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Posts from the ‘Tax’ Category

Support your local farmer

csaboxMarch 3rd, 2014 is an optional deadline for those that qualify as farmers to file their tax returns, pay the tax due and not be subject to tax penalities.  This special deadline has been in place for many years.  March 3rd should be the unofficial “Thank a Farmer” day in the Valley.  I urge you to search out and buy from a local grower and help him or her in their endeavors in this potentially trying year for farmers.

There are several ways you can support a local grower.  When you are in a supermarket, look for the produce marked with local labels and packing houses in the Valley.  Go more local by searching for nearby Farmers markets.  There are several in Fresno including one held year round on Wednesday morning in front of Kaiser Permanente.  Another year round farmers market is on the corner of Blackstone and Shaw at the Vineyard Farmers Market.

Soon the strawberries will be in season and you’ll be able to find Strawberry stands on various corners in Fresno.  Later on Stone fruit will be in season.

If you want to support your local farmer even more, consider joining a Community Supported Agriculuture, or CSA offering. You can find several farmers that participate in CSA’s by looking online.  You’ll then pay a monthly amount and every week pick up seasonal fruits and vegetables.

You’ll find that in addition to helping a local family, you’ll get fresher fruits and vegetables and find that food prepared with these fresh ingredients tastes better too.

So on March 3rd while those of us here at the office are ensuring we have filed all the farmers’ tax returns timely for the year, eat something grown by a local grower!

Making time for you

daff While Fresno is getting a bit of wet weather today, and the flowers and fruit trees indicate that Spring is right around the corner, for those of us at Tamiyasu, Smith, Horn and Braun, this time of year is “Tax Season”.  That means on Saturdays during this time of year,  you can probably count on us answering phone calls, responding to emails, and meeting with clients wearing jeans and tennis shoes.  If you need to make an appointment and work odd hours, don’t worry, we’ll arrange a time that works best for you.

We can also arrange for a virtual meeting using Skype or GotoMeeting if you can’t be here in person.  Just give us a call at 559-252-8585 and we can arrange our schedules around yours.

How long should I keep that document?

keephowRecently one of our Accountants, Ken Awbrey, shared that he was asked about how long someone should keep documentation.  He listed the following guidelines:

If the items are included in your tax return – either as an item of income or declared as a deduction – keep the documentation for it for 7 years after you have filed the return.  You don’t necessarily need to keep the paper copy, you can keep electronic documentation, but just make sure you have access to it for a period of seven years.   Items in this category include 1099s, W-2’s, documentation for deductions such as Home mortgage interest, property taxes, contributions, DMV fees, etc.  For those that have returns that include businesses, ensure this covers accounting records and receipts for items purchased and depreciated.

If the items  relate to your house or another piece of property that generate capital gain income or losses –  ensure that you keep the item for 7 years AFTER the sale of the property.  Items in this category include the escrow statement when you originally purchased the property or amounts that add to the cost basis and value of the property such as improvements to the asset.

If the items relate to a warranty or purchase – ensure you keep the documentation for the warranty period in question.  For automobiles, ensure you keep documentation of regular maintenance that ensures that the Dealership sees that you are maintaining the car in good working order.  For computers, ensure that you keep the original invoice and even review if the item needs to be registered on the manufacturers’ web site in order to be eligible for future support and warranty coverage.

For everything else – there’s no need to be a paper or information hoarder and keep any other documents unless you really want to do so.   For example —  It’s not necessary to keep receipts for items that you didn’t deduct on your tax return.  Nor is it necessary to keep copies of your tax documents after that seven year window passes.  You can shred these documents once the periods noted above have passed.

For those items that you should have kept and accidentally didn’t,  we often keep these documents for you in our tax files.  So if you’ve accidentally shredded that old escrow statement, don’t panic, give us a call and we may already have it in our permanent files for our future needs.

When you are finally ready to purge old documents, don’t just place them in the trash can, ensure that you shred these documents to ensure that you aren’t subject to possible identity theft from sensitive information on these old documents.  If you don’t have a shredder, the Better Business Bureau often has free shred events, so look for such events in 2014.

