GRACE & ASSOCIATES, P. C.

29 LENOX POINTE, N.E. ATLANTA, GEORGIA 30324-3172

MEMBERS TELEPHONE: (404) 364-9000

AMERICAN INSTITUTE OF FAX: (404) 364-9111

CERTIFIED PUBLIC ACCOUNTANTS GEORGIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

TAX NEWSLETTER – JANUARY 2015

TABLE OF CONTENTS

General

1.

FICA and self-employment taxes

2.

Personal exemption

3.

Social security cost of living increase

4.

Standard deduction

5.

Maximum earnings without losing social security benefits

6.

Federal income tax rates – 2014 and 2015

7.

Capital gains and qualified dividends

8.

.9% and 3.8% Medicare taxes

9.

Alternative minimum tax rates

10.

Children’s earnings

11.

Long-term care insurance

12.

Estimated tax payments

13.

Estate, gift and generation skipping tax

14.

Gift tax exclusion

15.

Phase-outs

16.

Retirement plan and IRA limits

17.

IRS interest rates on underpayments of tax

18.

Eligibility for making traditional (not ROTH) IRA contributions

19.

ROTH IRA’s

20.

Nanny tax

21.

Georgia 529 college savings plan

22.

Uniform lifetime table

23.

Report of foreign bank and financial accounts (FBAR)

24.

Foreign financial asset reporting

25.

Medicare premiums for 2015

26.

Georgia retirement exclusion

27.

Charitable contributions

28.

Medical expense deductions

29.

Georgia movie credits and conservation easements

30. One per year limit on IRA Rollovers

Information that pertains primarily to the operation of a business

32. Section 179 deduction, bonus depreciation and software expensing

33. Standard mileage rates

34. Automobile depreciation

35. Form 1099 and Form W-2 reminders

36. Backup withholding

37. Federal unemployment taxes

38. State unemployment taxes

39. Georgia withholding deposit rules

40. Federal payroll tax deposit requirements

41. Cash payments of $10,000 or more

42. Credit card charges

43. Business personal property tax returns/business licenses

44. New optional rules for home office expense

1. FICA AND SELF-EMPLOYMENT TAXES

2014 2015

For 2014 and 2015, Social security wage base maximum taxed at 6.2% for both

employers and employees $117,000.00 $118,500.00 Medicare wage base maximum taxed at 1.45% for both employers and employees No limit No limit For example:

2014 2015 Amount of wages $117,000.00 $118,500.00 Employees social security at 6.2% 7,254.00 7,347.00 Employees Medicare at 1.45% 1,696.50** 1,718.25** Total on 7.65% of wages 8,950.50 9,065.25 Employers social security at 6.2% 7,254.00 7,347.00 Employers Medicare at 1.45% 1,696.50** 1,718.25**

Total tax $ 17,901.00 $ 18,130.50

In addition to Medicare taxes detailed above, also see Item 8 below that addresses .9% and 3.8% Medicare taxes that are mandated by the 2010 Affordable Care Act.

** For wages in excess of the FICA wage maximum, the employee and employer share of Medicare tax is each 1.45% (total of 2.9%) on an unlimited amount of wages.

Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to Social Security, Medicare or federal unemployment (FUTA) taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. However, the wages for the services of a child are subject to Social Security, Medicare, and FUTA taxes if the child works for a corporation, even if controlled by the child’s parent.

Generally the wages for the services of an individual who works for his or her spouse in a trade or business are subject to Social Security and Medicare taxes, but not to FUTA tax. Similar rules apply to wages for services of a parent employed by his or her child.

2014 2015

2. PERSONAL EXEMPTION $3,950 $4,000

3. SOCIAL SECURITY COST OF LIVING INCREASE 1.5% 1.7%

4. STANDARD DEDUCTION

Married filing jointly $12,400 $12,600

Head of household 9,100 9,250

Single 6,200 6,300

Married filing separately 6,200 6,300

Additional deduction if age 65 or blind

Single 1,550 1,550

Married 1,200 1,250

The standard deduction that may be taken by someone who is claimed as a dependent on another taxpayer's return in 2014 may not exceed the greater of $1,000 or the sum of $350 and the amount of his or her "earned" income up to $6,200 ($350 plus earned income of $5,850 equals $6,200). For 2015 it may not exceed the greater of $1,050 or the sum of $350 and the amount of his or her “earned” income up to $6,300.

