Monthly Archives: December 2014

President Signs Extenders – What Does this Mean for Filing Season?

by Tony Pandisciairs

If you hadn’t heard by now, Congress passed a temporary extenders bill Dec. 16, which was signed into law by the President today. The Tax Increase Prevention Act of 2014 retroactively extends for one year (to Dec. 31, 2014) all the provisions that expired last year. So yes, that means those very same provisions will expire in just a few weeks, leaving the question of longer term extensions to the new Congress.

The larger question is what impact this will have on filing season. The Tax Girl blog (written by Kelly Phillips Erb, Forbes) suggested that this bill will delay the start of filing season, even though it merely extended existing provisions and did not result in significant forms delays or other operations changes to IRS. She observed, “The IRS Commissioner has not yet announced a start date to the 2015 season: I would expect a late January to early February date.” Many were already anticipating another challenging filing season, perhaps the most difficult season the profession has seen in many years.

Compounding the problem is that a separate bill passed by Congress on Dec. 13 cut the IRS budget by nearly $346 million. Last September, the AICPA recommended Congress fully fund the IRS, stating that “we believe that proper funding of the IRS’s budget is essential to the IRS’s ability to carry out its mission,” which includes providing assistance to taxpayers and tax practitioners. These additional cuts to the IRS budget could mean even longer wait times when calling IRS, additional delays in responses to inquiries and issuance of administrative guidance, as well as a further slowdown in the release and update of tax forms and instructions.

Individual extenders

The following provisions which affect individual taxpayers are extended through 2014:

… the $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom;

… the exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income;

… parity for the exclusions for employer-provided mass transit and parking benefits;

… the deduction for mortgage insurance premiums deductible as qualified residence interest;

… the option to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes;

… the increased contribution limits and carryforward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;

… the above-the-line deduction for qualified tuition and related expenses; and

… the provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 and ½ or older.

Business extenders

The following business credits and special rules are generally extended through 2014:

… the research credit;

… the employer wage credit for activated military reservists;

… the work opportunity tax credit;

… three-year depreciation for racehorses;

… 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;

… 7-year recovery period for motorsports entertainment complexes;

… 50% bonus depreciation (extended before Jan. 1, 2016 for certain longer-lived and transportation assets);

… the election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation;

… the enhanced charitable deduction for contributions of food inventory;

… the increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing;

… the exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity;

… exceptions under subpart F for active financing income;

… look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules;

… the exclusion of 100% of gain on certain small business stock;

… the basis adjustment to stock of S corporations making charitable contributions of property;

… the reduction in S corporation recognition period for built-in gains tax;

… the empowerment zone tax incentives;

Energy-related extenders

The following energy provisions are retroactively extended through 2014:

… the credit for nonbusiness energy property;

… the renewable electricity production credit, and the election to claim the energy credit in lieu of the renewable electricity production credit;

… the credit for construction of energy efficient new homes

Langdon & Company LLP advises and supports nonprofit organizations, commercial businesses and their owners, endeavoring to fulfill all of their tax planning, auditing, consulting, and outsource accounting needs.

Upcoming NFP Changes: Accounting for Shared Services

by Brittany Powellaccountant-real deal

In April 2013, FASB issued ASU 2013-06 – Not-for-Profit Entities (Topic 958): Services Received from Personnel of an Affiliate which requires not-for-profit organizations to recognize contributed services received from an affiliate that directly benefit the not-for-profit entity.  This means that a not-for-profit entity may have to record services provided by an affiliate that the affiliate does not charge the recipient not-for-profit entity for.  According to ASU 2013-06, contributed services should be recognized if they meet one of the following criteria:

  1. The services provided “create or enhance nonfinancial assets”, or
  2. The services provided “require specialized skills, are provided by individuals possessing those skills, and typically need to be purchased if not provided by donations.”

Typically, in accordance with ASU 2013-06, the contributed services should be recorded “at the cost recognized by the affiliate for the personnel providing those services.”  However, if recording the services at cost would significantly misstate the value of the services received, ASU 2013-06 allows the not-for-profit entity to elect to record the contributed services at either cost or at fair value.

ASU 2013-06 will be effective for fiscal years beginning after June 15, 2014, or in other words beginning with fiscal year ended June 30, 2015 for not-for-profit entities with a June 30 year-end.  Early adoption of ASU 2013-06 is permitted.

With the approaching implementation date of ASU 2013-06, please contact our office with any questions regarding the application of ASU 2013-06 or its applicability to your not-for-profit organization.

Brittany Powell ([email protected]) is a Senior Accountant with Langdon & Company LLP.  She specializes in audit, serving a wide variety of nonprofit organizations.

Six IRS Tips for Year-End Gifts to Charity

by Susan Dean

Many people give to charity each year during the holiday season. Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions. donationsThere are several tax rules that you should know about before you give. Here are six tips from the IRS that you should keep in mind:

  1. Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
  2. Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.
  3. Household goods.  Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.
  4. Records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
  5. Year-end gifts.  You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.
  6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. For more information visit IRS.gov.

This article is an excerpt from the IRS Special Edition Tax Tip 2014-23. For more information, please visit, here, or call our office for additional details.

Susan ([email protected]is a tax manager at Langdon & Company LLP.  As an Enrolled Agent she focuses primarily on the non-profit industry, trust income tax reporting and multi-state filings.