The early bird – gets their return filed

fraudtaxBy now you should be receiving various tax forms such as 1099’s and W-2s that we will need copies of in order to file your tax return for 2013. Brokerage houses have until mid February to send you their consolidated statements.

Last year, a few of our clients experienced an issue whereby they went to electronically file their tax return and found that someone had already beat them to it.  As noted in the excellent online blog “KrebsOnSecurity”  written by the former Washington Post columnist Brian Krebs, the IRS is finding that identity thieves are using stolen Social Security numbers to file for fraudulent refunds.   The fraudsters file their returns early on in the tax filing season before the actual taxpayer does.  Then when the actual tax payer goes to file the true return, they find that the electronic filing fails due to a previously filed return.  The actual taxpayer then has to file a paper return and go through the cumbersome process of signing up for a PIN code.  It will also result in a much delayed tax refund as a result.  Bottom line, fraudsters are using any number of means to obtain funds from the credit card attacks showcased by the Target breach, to fraudulent filing of tax returns.

Electronic filing just opened up this week and we urge you to start gathering your tax documents and make an appointment to meet with us to begin your tax preparation for your 2013 tax information.

Highlights for Small Businesses

jbraunxmasThe Seasonal cards stacked up on the file cabinets remind us that we’re almost to the end of 2013. As we close the year out comes tax changes to small businesses.

Here are some of the highlights:

1.  Business expenses

The new tax law extended two major business tax benefits through 2013. Both the Section 179 and bonus depreciation deductions provide immediate tax relief, increasing cash flow and reducing the after-tax costs of investing in new business property. Rather than capitalizing and depreciating the cost of the property over time, the Section 179 deduction allows a small business to immediately write off up to $500,000 of eligible tangible business property, as well as up to $250,000 of qualified real property. The larger deduction applies to most tangible personal business property placed in service during the tax year, including items such as:

• Computers
• Office furniture
• Vehicles and machinery
• Off-the-shelf computer software

Businesses that acquire $2 million or more in new property in a single year will either have a reduced deduction or may not qualify for this benefit. If the entire cost of business property cannot be immediately deducted, the remaining cost may qualify for bonus depreciation. Bonus depreciation provides a deduction of up to 50% of the cost in the first year the asset is placed in service, with any remaining basis subject to regular depreciation rules. Determining how best to maximize these tax benefits depends on individual business circumstances.  Keep in mind that in 2014 this amount drops dramatically down to $25,000.  Contact us for more information.

2.  Start up and organizational expenses

New business owners typically incur a wide range of costs in the launch of their business. Both start-up and organizational costs are eligible to be deducted in the year a business is started. These deductions promote entrepreneurship and make additional capital available to business owners since they reduce your net taxes owed. Start-up costs include expenses incurred when investigating whether to start or buy a business, market analysis and feasibility studies, advertising, consultant fees, attorney fees and accountant fees paid prior to the start or purchase of the business. The tax law allows business owners to deduct a portion of these costs in the year the business starts ($10,000 in 2013), as well as a portion over time (typically over 180 months). Organizational costs (which are different from start-up costs) are incurred in the setup of a C or S corporation or a partnership and can be deducted under the same rules as business start-up costs.

3.  New Health Care Law requirements

The Patient Protection and Affordable Care Act of 2010 requires “large” employers to offer health insurance to their employees or be subject to a financial penalty. While the penalty provisions don’t apply until 2015, business owners may need to begin planning now in order to avoid the penalties. The law’s definition of a large employer is a business that employs at least 50 full-time equivalent employees during the preceding calendar year (2014). You may be surprised to learn that full-time employees are individuals who work at least 30 hours per week.

Key Fact: In addition, in determining whether an employer has met the 50-employee threshold, part-time workers must be counted, as well as employees who work for related entities.