5. MAXIMUM EARNINGS WITHOUT LOSING SOCIAL SECURITY BENEFITS

2014 2015 Benefits Lost

Under normal retirement age (NRA) $15,480 $15,720 $1 for each $2 over threshold

NRA and over $41,400 $41,880 $1 for each $3 over threshold

If normal retirement age will be reached in 2015, $1 of benefits will be withheld for every $3 of earnings over $41,880, but the reduction applies only for months prior to attaining normal retirement age. There is no reduction for earnings starting with the month in which normal retirement age is reached (65 and 10 months for those born in 1942 and 66 for retirees born between 1943-1954, for example). Maximum social security benefits in 2014 and 2015 are $2,642/month and $2,663/month. For more answers to your social security questions go to www.socialsecurity.gov.

6. FEDERAL INCOME TAX RATES – 2014 AND 2015

2014 Tax Rate Married Filing Jointly Single Head of Household Married Filing

Separately Estates & Trusts 10% $ 0 – 18,150 $ 0 – 9,075 $ 0 – 12,950 $ 0 – 9,075 – 15% $ 18,151 – 73,800 $ 9,076 – 36,900 $ 12,951 – 49,400 $ 9,076 – 36,900 $ 0 – 2,500 25% $ 73,801 – 148,850 $ 36,901 – 89,350 $ 49,401 – 127,550 $ 36,901 – 74,425 $2,501 – 5,800 28% $148,851 – 226,850 $ 89,351 – 186,350 $127,551 – 206,600 $ 74,426 – 113,425 $5,801 – 8,900 33% $226,851 – 405,100 $186,351 – 405,000 $206,601 - 405,100 $113,426 – 202,550 $8,901 – 12,150 35% $405,100 – 457,600 $405,101 – 406,750 $405,101 – 432,200 $202,551 – 228,800 - 39.6% Over $457,600 Over $406,750 Over $432,200 Over $228,800 Over $12,150

2015 Tax Rate Married Filing Jointly Single Head of Household Married Filing

Separately Estates & Trusts 10% $ 0 – 18,450 $ 0 – 9,225 $ 0 – 13,150 $ 0 – 9,225 – 15% $ 18,451 – 74,900 $ 9,226 – 37,450 $ 13,151– 50,200 $ 9,226 – 37,450 $ 0 – 2,500 25% $ 74,901 – 151,200 $ 37,451 – 90,750 $ 50,201 – 129,600 $ 37,451 – 75,600 $2,501 – 5,900 28% $151,201 – 230,450 $ 90,751 – 189,300 $129,601 – 209,850 $ 75,601 – 115,225 $5,901 – 9,050 33% $230,451 – 411,500 $189,301 – 411,500 $209,851 – 411,500 $115,226 – 205,750 $9,051 – 12,300 35% $411,501 – 464,850 $411,501 – 413,200 $411,501 – 439,000 $205,751 – 232,425 – 39.60% Over $464,850 Over $413,200 Over $439,000 Over $232,425 Over $12,300

CORPORATE TAX RATES - 2014 AND 2015

of the

% on Amount

Taxable Income Pay + Excess Over

Up to $50,000 $ 0 15% $ 0 $50,001-$75,000 7,500 25% 50,000 $75,001-$100,000 13,750 34% 75,000 $100,001-$335,000 22,250 39%* 100,000 $335,001-$10 million 113,900 34% 335,000 $10 million-$15 million 3,400,000 35%** 10,000,000 $15 million-$18,333,333 5,150,000 38%*** 15,000,000 Over $18,333,333 0 35% 0 * Includes additional 5% "recapture" tax under 1986 law.

** Personal service corporations pay a flat rate of 35%. *** Includes additional 3% "recapture" tax under 1993 law. 7. CAPITAL GAINS AND QUALIFIED DIVIDENDS

Tax rates on capital gains and “qualified” dividends (those from a domestic corporation or a qualified foreign corporation) increased in 2013 but only for higher income taxpayers. Taxpayers earning less than $200,000 (single filers) or $250,000 (married filers) will not be taxed any differently than in 2012, but those earning over these limits will pay more. Here is a 2014 rate summary:

Single Taxpayer Married Filing Jointly

Capital Gain and Qualified Dividend Tax Rate Section 1411 Medicare Surtax Combined Tax Rate $ 0 – 36,900 $ 0 – 73,800 0% 0% 0% $ 36,901 – 200,000 $ 73,801 – 250,000 15% 0% 15% $200,001 – 400,000 $ 250,001 – 450,000 15% 3.8% 18.8% Over $400,000 Over $450,000 20% 3.8% 23.8%

Beginning in 2013, long term capital gains and qualified dividends are taxed to those in the highest tax bracket ($400,000 and over for single taxpayers and $450,000 and over for married taxpayers) at 20% rather than 15%. For example, to the extent long-term capital gains of a single individual cause his or her taxable income to exceed $400,000, the capital gains will be taxed at 20%. The maximum rates of 28% on the sale of collectibles and 25% on the gain attributable to depreciation taken on depreciable realty were not changed and continue to apply for 2013 and subsequent years. For long-term capital gains and/or qualified dividends that would otherwise be taxed in the top tax bracket of a trust or estate (i.e., for 2013, where taxable income exceeds $11,950), new legislation permanently increases the rate to 20%.

