Client Portals

As part of our effort to improve our client services, we recently sent out invitations to our clients to set up a client portal. A portal is way we use to securely transfer information and provide our clients with 24/7 access to their tax information and other valuable and useful resources. This is an additional way to provide us with the information we need to do your tax or accounting projects. Here are some of the advantages to using a portal.

It can be used to efficiently transfer data. There are no limits on file size, and the data is encrypted for better security.
It provides client access to tax documents, such as prior year tax returns, whenever needed. This eliminates the need to contact us when you need a copy of your return or other important documents. Instead you can log on your portal.
The system give you access to all sorts of legal and business forms including various types of agreements and corporation documents.

The process is pretty easy. Just follow the instructions on the invitation. If you need help give us a call.

Mileage Rate For 2016 to Drop

The Internal Revenue Service announced that the 2016 optional standard mileage rate will be 54 cents per mile. This is down from the 57.5 cents per mile rate in 2015. The rate for medical and moving purposes in 2015 is 19 cents per mile, a drop of four cents. The portion of the rate attributed to depreciation is 24 cents for both years.

The charitable rate remains at 14 cents per mile, the amount established by statute.

 

Congress Acts to Tighten Up Tax Collections

Congress passed the Fixing America’s Surface Transportation Act, HR 22 on Thursday, December 3, 2015. The bill has three major provisions, two of which may affect tax payers with unpaid federal taxes.

The first provision requires the Secretary of State to deny or revoke a passport of anyone who has “seriously delinquent” tax debt. This is generally defined as outstanding tax debt of $50,000 or more on which a notice of lien or a levy has been filed. Under this provision, denial or revocation of the passport can be avoided under certain conditions such as if the taxpayer is making timely payments on the debt.

Another provision in this bill that affects collections is a requirement that the IRS use third party collectors to go after inactive tax receivables. These are tax debts that the IRS has quit trying to collect because of limited resources or because they cannot find the taxpayer.

The other provision repeals a change that authorized an automatic extension for Form 5500, Annual Return/Report of Employee Benefit Plans. The extended due date for employee benefit returns will now be determined under the existing Department of Labor and IRS regulations.

Link to Journal of Accountancy Article

The Billups Company CPA’s Under New Management

We are pleased to officially announce that the firm’s founder, Mike Billups, sold the firm earlier this year to long-time associate Steve Ashby, who takes over as the sole shareholder and President. Mike will continue some involvement with the firm, but will be cutting back his working schedule in order to spend more time with his family and to pursue other interests.

In his letter to the firm’s clients, Mike wrote, “I have been privileged to provide tax and accounting services to hundreds of individuals and businesses in the area, and I want to thank all of you who have made this venture such a successful and rewarding one over the past thirty years.

Partnership and C Corporation Deadlines to Change

The House of Representatives passed a highway funding bill, (HR 3236), on July 30 that has a number of important tax provision. One of them, affecting partnerships and C corporations, is a modification of the due dates for income tax returns, for tax years beginning after December 31, 2015.

Currently, partnership returns are due on April 15. This can create problems for the partners, and their tax preparers, because their individual returns are due on the same day and they need information from the partnership to do the individual return. To remedy this issue, the law shifts the due date for partnerships to one month earlier in the year, March 15, and allows a six month extension to September 15. Presumably, taxpayers will now get partnership information in time to file their individual returns, reducing the need for individual extensions.

C Corporation tax returns are currently due on March 15. The new law shifts this due date to one month later, April 15, (or the 15th day of the fourth month following the close of the tax year). The extension period for calendar year C corporations will be five months, and for corporations with a June 30 year-end, it will be seven months. The new due dates do not apply to C corporations until 2026 if they have a June 30 fiscal year-end.

Deadlines and extension period rules for S Corporation are not affected by the changes.

The bill previously passed the Senate and now goes to President Obama for his signature.

California War on LLC’s

This Tax Advisor article, “Watch Out of California’s Late-Filing Penalty for LLCs Investing in LLCs”, reports that the California Franchise Board is sending penalty notices for failure to file California LLC income tax returns, to out-of-state Limited Liability Companies (LLC) who own an interest in other LLC’s that do business in California.

In California, Limited Liability Companies, including out-of-state LLC’s that do business in California, are required to file a tax return with the state annually and are subject to a minimum tax of $800 plus a fee based on apportioned gross receipts. That fee can range from zero to up to $11,790 for apportioned gross receipts of $5 million dollars or more. The penalties for failure to file and pay the tax are severe and in addition the state assesses is a $2,000 penalty for LLC’s that are “doing business” in the state but have not registered with the Franchise board.