4.  Choice of Entity – what should you be?

When setting up a new business, choosing the right entity that meets your business and tax needs is crucial to minimizing your taxes and efficiently running your business. Tax issues such as double taxation and differences between the corporate and individual income tax rates have made various flow-through entities (sole proprietorships, partnerships, LLCs and S corporations) very popular with most small business owners. However, the new 39.6% individual tax bracket and 3.8% Medicare surtax on high-income earners could significantly erode a pass-through’s tax benefits. Changing organizational form requires consideration of both tax and non-tax issues and has many potential tax traps that must be managed. Factors to consider include legal liability issues for business owners, the ability of a company to distribute profits to owners in a tax advantaged manner (salaries, rents, interest and dividends), self-employment taxes and payroll taxes.

5.  Saving for retirement

Saving for retirement is a key consideration for many small business owners and self-employed individuals. Common options for small business owners include: IRA-based plans such as Savings Incentive Match for Employees (SIMPLE) and Simplified Employee Pension (SEP) plans, as well as profit-sharing plans and a variety of 401(k) plans. Key Fact: SEP IRAs can even be set up after year’s end, as late as the due date (including extensions) of your business income tax return for 2013. With traditional plans, employers get a tax deduction for contributions, and employees may be allowed to make pre-tax contributions and defer taxes on income until distribution. In Roth plans, employees do not get tax deductions for contributions, but qualified distributions and withdrawals are tax-free. In addition, assets held in qualified plans generally are protected from creditors of both employees and employers. However, these plans are heavily regulated and include different contribution limits and matching requirements. While Congress provides many tax incentives for retirement saving, understanding the options and determining the most appropriate retirement plan for your business can be overwhelming.  Ask us for help.

6.  Built in gains and small business stock

The new tax law extended the 100% exclusion for gains on qualified small business stock to stock purchased before Jan. 1, 2014. However, the stock must be held for more than five years. If you purchased small business stock after Sept. 27, 2010, and before Jan. 1, 2014, and are contemplating disposing of the stock, talk to us first to see if you qualify for the exclusion. If you previously converted from a C corporation to an S corp and now have disposed of property, give us a call to ensure you qualify for the reduced recognition built-in gains.

7.  3.8% tax on net investment income

The new 3.8% tax on net investment income is in effect for the 2013 tax year. This tax applies to high-income individuals with net investment income whose modified adjusted gross income exceeds certain threshold amounts ($250,000 for married couple filing joint returns and $200,000 for single taxpayers). Net investment income may include income such as interest, dividends, rents and passive income that the business owner receives from a partnership, S corporation or other pass-through entity. Planning payments and distributions to owners of small businesses is critical in order to minimize this tax. In addition, selling your business may result in net investment income subject to the tax.

8.  New tax rules for buying or improving property

The IRS issued final regulations in September 2013 that clarifies when business owners can deduct the cost of acquiring, producing or repairing tangible property. For example, the costs of resurfacing a floor to keep the property in good condition would likely be deducted immediately, whereas the addition of a security system may need to be capitalized. Almost all businesses will be affected by the new regulations. The good news is that taxpayers may deduct any single item whose cost does not exceed $500 per invoice or item. For taxpayers who file financial statements with the Securities Exchange Commission or state or federal agencies or have audited financial statements, the regulations allow any item up to $5,000 to be deducted if they have written expensing thresholds in place. While it is possible to file 2013 returns under this provision, a taxpayer must have had written procedures in place at the beginning of 2014. Under another new rule, small business taxpayers may elect to expense improvements if the total amount paid for repairs, maintenance and improvements does not exceed the lower of $10,000 or 2% of the adjusted basis of the building. While the regulations apply to tax years beginning in 2014, taxpayers may choose to follow selected provisions on their 2013 tax returns.  We’ve included a downloadable copy of the accounting policy you can adopt on this blog post.

9.  Home office deduction

Home office expenses generally are deductible if part of a business owner’s personal residence is used regularly and exclusively as either the principal place of business or as a place to meet with patients, customers or clients. The IRS recently provided an optional safe-harbor method that makes it easier to determine the amount of deductible home office expenses. Starting in tax year 2013, the new rules allow taxpayers to deduct $5 per square foot of home office space (up to 300 square feet).