The retention of the zero percent rate for long-term capital gains and qualified dividends is particularly important to lower-income retireees who rely largely on investment portfolios that generate dividends and long-term capital gains. Furthermore, gifts of appreciated securities to lower-income donees who then sell the securities could reduce the tax on all or part of the gain from 15% or 20% to zero percent. Note however that if the donee is subject to the so-called kiddie tax, this planning technique will generally not work. Moreover, if you sell capital gain property using seller financing, you generally recognize gain in the years you receive payments on the installment note. Thus, spreading the capital gain over multiple years by taking an installment note upon the sale may allow you to keep your taxable income below the top tax bracket causing your capital gain to be taxed at a maximum rate of 15% (or possibly 0%), rather than 20%.

Also, see the next section explaining the 3.8% medicare tax that can have the effect of increasing taxes on capital gains. 8. .9% AND 3.8% MEDICARE TAXES

Starting in 2013, the Affordable Care Act enacted in 2010 imposed an additional Medicare tax of .9% on the wages and self-employment income of higher-income individuals, as well as a 3.8% Medicare tax on their net investment income. These taxes are in addition to the tax rate increases enacted in January 2013 that also began in 2013. Thus, beginning in 2013, the Federal tax rates for individuals taxed in the highest income tax brackets who are also subject to these new Medicare taxes could be as high as: 40.5% (39.6% plus .9%) for wages and self-employment income; 23.8% (20% plus 3.8%) for long-term capital gains and dividend income; and 43.4% (39.6% plus 3.8%) for interest income. The following highlights how these new Medicare taxes operate: .9% Medicare tax on earned income of higher-income individuals

Payroll taxes imposed on your W-2 earnings include both a social security tax and a separate Medicare tax. Prior to 2013, the overall Medicare tax rate was 2.9% (1.45% imposed on the employee and an additional 1.45% imposed on the employer). If you are self-employed, you must pay the entire 2.9% Medicare tax on your income from self-employment. Generally, effective for wages and self-employed earnings received in 2012 and later that exceed certain thresholds, the 2010 Affordable Care Act imposes an additional .9% Medicare tax on individuals with higher W-2 wages and self-employed income. This .9% Medicare tax applies to the amount by which the sum of your W-2 wages and your self-employed earnings exceeds the following thresholds: $250,000 if you are married filing jointly; $200,000 if you are single, or $125,000 if you are married filing separately. For married individuals filing a joint return, the .9% Medicare tax will apply to the extent the sum of both spouses' W-2 earnings and the self-employed earnings exceeds the $250,000 threshold. These thresholds are not indexed for inflation and you are not allowed an "income" tax deduction for any portion of the .9% tax, whether or not you are self-employed.

Employers are required to withhold the .9% Medicare tax on W-2 earnings in excess of $200,000, but there is no employer match of the .9% tax. An employer is required to withhold the .9% Medicare tax once the employer pays an employee more than $200,000 whether the employee is single or married and without regard to the employee's spouse's earnings. Wages are subject to

the .9% Medicare tax if the wages are otherwise subject to Medicare taxes generally. For example, elective deferrals under a 401(k) plan are subject to Medicare tax generally and, therefore, are subject to the .9% Medicare tax--provided the employee's earned income exceeds the .9% Medicare tax earned-income threshold. Amounts deferred in a non-qualified deferred compensation arrangement are subject to the .9% Medicare tax when taken into account as wages for FICA purposes. Individuals are required to report their .9% Medicare tax on Form 1040 and must also pay the .9% Medicare tax with their Form 1040 to the extent it was not paid through employer withholding or estimated tax payments.

3.8% Medicare tax on "net investment income" of higher-income individuals

The 2010 Affordable Care Act imposes a 3.8% Medicare tax on the net investment income of higher-income taxpayers. With limited exceptions, "net investment income" generally includes the following types of income (less applicable expenses): interest, dividends, annuities, royalties, rents, "passive" income, long-term and short-term capital gains and income from the business of trading in financial securities and commodities. Income, including "passive" income, is not "net investment income" if the income is "self-employment income" subject to the 2.9% Medicare tax. The 3.8% Medicare tax applies to individuals with modified adjusted gross income exceeding the following "thresholds" (which are not indexed for future inflation): $250,000 if married filing jointly; $200,000 if single; and $125,000 if married filing separately. The 3.8% Medicare tax is imposed upon the lesser of an individual's 1) modified adjusted gross income in excess of the threshold, or 2) net investment income. Moreover, trusts and estates that have net investment income and adjusted gross income in excess of a certain "threshold" (for 2014, the threshold is $12,150) must pay the 3.8% Medicare tax, unless the income is timely distributed to beneficiaries.