Limited Liability Companies that have investments in other LLC’s should assess whether the LLC in which they are investing is doing business in California, and whether they have some sort of reporting obligation. If a company plans any investments in other companies with any connection to California, some careful planning would be wise.

California is notoriously aggressive in trying to grab revenue from out-of-state companies that they think fall under their wildly broad definition of doing business there. This approach is a good example. As the article points out, it is likely that other states will follow their example, likely diminishing the usefulness of LLC’s as an entity choice in the future.

Obamacare and Possible Tax Filing Issues

Obamacare is going to add another layer of complexity to preparing individual income tax returns in the coming tax season. There are several big issues millions of taxpayers are facing.

The first is determining whether taxpayers are in compliance with the coverage mandate. (Thanks for nothing Chief Justice Roberts.) If they do not have the required health insurance coverage, the questions are whether they are subject to the penalty, or do they meet one of the many exceptions?

The second big issue affects anyone who bought insurance from an exchange. Typically people go on-line, (if the website actually worked), and pick an insurance plan. A portion of the cost of the coverage is offset by subsidies that are based on the income information the taxpayer supplied when they applied. The potential problem is that the actual amount of the subsidy is going to be determined by a computation on their tax return. Some may be in for an unpleasant surprise. If the amount of income used when they applied for coverage is lower than the actual income reported on the tax return, they may find that they received too much in subsidies and may have some or all of the subsidy amounts added to their tax bill.

Some are also worried that many taxpayers may experience filing delays. Those buying coverage from the exchanges will receive a form from the exchange that details coverage and subsidy amounts. This form will be vital in correctly computing their taxes on their 2014 tax return. If the forms are delayed, preparation and filing of returns will be delayed. If taxpayers file without receiving the forms, it could result in adjustment notices from the IRS or delayed refunds. Here is an article on possible filing delays.

Finally, […]

Billups CPA’s Successfully Completes 2014 Peer Review

Our firm recently and successfully completed a system review of our accounting and auditing quality control system.

Certified Public Accounting firms that perform auditing and accounting engagements are required to obtain an independent peer review of their quality control system every three years. The goal is to determine whether the quality system is designed and implemented in a way that assures that the firm’s accounting and auditing work meets the rigorous standards of the profession.

Billup’s review was completed in July and the report was accepted by the Peer Review Committee of the Oregon Society of Certified Public Accountants on August 1.  Firms can receive a rating of “pass”, “pass with deficiencies”, or” fail”. The Billup’s Company’s rating on the review was “pass”. A copy of the report can be read below.

Peer Review Report

Penalties for Failure to File Returns and Pay Taxes

Here is a excellent article on the consequences for ignoring the filing deadlines set by Congress in the Internal Revenue Code. Failure to file returns and pay taxes by the April 15th deadline can be a costly mistake. If you need more time, an automatic six month extension of time to file can be easily obtained. If you need an extension give us a call.
Here is the link: What Are The Penalties For Failing To File Your Tax Return On Time?

Is it possible to avoid the new 3.8% Net Investment Tax and the additional 0.9% Medicare tax?

Are You Exposed?
The Net Investment Income tax took effect January 1, 2013. You are only exposed to the new 3.8% Medicare tax and the additional 0.9% Medicare tax if your modified adjusted gross income (MAGI) exceeds the applicable threshold o

$250,000 Married filing Jointly
$125,000 Married Filing Separately
$200,000 Single
$200,000 Head of household (with qualifying person)
$250,000 Qualifying widow(er) with dependent child

You may be subject to both taxes, but not on the same type of income. The 0.9% medicare tax is on wages and self-employment income.

The amount hit with the 3.8% tax is the lesser of: (1) your net investment income or (2) the amount by which your MAGI exceeds the applicable threshold from above.
In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer (passive S-corp and partnership involvement).
There are tax planning strategies to at least lessen these taxes. For example: For property sales, it might be a good idea to do an installment sale and/or a like-kind exchange. If you sold stocks at a gain it might be a good idea to counteract this by selling your stocks that have losses.
These two taxes may have a significant effect more taxpayers going forward since the threshold amounts are not indexed for inflation. We would be happy to meet with you to discuss these taxes further and how they may impact your individual tax situation for the future.