As we close the 2013 year we wish you the happiest of holidays and a wonderful new year!

New tax laws for Individuals

KenChrismasAll of us here at Tamiyasu, Smith, Horn & Braun are getting ready for 2014.  One of our shareholders, Ken Awbrey, is in the Christmas spirit this year with his festive Christmas tie. He’s recently been attending several end of year tax seminars to get ready for tax season and wanted to remind all of our clients of some new taxes you might see in 2014:

1.  New Tax rates on ordinary income and capital gains.

The new tax law increased the highest income tax rate to 39.6% for single individuals with taxable income of $400,000 or higher and married couples with taxable income exceeding $450,000. Taxpayers subject to the new 39.6% rate also will see an increase in their tax rate on dividend income and long-term capital gains from 15% to 20%. Taxpayers with taxable incomes below the top 15% ordinary income tax bracket will continue to enjoy a zero percent rate on dividends and long-term capital gains with other taxpayers paying a 15% rate. The marriage penalty for taxpayers in the 15% tax bracket has also been eliminated.

2.  New 3.8% tax on net investment income.

The new 3.8% tax on net investment income went into effect in 2013 as a result of the passage of the Patient Protection and Affordable Care Act of 2010. The 3.8% tax applies to individuals with net investment income if their income (after certain deductions) exceeds $250,000 for married couples filing joint returns or $200,000 for single taxpayers. Net investment income may include capital gains, interest and dividend income received from investment assets such as stocks, bonds, certificates of deposit and mutual funds and may include rental income and royalties. Contact us at 559-252-8585 for more details.

3.  Alternative Minimum Tax

The Alternative Minimum Tax (AMT) was designed to ensure that high-income taxpayers who benefit from certain exemptions, deductions and credits still pay a minimum amount of tax. Over time, the AMT affected more and more middle-income individuals as well.  When the AMT is triggered, the taxpayer pays a higher tax than their regular federal income tax.  The new tax law increased the AMT exemption to $51,900 for single taxpayers and heads of household and $80,800 for surviving spouses and married couples filing jointly. These amounts will be indexed for inflation after 2013. These changes should help ensure that middle-income taxpayers are not routinely subject to this tax. However, the new tax law did not increase the income levels at which those exemptions phase out. Accordingly, taxpayers may find themselves unexpectedly subject to the AMT in certain situations — for example, when they recognize large capital gains (even though the capital gains income itself is not subject to the AMT or exercise certain stock options).  The good news? Taxpayers who have been subject to AMT in the past but find themselves not owing AMT in 2013 may be eligible for a minimum tax credit.

4. New rules for higher income taxpayers

The new tax law revives both the phase out of personal exemptions and the limitation on itemized deduction for high-income taxpayers. Under the phase out of personal exemptions, the total amount of personal exemptions for taxpayers and dependents is reduced if the taxpayer’s adjusted gross income is more than $300,000 for married couples and $250,000 for single taxpayers. In a similar fashion, certain itemized deductions of high-income taxpayers are reduced if their adjusted gross income exceeds certain thresholds.

5.  Tax benefits for families, homeowners

The new tax law extended many credits and other benefits that otherwise were scheduled to expire after 2012. Child-related tax credits and benefits that were extended include:

• The $1,000 child tax credit
• The tax credit for qualified adoption expenses ($12,970 in 2013)
• The exclusion for qualified adoption-assistance programs offered by employers

The child and dependent care credit, which applies to care for children age 12 or younger and certain individuals (e.g., a spouse) who are physically or mentally incapable of self-care, was made permanent. For homeowners, the law extends the provision to shield taxpayers from tax on income from the cancellation of debt of up to $2 million on a principal residence. Individuals who made qualified energy-saving improvements (such as high-efficiency furnaces and air conditioners) to their home in 2013 will be glad to know related tax credits are still available.  Be aware that provisions like the energy credits and the exclusion for debt forgiveness income are not in the law for next year.