The following types of income are exempt from the 3.8% Medicare tax: municipal bond interest, gain on the sale of a principal residence otherwise excluded under the home-sale exclusion rules and life insurance proceeds. Also, the 3.8% Medicare tax does not apply to distributions from qualified retirement plans, whether or not the distributions are otherwise taxable.

In certain situations, rules for determining whether you have net investment income subject to the 3.8% Medicare tax can be complicated. For instance, net investment income generally includes net income that you report from a business activity if you are a "passive" owner. You will be deemed a "passive" owner if you do not "materially participate" in the business as determined under the traditional "passive activity loss" rules. For example, under the passive activity loss rules, you may be deemed to be a "passive" owner unless you spend more than 500 hours working in the business during the year. Furthermore, subject to limited exceptions (e.g., real estate professionals), rental income is generally deemed to be "passive" income regardless of how many hours you spend working in the rental activity.

9. ALTERNATIVE MINIMUM TAX RATES

The 0%, 15%, and 20% tax rates on long-term capital gains and qualified dividends for regular income tax purposes also apply in calculating the AMT.

The AMT exemption amounts for 2014 and 2015 are $52,800 and $53,600 for individuals and $82,100 and $83,400 for married couples filing jointly. The AMT exemption for children subject to the kiddie tax is $7,250 in 2014 nd $7,400 in 2015. 10. CHILDREN'S EARNINGS

Children subject to “Kiddie Tax” who do not have earned income from jobs can earn up to $2,000 in 2014 and $2,100 in 2015 without being taxed at the parents' federal tax rates.

11. LONG–TERM CARE INSURANCE

Premiums paid for a qualified long-term care insurance contract are a deductible medical expense, but the deductible amount of the premium is limited by the age of the individual at the close of the tax year. The maximum deductible amounts (per person) for 2014 and 2015 are as follows:

2014 2015

Age 40 and younger $ 370 $ 380

Age 41 – 50 700 710

Age 51 – 60 1,400 1,430

Age 61 – 70 3,720 3,800

Age 71 and older 4,660 4,750

12. ESTIMATED TAX PAYMENTS

for married individuals filing separately) are generally required to pay at least 100% of the prior year tax liability or 90% of their current year tax liability via withholding and/or estimated taxes.

An individual with adjusted gross income in excess of $150,000 ($75,000 for a married individual filing separately) in 2014 and thereafter can generally avoid the estimated tax penalty by paying 110% of the amount of tax shown on the prior year’s tax return. For State of Georgia purposes, underpayment penalties can be avoided by paying 100% of the prior year tax or 70% of the current year tax. Beware, however, that if your prior year Georgia return shows no liability you cannot use the prior year criteria to avoid penalties for underpaying State of Georgia taxes. This penalty for underpaying Georgia is 12% per annum and the amount is not tax-deductible.

13. ESTATE, GIFT AND GENERATION SKIPPING TAX

The American Tax Relief Act of 2012 (ATRA), enacted in January 2013,extended the inflation-adjusted $5 million lifetime estate and gift tax exclusion amount permanently. That inflation-adjusted amount is $5.34 million in 2014 and $5.43 million in 2015. The estate and gift tax rate is 40%.

• ATRA Permanently Unifies The Gift And Estate Tax “Exclusion Amount.” For several years before 2011, the gift tax exclusion amount for aggregate lifetime gifts was set at $1 million, while the estate tax exclusion amount was higher (e.g., $5 million for decedents dying in 2010). ATRA makes the single unified gift and estate exclusion amount permanent. As a result, the exclusion amount is $5.34 million in 2014 and $5.43 million in 2015.

• “Portability” of Deceased Spouse’s Unused Exclusion Amount. Historically, each spouse’s estate has been entitled to a full estate tax exclusion amount. Traditionally, technical estate tax planning structures and strategies (e.g. credit shelter trusts) were often necessary to ensure that the estate tax exclusion amount of the first spouse to die was not partially or completely wasted. A personal representative of an estate of the first spouse to die can now “elect” (by timely filing a completed estate tax return) to transfer the deceased spouse’s unused portion of the estate tax exclusion amount to the surviving spouse.

