It is my pleasure once again to introduce our Year-End Tax Guide. This 2014 Marcum Tax Guide is structured similarly to those we issued in prior years, continuing our tradition of providing timely tax guidance to clients and friends. Our Tax Guide has been notable for addressing significant tax legislation enacted applicable to current year planning. While there is no new significant tax legislation affecting 2014 planning, uncertainties still linger. Congress remains unable to reach agreement on numerous extenders and tax provision modifications which the professional tax community expects to be enacted retroactively. Therefore, this Tax Guide continues our effort to provide guidance based on enacted laws, while addressing important provisions that may be retroactively reinstated.
What does this mean for planning? Throughout this Guide, we address traditional tax planning concepts and set out alternatives should certain provisions not be reinstated, along with the impact of any new provisions. Due to a divided Congress in 2014, uncertainty continues to be the rule with tax legislation. As always, planning is essential. The more often you plan, the less likely you will be surprised when you are presented with your tax return for review and filing. We hope you will use this Guide to further understand planning options during these uncertain times, enabling you to raise issues and questions with your Marcum tax advisor.
The end of the year is an important time for business owners to evaluate the current and future status of operations and the associated tax implications. Businesses must understand the tax law changes that impact their industry and ultimately, their profitability.
One of the biggest tax stories of 2014 is the combined efforts of the Internal Revenue Service (IRS) and U.S. Department of the Treasury (Treasury Department), along with several members of Congress, to prevent U.S. corporations from undertaking inversion transactions with foreign corporations.
At the end of 2013, the number of U.S. individual citizens revoking their U.S. citizenship for another home country hit an all-time high. In the corporate world, there has been a similar trend. One of the “hottest” and more controversial tax topics “inside the Beltway” in 2014 has been the resurgence of corporate tax inversions (“inversions”).
On January 14, 2014, the New York Court of Appeals, the state’s highest court, declined to hear a challenge to the Metropolitan Commuter Mobility Tax, the payroll tax levied in counties served by the Metropolitan Transit Authority.
2014 has seen a number of developments involving the Patient Protection Affordable Care Act, including the application of the Individual Mandate, the Premium Tax Subsidy, the Shared Responsibility Payment for Large Employers, and complex reporting requirements.
As more and more companies use technology to improve products and increase efficiencies, the relevance and importance of reviewing costs for eligibility for the Research and Development Tax Credit becomes more critical.
In 2013, wealthy taxpayers experienced significantly higher tax rates as well as phased-out deductions due to the American Tax Relief Act of 2012 and the Affordable Care Act. Many high net worth clients were dismayed to learn that their federal marginal tax rate went from a high of 35% in 2012 to as much as 45% in 2013 after taking into account the impact of phase-outs, the Medicare surtax and the net investment income tax on portfolio and passive income.
Treasury issued final regulations in 2013 providing new rules for the capitalization of expenditures relating to tangible property. These regulations establish a general framework to distinguish capital expenditures from deductible supplies, repairs, maintenance expenses and costs incurred for tangible property.
2014 continued to be an active year on the State and Local tax front as governments wrangled with issues designed to keep the state coffers flowing with tax revenues. State taxes encompass a wide variety of tax types and taxpayers.
The year following the landmark Supreme Court Decision in US v. Windsor has seen an exponential growth in the number of states recognizing same sex marriage. Last year at this time, there were only 16 recognition states, plus the District of Columbia.
Many individuals feel confident that they would never fall victim to a tax-related scam. However, stories over recent years are showing that sophisticated scams continue to surprise many people, both in their ingenuity and success in yielding significant sums of money and personal information for the scammers.
Identity thieves stole an estimated $5.2 billion from the IRS this past year per a recent Government Accountability Office (GAO) report. Through just the first six months of 2013, the Treasury Inspector General for Tax Administration (TIGTA) identified approximately 1.63 million taxpayers that were affected by identity theft, which is many multiples of the 270,000 taxpayers affected in all of 2010.
The tax law offers credits and deductions to assist taxpayers in meeting the increasing cost of a college education. Review for eligibility of such credits and deductions should be part of any family tax planning to the extent available.
The gift tax annual exclusion remains at $14,000 per donee. This allows a married couple to split their gifts for up to $28,000 per year to each donee. It is important to note that all gifts made to an individual donee are counted. Therefore birthday, holiday and graduation gifts must be carefully tracked so that gifts in the aggregate do not exceed the $14,000 annual exclusion.
Whether giving or receiving, gifts and December go together. The good news is gifts are generally tax-free to the recipient. However, if you receive a gift (or inheritance) from a foreign person, you may be required to report it to the IRS to avoid a penalty, and there may be tax implications.
Ultra-affluent clients often utilize Private Placement Life Insurance and Annuity accounts to shield traditional and alternative asset class investments from current taxation.
Just as we should all be going to our family doctors as we get older to have a check up to make sure we are healthy and in good physical condition, everyone should also periodically have a financial checkup, including a review of your estate plan and your estate planning documents, wills, and trusts.