6.  Tax help for higher education costs

The new tax law extended several education-related incentives for taxpayers who are in college or have children in college. The American Opportunity Tax Credit was extended through 2017 and allows eligible taxpayers to claim a tax credit for post-secondary education expenses such as books or equipment. The Lifetime Learning Credit remains available as does the deduction for tuition and related higher education expenses.

Other education incentives that will be permanently available are:

• The $5,250 exclusion for employer-provided educational assistance
• The $2,500 deduction per return for student loan interest (without a 5-year limitation)
• The $2,000 maximum contribution for education savings accounts, which allow expenditures for elementary, secondary and post-secondary education

Planning for college is critical as tuition costs continue to rise.  Ken knows all too well about this, he has two children that are completing their college education.

7.  Donations and other expenses – what can you deduct?

Charity: Charitable contributions may provide generous tax benefits for taxpayers. However, the law requires significant documentation in order to claim those benefits, especially in the case of donated property. Deductible contributions are subject to limits based on:

• The type of property donated
• The type of charity
• Taxpayer’s adjusted gross income

The new tax law reinstated the popular provision allowing taxpayers age 70½ and older to make up to $100,000 of tax-free distributions from individual retirement accounts (IRAs) directly to qualified charities.

Sales Taxes & Mortgage Insurance Premiums: The law also extended a number of popular tax breaks, including the deduction for state and local sales taxes in lieu of a deduction for state and local income taxes. This provision is particularly important for taxpayers living in states without income taxes and for retirees who may not pay significant state income taxes. The law also extends the treatment of mortgage insurance premiums as interest expense.

Medical: As in past years, taxpayers who itemize their deductions can write off qualified medical costs not covered by insurance. However, for taxpayers under age 65, the costs must exceed 10% of adjusted gross income in 2013, up from 7.5% in previous years. Once the threshold is passed, there is no dollar limit on the deduction amount.

8.  Estate and gift tax

The good news is that Congress made several estate and gift tax provisions permanent. For decedents dying in 2013, the estate tax exclusion (the amount that a decedent can leave to heirs without owing estate tax) permanently increased to $5 million and will be indexed for inflation. The exclusion is $5.25 million for 2013 deaths. Among the taxpayer-friendly provisions, Congress made permanent the portability of a deceased spouse’s unused exclusion to a surviving spouse. However, it also increased the estate tax rate to 40%. Effective estate tax planning must include a consideration of income tax as well as estate and gift tax consequences and must start before a taxpayer’s death.

9.  Reporting of foreign bank and financial assets

If you own a bank account or other financial assets located in a foreign country, you may have a responsibility under the Foreign Account Tax Compliance Act (FATCA) or the Bank Secrecy Act to disclose your ownership to the IRS. In recent years, government enforcement of these requirements has increased significantly. Failure to report foreign financial assets may result in substantial penalties starting at $10,000.  As part of our engagement letter, we’ll be asking you to sign whether or not you have such an account.  Look for mailed communication on this question early in 2014.

Last but not least, as we hear about a major online credit card breach in the news, tax-related identify theft is on the rise. In addition to other fraudulent activities, criminals are using stolen Social Security numbers and other information to file fake returns requesting fraudulent tax refunds. While the IRS is taking aggressive steps to combat the problem, the best defense is to safeguard your personal information at all times.  Never give out your Social Security Number over the phone. 

We wish you the happiest of holiday seasons this year.

Businesses – new rules

yearendRecently, the Internal Revenue Service issued final tangible property capitalization regulations. These regulations provide clarity to a complex area of tax law for business taxpayers who acquire tangible property or who own tangible property which they improve, maintain or repair. The final regulations address the proper characterization and tax treatment of expenditures related to these acquisitions, improvement, maintenance and repair activities.


Generally, under IRC Section 263(a), amounts paid to acquire, produce or improve tangible property must be capitalized. However, taxpayers are permitted to deduct ordinary and necessary business expenses, including the costs of certain supplies, repairs and maintenance under IRC § 162(a). It is often difficult to distinguish (1) between assets that must be capitalized and property that is a material or supply, and (2) between improvement costs and repair or maintenance costs. The finalized regulations attempt to clarify when such payments may be deducted and when they must be capitalized.