•• Example. Assume that Husband dies in 2014 when the maximum exclusion amount is $5.34 million, but Husband’s taxable estate is only $3.34 million. Under this portability rule, the personal representative for Husband’s estate is allowed to elect to have Husband’s unused $2 million exclusion amount added to the surviving Wife’s unused $5.34 million exclusion amount.Wife could then use her $7.34 million exclusion amount to shelter her lifetime gifts from gift taxes. And, to the extent not used to shelter gifts from the gift tax, any remaining exclusion amount could be used to shelter amounts in her estate from estate taxes.

•• To make the “portability” election, IRS says that the deceased spouse’s estate must timely file a properly-completed estate tax return. An estate tax return generally must be filed within 9 months of a decedent’s death, unless the estate timely obtains a 6-month filing extension. If you need additional information regarding the technical requirements for making this portability election, or the advisability of making this election, please call our firm.

• Generation-Skipping Tax. In addition to the estate and gift taxes, there is also a generation-skipping tax (GST) imposed on transfers that skip a generation (e.g., gifts to grandchildren). ATRA permanently sets the GST exemption amount at an inflation-adjusted amount of $5 million ($5.34 million for 2014 and $5.43 million for 2015) and the maximum GST rate at 40%. Unlike the estate and gift tax exclusion amount discussed above, the GST exemption amount is not portable between spouses. During 2014 Georgia permanently repealed the estate tax for state tax purposes

14. GIFT TAX EXCLUSION

The gift tax exclusion is $14,000 for 2014 and 2015.

15. PHASE-OUTS

Itemized deductions (other than medical expenses, investment interest, gambling losses, casualty losses, and theft losses) are generally reduced by 3% of adjusted gross income (up to 80%) in excess of the following 2014 (adjusted annually for inflation) thresholds:

 $305,050 for joint filers;  $254,200 for single filers;

 $279,650 for head of household filers; and  $152,525 for married individuals filing separately.

Note that the phase out is a function of adjusted gross income, and is not dependent on the amount of itemized deductions. Personal Exemption Phase-Outs

In 2014 personal exemptions will be phased out when adjusted gross income falls in the following ranges: Personal exemption AGI Phase Out Ranges for 2014:

AGI

From To

Joint Returns $305,050 $427,550

Singles $254,200 $376,700

Heads of Household $279,650 $402,150

Married Filing Separately $152,525 $275,025

Each personal exemption claimed will be reduced by 2% for each $2,500 (or part of $2,500) of AGI in excess of the thresholds. These thresholds are adjusted for inflation.

16. RETIREMENT PLAN AND IRA LIMITS

2014 2015

Maximum IRA and Roth IRA Contribution (See 18 and 19 below):

Under age 50 $5,500 $5,500

Age 50 or older 6,500 6,500

Maximum deferred compensation contribution to 401(k) and 403(b) plans:

Under age 50 $17,500 $18,000

Age 50 or older 23,000 24,000

Maximum SIMPLE IRA contribution:

Under age 50 12,000 12,500

Age 50 or older 14,500 15,500

Maximum earnings used to determine retirement benefits 260,000 265,000

Maximum addition to defined contribution plan 52,000 53,000

Income limit for definition of “highly compensated” 115,000 120,000

17. IRS INTEREST RATES ON UNDERPAYMENTS OF TAX

January 1 – December 31, 2014 3%

January 1– March 31, 2015 3%

18. ELIGIBILITY FOR MAKING TRADITIONAL (NOT ROTH) IRA CONTRIBUTIONS

If neither you nor your spouse is covered under a retirement plan, you are still permitted to make a deductible IRA contribution of up to $5,500 for 2014 and 2015 ($6,500 for individuals who are at least 50 by year end).

If you are covered under a retirement plan, amounts may not be deductible, depending on your income level: If you are Covered by an Employer Retirement Plan:

Reduced Deduction if Modified AGI

Single/Head of Household $60,000 - $ 70,000 $61,000 - $ 71,000 Married-jointly 96,000 - 116,000 98,000 - 118,000 Married-separately 0 - 10,000 0 - 10,000

If you are Not Covered by an Employer Retirement Plan, but Your Spouse Is: Reduced Deduction if Modified AGI

Filing Status 2014 2015

Married-jointly $181,000 - $191,000 $183,000 - $193,000 Married-separately 0 - 10,000 0 - 10,000 19. ROTH IRA'S

The $5,500 maximum 2014 and 2015 contribution that can be made to a Roth IRA is the same as for a traditional IRA but is phased-out based on modified adjusted gross income as follows:

Filing Status 2014 2015

Married-jointly $181,000 - $191,000 $183,000 - $193,000 Single 114,000 - 129,000 116,000 - 136,000 Married-separately 0 - 10,000 0 - 10,000

In order to receive the tax-free advantages of a Roth, distributions must be qualified. A qualified distribution is any payment or distribution that meets the following requirements.

