Monthly Archives: December 2015

Tax Provisions of the “Protecting Americans from Tax Hikes (PATH) Act of 2015

taxesIn recent years, the $500,000 limit and some other favorable aspects of the election have been extended for a year or two at a time, but sometimes these provisions weren’t extended until December, leaving many taxpayers uncertain for most of a tax year as to whether the higher expensing limit and other favorable provisions would be extended. What’s worse, the $500,000 limit and other favorable provisions expired again at the end of 2014. Most dramatically, on Jan. 1, 2015, the limit reverted to its old level of $25,000 and the other favorable provisions also lapsed, once again plunging taxpayers into uncertainty.

The recently enacted “Protecting Americans from Tax Hikes Act of 2015” (i.e., the 2015 PATH Act) makes permanent the $500,000 Section 179 expensing limit, thus enabling a small business to elect to expense up to $500,000 of investment in new equipment and other qualifying property instead of having to depreciate the cost over a number of years.

To provide a bit more detail, the new law, retroactive so as to not leave out tax years beginning in calendar year 2015:

  • makes permanent the expensing of up to $500,000 annually of the cost of qualifying property; as was true for earlier years for which the $500,000 limit was in place, the amount of expensing allowed is subject to gradual reduction (down to zero) once the total qualifying property placed in service during the year exceeds $2 million;
  • makes permanent the eligibility for expensing of most computer software;
  • makes permanent the eligibility for expensing of qualified real property (certain leasehold building improvements, retail building improvements and restaurant property); and
  • makes permanent the ability to revoke an election, or change its specifics, without IRS consent.

And, for tax years beginning after calendar year 2015 (post-2016 years), the new law:

  • indexes both the $500,000 and $2 million limits for inflation;
  • ends the exclusion from expensing of air conditioning and heating units; and
  • removes the $250,000 cap on qualified real property expensing; the capped expensing nevertheless also had to be applied against the $500,000 limit.

The PATH Act also extends and modifies the rules pertaining to bonus depreciation. The applicable bonus depreciation percentage will be 50% for property placed in service during 2015, 2016 and 2017. The applicable bonus depreciation percentage will be 40% for property placed in service in 2018, and 30% for property placed in service in 2019. The PATH Act also continues to allow taxpayers to accelerate alternative minimum tax credits rather than use bonus depreciation. For the 2016 taxable year, the PATH Act modifies the rules relating to the use of alternative minimum tax credits in lieu of bonus depreciation by increasing the amount of unused tax credits that can be claimed instead of bonus depreciation.

The Act has numerous other individual and business tax provisions.  L&C’s tax professionals routinely provide tax advice to individuals and businesses. If you would like more details about these changes or any other aspect of the new law, please do not hesitate to contact our office.

2015 Blog Roundup

2015 produced a range of interesting and informative blogs from the Langdon & Company, LLP staff. Here we will look back on some of the highlights from the round up

January 2015

January brought us the introduction of the upcoming changes in Revenue Recognition. Audit Manager, Lee Byrd, shared with us a summary on the proposed standard in her blog On the Horizon: Revenue Recognition. This blog summarized the five-step model of ASU 2014-09. In September 2015, Audit Senior, Rebecca Lunn, provided an update on the standard while discussing the delay of the effective date by FASB.

February 2015

An audit committee is essential to the fiduciary oversight of a nonprofit organization. Meagan Bulloch, Audit Manager, discussed just this in her blog The Why, Who, What and How of an effective audit committee for nonprofit organizations. Visit the link to read frequently asked questions and answers on this topic.

March 2015

In March, Staff Accountant, Brittany Spragins, touched on a topic that is sometimes difficult to consider but necessary to ensure the protection of our loved ones. In her blog The “Legacy Drawer”, she discusses the most important documents to have in place in preparation of our final days such as a Last Will and Testament, insurance documents, and funeral instructions.

April 2015

April was the time for spring cleaning! This extended to the office in our April 2015 blog Spring Cleaning: Document Retention Policies for Non-Profits by Brittany Powell, Audit Senior. Check out this blog for guidelines on how long to keep those important documents.

May 2015

Have you or your organization ever been the victim of a cyber-attack? While technology is a wonderful tool, it can also make us vulnerable to cyber-attacks in ways we wouldn’t even consider. In May 2015, after news of data breaches at major retailers in the US, Meagan Bulloch, Audit Manager, provided us with great ways to protect ourselves and our organizations against cyber threats. View her blog to find out what you should be doing to protect yourself!

June 2015

In June we considered a different kind of threat. Tax Manager, Susan Dean, walked us through the Taxpayer Guide to Identity Theft posted by the IRS. Her blog provided a host of information on when to recognize and how to protect ourselves against tax identity theft which will be sometime to watch for during the upcoming tax season.

July 2015

In July 2015, Rachel Owens, Senior Accountant, gave us an update on the reporting requirements for NC Adult Care Homes. Cost reports are due December 31, 2015!

August 2015

There’s an App for that! In August, Dwayne Murphy, Audit Senior, summarized the most useful apps available for tracking travel expenses. Hopefully, these apps will make the pesky task of tracking and reporting expenses a little easier.

September 2015

Don’t be surprised at the end of the year by taxes due! Cody Taylor, Staff Accountant, explains how payroll tax withholdings affects your total tax due at the end of the year and how to calculate the proper withholding amounts using the IRS Withholding Calculator. Find the information in Cody’s blog, Are You Withholding Enough?.

October 2015

Ever wonder if you should hire a CPA? In her blog, Why Hire a CPA?, Brittany Spragins, Staff Accountant, provides the reader with numerous reasons that hiring someone with the CPA title can be advantageous to your organization.

November 2015

Ever received a phone call that you thought was from the Internal Revenue Service but later found out it was a scam? If so, you are not alone! In her blog, Have you been scammed?, Susan Dean, Tax Manager, walks you through examples of phone scams and helpful tips on how to recognize and report potential scams.

December 2015

This month, Eric Murphy, Tax Senior, gave us an Update on Increase of Deduction for Purchase of Tangible Property which increased the threshold for capitalization from $500 to $2,500.

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Update on Increase of Deduction for Purchase of Tangible Property

by Eric Murphy

For several years, the IRS has deemed that tangible assets used in business such as equipment and computers with a purchase price of more than $500 must be capitalized and depreciated based on the Assets’ useful life.  Any money spent below $500 on an asset that would have traditionally be capitalized, could be expensed in the year of purchase instead.  The IRS made this rule under the Tangible Property Regulations, specifically Reg. 1.263(a)-1(f)(1)(ii)(D).  This deduction was allowed for businesses that didn’t have annual financial statements subjected to annual audits.

Under IRS Notice 2015-82,  the lower tier safe harbor amount was increased from $500 to $2,500 of costs per tangible item and can now be expensed instead of being capitalized for small businesses that don’t have audited annual financial statements.  This ruling will take effect for the tax year beginning January 1, 2016 all future years unless a modification is made at a future date.  The IRS will also not challenge amounts between $500 and $2500 that were expensed in prior years between December 31, 2011 and December 31, 2015 that should have been stack

If you’re a business owner who wants to make sure their purchases are properly recorded and reported in their financial statements and tax returns, contact Langdon & Company LLP.  Our team of highly skilled tax and bookkeeping professionals will assist you in making sure your company’s financial activity is reported properly and in conformity with all legally mandated requirements.  We will also analyze your statements and make suggestions on ways you can become more profitable and efficient to the best of our ability.

Eric ([email protected]) is a Senior in the Langdon & Company LLP tax practice. He works with a variety of clients in preparation of tax returns and other projects.