DWIGHT HETLETVED PC CERTIFIED PUBLIC ACCOUNTANT 620 MAIN AVENUE PO BOX 1106 WASHBURN ND 58577-1106 Telephone: 701-462-3376 Website: www.hetcpa.com Fax: 701-462-3371 December 22, 2014 This year we have included worksheets that need to be completed before we can prepare your return. If you email, mail, or upload to the portal, please include these worksheets. If you don’t return them, we will have to call to get the information. If you come in for an appointment or drop off your tax information, it will be more efficient if the worksheets are completed. The affordable healthcare act requires information for the 2014 tax return. The worksheet provided includes some of that information, but we also need the total household income. That includes income from any dependent listed on your tax return. To try to avoid any mistakes, you may not want to file your dependent tax returns until yours is completed. This guidance is meant to protect you from your children inadvertently costing you in potential health care tax credits. There is a new Form 8962 to calculate the credit, and in our continuing education classes we have learned how difficult it is to calculate the credit and how easy it is to make a mistake and lose the credit. We are estimating this new form will require substantially more preparation time for this year’s return which means we will raising your fee by at least $25. We are sorry about the fee increase but this is one of the costs of compliance with these new requirements. We included information concerning the repairs and capitalization regulations. These apply to all business, farm, and rental expenses. As stated in that information, we are going to rely on how you have reported these expenses to us, when preparing your return. Individuals over age 70 ½ can have funds from their IRA sent directly to a charity ($100,000 maximum). A farmer paying a veterinarian more than $600 in one year, even if the veterinarian is incorporated, must issue the vet a 1099-Misc with the amount paid entered in Box 6 as medical and health care payments. We emailed this letter to many clients this year. Let us know if you would like this letter emailed to you next year. Those of you on the portal, please let us know when you upload something to the portal. If a bank or another 3rd party requires a copy of your tax return, and you would like us to provide that to them, please let us know and we can have you sign the release form required to do so. No release is necessary if we make the requested documents available through our secure online portal. Deductions and Tax Rates  Tax rates, mileage rates, the standard deduction, personal exemption, and depreciation amounts are available on our resources page at www.hetcpa.com/resources.  The business mileage rate for 2014 is 56 cents per mile. Moving & Medical mileage rate is 23½¢ and charitable 14¢.  There is an optional method for the home office deduction. WEBSITE  Gambling losses require a log showing date and type of specific wager. In most cases, those who are gambling are winning more than the amounts shown on the W-2G. If the taxpayer gets the print out from the casino to verify losses, that printout also shows additional winnings that need to be reported. WEBSITE  Contributions less than $250 require either the canceled check or written communication from the donee showing the name of the donee organization, the date, and the amount of the contribution. Contributions in excess of $250 require a receipt from the organization that must include date & amount. Because a recent audit disallowed the deduction, the written document from the donee organization must be dated near the date of the contribution or shortly after year end.  The “kiddie tax” requires children with unearned income in excess of $2,000 to pay tax at their parent’s rate. The tax applies to those under age 18, as well as dependent full time students under age 24.  Section 179 deduction for 2014 is $500,000 with phase out beginning with total purchases of $2,000,000. 50% Bonus depreciation is available for 2014.  Construction & oilfield workers. WEBSITE  Farm, business, and rental schedules have 2 questions that “must” be answered: Is there a 1099 filing requirement? If yes, was it filed? Be sure that you have filed any necessary 1099’s. If you have a student in college and need to have your return completed earlier than usual, please call early to schedule an appointment. Farmers  When prepaying expenses, be sure the invoice shows quantities (i.e. pounds of fertilizer), that there is a legitimate business purpose (price protection, discounts, availability) and that the expenditure doesn’t result in a material distortion of income (quantity should be used in the next year).  Those who are disabled or retired will not be subject to self-employment tax on CRP payments.  Farmers will not be required to file their returns until April 15th if they make one estimate by January 15th.  Farmers can make contributions to charities with commodities. There are specific requirements to be done correctly. Credits  The residential energy credit has been extended through 12/31/14. Solar energy credits, 30% of cost (no maximum) including installation, geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells are still available.  The education credits - Lifetime Learning Credit and the American Opportunity Credit are still available. Employers  If you hire an independent contractor, you will need to prove that individual truly is an independent contractor and not an employee. You must to issue a 1099 to the independent contractors paid more than $600.  There is a requirement to take regular and consistent periodic inventories and adjust the books to agree to actual. Regulations are generally interpreted to mean that an annual physical inventory is required at or near year end.  A recent court case disallowed deductions determining the (farm or business) operation was not engaged in for profit because it was not operated in a business-like manner. They had no business plan, insufficient records and didn’t seek professional advice. If you paid an individual, LLC, partnership, veterinarian (even if incorporated), or attorney (even if incorporated), $600 or more in rent, interest, or labor (not wages) for business purposes, you must issue a Form 1099 by January 31st. If you would like us to prepare any W-2’s or 1099's, please have the information to us by January 15th. If we prepared 1099’s and/or W-2’s for you last year we have included a worksheet with the names, addresses, and ID numbers for the recipients. Please review and let us know of any address or ID number changes. You will still need to notify us with the amounts. IRS     IRS requires tax return preparers to e-file returns. Those of you who prefer not to e-file may have to in the future. We prefer the e-filing as there are more errors with paper filing. If you choose to paper file your return and there is an error we will charge to correct any errors. The IRS has a relief program for an individual or business that has been treating a true employee as a subcontractor. This program saves substantial penalties for voluntarily changing to employee. WEBSITE Recently, the IRS disallowed the business use of a home deduction for a home day care business because the taxpayer was not licensed as a day care facility as required by state law. If you have an account, rental property, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund) please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items. These could include a time share or condo outside the US or Canadian land rental. Email: [email protected], [email protected], [email protected], [email protected] and [email protected]. We are encouraging you to use our web portal for your copy of the tax return. We will put prior year returns on the portal as well. You can then print copies of returns at any time and not have to contact us for additional copies. If you received a flash drive in prior years, please bring it in and we will put 2014 on the same flash drive. If we didn’t include the necessary worksheets with this letter, you are able to print them from our website at www.hetcpa.com/worksheets. Sincerely,