1. It is made after the 5-year holding period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and

2. The distribution or payment is:

a. Made on or after the date you reach age 59 1/2, b. Made because you are disabled,

c. Made to a beneficiary or to your estate after your death, or d. Made for qualified first-time home buyer expenses

Generally you do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). However, you may have to include part of other distributions in your income and you may have to pay the 10% additional tax on early distributions.

If within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution.

The question of whether or not to make the conversion depends on many factors, including your income tax rate, the length of time you can invest the funds without needing to take distributions and how you will pay the income taxes due on the conversion. It may also depend on where you think income tax rates are headed.

20. NANNY TAX

The amount paid by an employer for domestic services in the employer’s home will not be considered FICA wages if less than $1,900 for 2014 and $1,900 for 2015.

21. GEORGIA 529 COLLEGE SAVINGS PLAN

Georgia’s Path2College 529 Contributions for 2014 of up to $2,000 on behalf of any beneficiary are deductible for Georgia income tax purposes regardless of the taxpayer’s annual income if made by April 15, 2015. In order to claim the deduction (generally worth $120 in tax savings) it is not necessary to itemize deductions. In addition, grandparents and others can make contributions since the beneficiary does not need to be a dependent in order to claim the deduction. The plan is managed by TIAA-CREF Tuition Financing, Inc. You can obtain more information at www.path2college529.com.

22. UNIFORM LIFETIME TABLE

To calculate minimum required distributions from IRAs and retirement plans, use the following formula for each account:

Account Balance as of December 31 of the prior year

(adjusted, if necessary, for any rollovers or transfer in process on 12/31 of the prior year)

/ Factor from New Uniform Lifetime Table* (use the divisor that corresponds to the age the

account owner attained in the MRD year)

Example:

Account balance as of December 31 of the prior year: $100,000 IRA owner's attained age in MRD year: 72

MRD Divisor = $100,000 / 25.6 = $3,906.25

Uniform Lifetime Table

Age of

Account Owner Divisor

70 27.4 71 26.5 72 25.6 73 24.7 74 23.8 75 22.9 76 22.0 77 21.2 78 20.3 79 19.5 80 18.7 81 17.9 82 17.1 83 16.3 84 15.5 85 14.8 86 14.1 87 13.4 88 12.7 89 12.0 90 11.4 91 10.8 92 10.2 Age of

Account Owner Divisor

93 9.6 94 9.1 95 8.6 96 8.1 97 7.6 98 7.1 99 6.7 100 6.3 101 5.9 102 5.5 103 5.2 104 4.9 105 4.5 106 4.2 107 3.9 108 3.7 109 3.4 110 3.1 111 2.9 112 2.6 113 2.4 114 2.1 115 and older 1.9

*The Uniform Lifetime Table can be used by all IRA owners, unless their sole beneficiary for the entire year is their spouse who is more than 10 years younger. In that case, the regular Joint Life Expectancy Table is used, which could reduce the MRD even further. Note: If you are taking MRDs from an inherited IRA, the formula, example, and table above are not applicable.

23. REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS (FBAR)

If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund, unit trust or other types of financial accounts, you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR) annually by June 30, and the filing must be made electronically using form FINCEN114a.

The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBAR's to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

The Internal Revenue Service may impose a civil penalty on any person who fails to file an FBAR when required. In the case of unintentional violations, the maximum penalty is $10,000. If a taxpayer willfully fails to file an FBAR, the IRS may assess a civil penalty equal to $100,000 or 50% of the balance of the account at the time of the violation, whichever is larger.

If you have an association with any type of foreign account and are not currently filing the FBAR form, call us to discuss specific filing requirements. Failure to report income and file FBAR is a serious matter.

24. FOREIGN FINANCIAL ASSET REPORTING

Certain individuals will need to attach Form 8938, Statement of Specified Foreign Financial Assets, to Form 1040 in addition to filing the FBAR. The purpose of the Form 8938 and FBAR are similar and there is significant overlap. Yet the filing of Form 8938 does not relieve individuals of the requirement to file the FBAR.