De Minimis Safe Harbor Election

A key provision in the final regulations is a revised safe harbor election that permits a deduction for de minimis amounts paid for tangible property. Under the safe harbor election, a taxpayer may elect to not capitalize (in other words, to currently deduct) specified amounts paid in the tax year to acquire or produce tangible property, provided the amounts don’t exceed applicable thresholds. The amount of the threshold depends on whether the taxpayer has written accounting procedures in place and, if so, whether the taxpayer has certain type of financial statement, normally one only done by larger enterprises and not normally prepared by small businesses.

Small businesses with written accounting policies

A small business with a written accounting policy in place calling for (1) expensing amounts paid for property less than a specified amount and/or (2) expensing payments for property with an economic life of 12 months or less, may rely on the de minimis safe harbor as long as the costs do not exceed $500 per item.

Taxpayers without either a certain Financial Statement or Written Accounting Procedures

 The final regulations increase the ceiling for characterizing tangible property as materials or supplies to $200 (formerly $100). Thus, taxpayers who do not have an applicable financial statement or written accounting procedures in place as of the beginning of the tax year may still deduct expenditures for tangible property costing $200 or less. Most small businesses fall into this category.

Making the Election

In order to use the safe harbor, businesses must have accounting procedures in place on the first day of the tax year. The accounting procedures must treat as an expense amounts paid for property that cost less than a specified dollar amount or have an economic useful life of 12 months or less. Failure to timely establish written accounting procedures may result in having to capitalize amounts that might otherwise have been expensed. In addition, the taxpayer’s timely filed original tax return must include an annual election to expense items addressed by the safe harbor provision. The annual election is irrevocable and generally applies to all tangible property including materials and supplies purchased during the tax year.  We will prepare the election on the tax return for you but need you to take action to adopt an accounting policy as of 12/31/2013.

We’ve included a downloadable copy on this web site: .  Sign the included document and place the information in your permanent firm information.  For more information and clarification of the new rules, please contact us at 559-252-8585. 


Out with the old year, in with the new year

Most people consider the end of the year to be the one in December at the end of the year. But not an Accountant. Take Ken Awbrey of our office.










He considers October 15th to be the end of the tax year and the beginning of the new one.  It’s the final date for the extended tax deadline.  And then it’s the time of the year we start asking our clients about tax planning ideas for 2013.

So Happy new TAX year to everyone!

And we’ll be contacting you to ask you about your tax planning this year.

Thinking of selling your house?

kenofficeWith the housing marketing starting to revive in California, we’re seeing an increase in people asking about house sales and whether or not they would incur a gain if they sell a house. In this quarter’s newsletter sent to our clients this issue is raised. In our Quarterly tax newsletter, the answer is discussed and unfortunately it’s a “it depends”.

If you used part of your house for business, you may end up with a small gain on the portion of home used in business. Concerned? We can determine ways to minimize the tax.

Contact one of our CPAs such as Ken Awbrey at 559-252-8585 and will walk you through your options.

Merry Christmas!

It’s almost hard to believe that here we are again near the end of December and the Holiday Season is upon us. That also means that the Income Tax Season isn’t far behind. During this Holiday Season, we’d like to take this opportunity to say, “Thanks for letting us serve as your accountants”. All of us in this office have certainly enjoyed working with you during the past year.

Our office is now preparing for the tax filing season which begins January of 2012. We would like to remind you that our job will be made easier, more efficient and especially less costly for you, if your income tax records are submitted to us in an organized fashion. To help you achieve that task we can send you a 2011 summary checklist. If you would prefer, we can also provide you with a pre-printed organizer that lists your 2010 tax information and provides space to place your 2011 information. To request, please send an email to with “Organizer” in the subject line.

It is not too late to do some tax planning for 2011. If you have not been in to talk with us about tax planning this year and you feel that you should, please contact us at your earliest convenience so that we can schedule an appointment as early as possible.

All of us here at Tamiyasu, Smith, Horn and Braun would like to wish you a happy and joyous holiday season.