate what the whole project will take from beginning to end because of the high degree of variability of the resource available as well as the time to solve the reoccurring technical issues.
Categories: Cost Accounting
2015 Inflation-Adjusted Items and Tax Tables Released
Dec 11, 2014
The annual inflation adjustments for 2015 for more than 40 tax provisions along with the 2015 tax rate tables for individuals and estates and trusts have recently been released by the IRS.
Personal exemption will increase from $3,950 in 2014 to $4,000 for 2015, as well as the standard deduction, which will increase from $12,400 in 2014 to $12,600 in 2015 for married taxpayers filing joint returns. The adoption credit under Sec. 23 is inflation-adjusted from $13,190 in 2014 to $13,400 in 2015.
The revenue procedure also contains the inflation-adjusted unified credit against the estate tax, which is $5.43 million for 2015. One amount that will remain unchanged is the annual gift tax exclusion which will remain at $14,000.
The AMT exemption amount for 2015 is $83,400 for married taxpayers filing joint returns and $53,600 for single taxpayers. The Sec. 911 foreign earned income exclusion increases from $99,200 for 2014 to $100,800 for 2015.
The revenue procedure also includes the inflation adjustments for the Sec. 24 child tax credit, the Sec. 25A Hope scholarship and lifetime learning credits, the Sec. 32 earned income tax credit, and the Sec. 221 deduction for interest on qualified education loans.
The 2015 contribution limits and other figures for pension plans and other retirement-related items have been released as well, along with the Social Security Administration announcing the Social Security wage base will increase from $117,000 in 2014 to $118,500 in 2015.
By: Rachel Mossing, Accountant
Categories: Uncategorized
Cost Accounting for Everyone
Dec 10, 2014
We’re beginning our latest cost assignment this week, where we have been asked to assist a very successful start-up company operating in a high-tech industry. This entrepreneur is quite talented and has a vast understanding of this industry. She has also been able to enter into this market quite seamlessly and has far exceeded the quality and service her customers expected. To her credit, they have had tremendous increases in volume from their launch two years ago. Unfortunately, they have been unable to bring appropriate profits to the bottom line.
This business meets many of the criteria that are required for new and emerging companies to be successful in today’s highly competitive, technically oriented business environment. Although this company is located in Toledo, Ohio, they have national reach and are dealing with clients across a broad geographical area. As a casual observer, it would seem as likely that such a business would be extraordinarily profitable and provide adequate rates of return on investments of talent and capital. However, that is untrue in this case and the entrepreneur has been frustrated in her attempt to find adequate advice to remedy the problem. We spent our first meeting with this client attempting to get a grasp of the types of customers they are dealing with, the kinds of services and products that they are providing, and some idea about how their record-keeping has been arranged.
What we learned through all of this, is that in this industry some of their rates are market driven and some offer more discretion. The market driven rates are widely available and price-competitive so that their ability to command higher fees in those areas is extremely limited. However, it is also true that they are providing high levels of highly specialized services that are not readily available in the marketplace, and therefore, offer a far greater freedom on how billing rates could be determined. Our job is to assist this entrepreneur in determining what the cost per hour to provide those services truly are. We will also offer suggestions as to how the billing rates might be computed in order to provide the highest levels of profitability available while still remaining competitive in a highly competitive industry.
I believe this owner fully understands that she has some components that can be priced in relation to the value they are delivering, but that other components must be priced more in line with current market rates. It will be our job to organize their cost structure and billing rates to cover all the costs of the company with an adequate margin to compensate the entrepreneur for the investment of capital and talent.
Categories: Cost Accounting