Filing thresholds for Form 8938 vary, with the lowest threshold being $50,000. Filing is required when an affected individual has an interest in one or more specified foreign assets having an aggregate fair market value exceeding either $50,000 on the last day of the year or $75,000 at any time during the year. In the case of married individuals filing a joint return, the aggregate values are applied to all specified assets in which either spouse has an interest and are doubled to $100,000 and $150,000 respectively. For qualified individuals residing outside of the U.S., the threshold is $200,000 on the last day of the year or $300,000 at any time of the year. For married individuals filing a joint return and residing outside of the U.S., the thresholds are $400,000 and $600,000, respectively.

Failure to file a complete Form 8938 when required subjects the individual to a $10,000 penalty. A continuing $10,000 failure-to-file penalty may be assessed for each 30 day period an affected individual fails to failure-to-file or correct a filing after being notified by the IRS. The maximum penalty is $50,000. For purposes of penalty assessment, the Commissioner may presume that the aggregate threshold is exceeded if insufficient information is provided.

Failure to file a complete Form 8938 may also extend the statute of limitations for income tax. 25. MEDICARE PREMIUMS FOR 2015

Medicare Part B premiums for 2015 are based on your 2013 income—income shown on your last return filed. If you didn't file an income tax return for 2013, your income tax return for 2012 is used by the Social Security Administration to tally your Medicare Part B premium for 2015.

Social Security Administration quote: "If your income has gone down due to any of the following situations and the change will make a difference in the income level we consider, contact us to explain you have new information and may need a new decision about your income-related monthly adjustment amount.

 You married, divorced, or became widowed;

 You or your spouse stopped working or reduced your work hours;

 You or your spouse lost income-producing property due to a disaster or other event beyond your control;

 You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer's pension plan; or

 You or your spouse received a settlement from an employer or former employer because of the employer's closure, bankruptcy, or reorganization."

You Pay If Your Yearly Income is: If Your Yearly Income is:

Part B Part D* Single Married Couple

$104.90 - $85,000 or less $170,000 or less

$146.90 $12.10 $85,0001-$107,000 $170,001-$214,000

$209.80 $31.10 $107,001-$160,000 $214,001-$320,000

$272.70 $50.20 $160,001-$214,000 $320,001-$428,000

$335.70 $69.30 Above $214,000 Above $428,000

You Pay If you are married and lived with your spouse at some time during the taxable year but you file a separate tax return from your spouse and your yearly income is:

$104.90 - $85,000 or less

$272.70 $ 51.30 $85,001-$129,000

$335.70 $ 70.80 Above $129.000

* Excludes your supplemental plan premium. 26. GEORGIA RETIREMENT EXCLUSION

The Georgia retirement income exclusion is $35,000 for taxpayers who are age 62 to 64 and $65,000 for taxpayers age 65 and older.

Retirement income includes interest, dividend, rent and royalty income, capital gains, pensions, annuities, other unearned income and up to $4,000 of earned income.

27. CHARITABLE CONTRIBUTIONS

General Rules: The law requires that you have a receipt, letter, or other written communication from the charity (showing the name of the charity, the date and the amount of the contribution) documenting all charitable contributions made in cash and that you have a receipt or a bank record (e.g., a cancelled check) documenting all contributions made by check or by other monetary means. For contributions of property, you generally need a receipt which contains the name of the charity, a description of the property, and the date and location of the contribution.

Contributions of $250 or more. For all individual donations of $250 or more (contributions of cash or property), the law requires a receipt (written acknowledgment) from the charity to which you made the donation stating the date and amount of the contribution as well as a statement as to whether you received anything in return for your contribution. The receipt (written acknowledgment) must be received by the earlier of the date the taxpayer files the tax return, or the due date of the return. The courts have upheld this unusually strict rule and have disallowed contributions for which receipts were obtained at a later date. If you received goods or services in return for the contribution, the receipt should include a description and an estimate of the value of the goods or services received in return for the contribution. If the goods or services received consist solely of intangible religious benefits, the receipt should include a statement to that effect.

Contributions of vehicles, boats, or airplanes of more than $500. If you are claiming a deduction of more than $500 for a vehicle, a boat, or an airplane you contributed to charity, the law requires that you obtain a Form 1098-C or other written acknowledgment containing the same information shown on Form 1098-C from the charity in order to deduct your contribution. Contributions of clothing or household items. Generally, a deduction is not allowed for a charitable contribution of clothing or household items unless the items are in good used condition or better. Household items generally include furniture, furnishings, electronics, appliances, linens, and other similar items.

Noncash contributions of $5,000 or more (other than traded securities). Taxpayers must obtain a qualified appraisal of noncash donations valued at $5,000 or more. The appraisal must be obtained not earlier than 60 days before the donation is made. For purposes of determining the threshold dollar amounts for the reporting requirements, all similar items of noncash property, whether donated to a single donee or multiple donees, are aggregated and treated as a single property donation.

28. MEDICAL EXPENSE DEDUCTIONS

Most taxpayers who itemize their deductions can claim deductions for unreimbursed medical expenses, those which are not covered by health insurance, that exceed 10 percent of their adjusted gross income. Prior to 2013, the law permitted deduction for unreimbursed expenses in excess of 7.5% of their adjusted gross income.

There is a temporary exemption for individuals age 65 and older until December 31, 2016. If you are 65 years old or older, you may continue to deduct total medical expenses that exceed 7.5% of your adjusted gross income through 2016. If you are married and only one of you is age 65 or older, you may still deduct total medical expenses that exceed 7.5% of your adjusted gross income. This exemption is temporary. Beginning January 1, 2017, the 10% threshold will apply to all taxpayers, including those over 65.

29. GEORGIA MOVIE CREDITS AND CONSERVATION EASEMENT Georgia Movie Credits:

Taxpayers who owe significant amounts of Georgia income tax have an opportunity to purchase "movie credits" at a discount that can be used to reduce Georgia tax liability. Here is how it works:

In order to attract film producers to Georgia, the state allows them to benefit from specified income tax credits. To the extent producers are unable to use the credits themselves, they are allowed to "sell" the credits to others and purchasers can claim the credits on their own Georgia income tax returns. Tax credits typically sell for 85 to 89 cents on the dollar and taxpayers who purchase them "effectively" reduce their Georgia income tax liability accordingly. If you purchase more credits than you can use, they can generally be carried forward 5 years. Furthermore, credits can be purchased in 2015 for use in defraying 2014 taxes.

Another benefit is that credits may be purchased for prior tax periods thereby giving them a retroactive tax effect. This allows for the satisfaction of prior period liabilities using discounted dollars and potentially eliminating penalties and interest associated with prior period underpayments.

Although the purchase of entertainment tax credits may provide substantial benefits, there are also risks. Under Georgia law, if a production company is found on audit to have overstated its qualifying production expenditures, the Department of Revenue may seek to recapture associated tax credits from either the production company or a subsequent purchaser of the tax credits. The Department of Revenue is only likely to attempt to recapture credits from a buyer when there is no recourse against the seller (e.g., the seller has no assets to satisfy this liability). This risk can be mitigated in a number of ways. One is by only purchasing credits guaranteed by the seller and making sure the seller has sufficient assets as to be able to live up to its guarantee. Another is by making sure the seller has had its qualifying expenditures verified by either an independent CPA firm or through a voluntary audit of the production company’s expenses by the Georgia Department of Revenue.

Contact us if you have an interest and we will advise you further. Conservation Easements:

Charitable contributions of conservation easements allow taxpayers to obtain a federal and state tax benefit while helping to conserve land for public use or enjoyment or to preserve a historic structure--all within the provisions of Section 170(a) of (h) of the Internal Revenue Code. Several of our clients have invested in partnership entities that flow through charitable

contribution deductions in the range of 3:1 or 4:1 for each dollar invested. In other words, a taxpayer might purchase a $25,000 interest in an entity that donates an easement in perpetuity to a land trust and in return deduct $100,000 in charitable

contribution deductions. These type vehicles can have higher than average audit risks based on appraised values used to generate the deduction; nevertheless, for clients in high tax brackets who face taxes approaching 50%, audit risks can be acceptable. If you have an interest in knowing more about this tax strategy, contact us. We can explain more fully how they work, discuss the risks, and provide names of brokers who market them.

30. ONE PER YEAR LIMIT ON IRA ROLLOVERS

Effective January 1, 2015, a taxpayer may only rollover one IRA per year tax free. This is regardless of how many IRA’s the taxpayer has. Any other distributions after one per year will be taxable.

As before, ROTH IRA conversions (rollovers from traditional IRA’s to ROTH IRA’s), rollovers between qualified plans and IRA’s, and trustee to trustee transfers (direct transfer of assets from one IRA trustee to another trustee) are not subject to the one per year limit.

31. NEW IRS PROCEDURE: IDENTITY PROTECTION PIN (IP PIN)

All taxpayers who filed their federal tax returns last year from Florida, Georgia and the District of Columbia are eligible to request an identity protection PIN (IP PIN) directly from the IRS by going to the following web site:

www.irs.gov/getanippin

The purpose of this identify protection pin is to expand the protection of taxpayers from identity theft. Taxpayers in Florida, Georgia and D.C. are eligible because these locations have the highest per-capita percentage of tax-related identity theft. Once issued an IP PIN, taxpayers are required to use it to confirm their identities on all federal income tax returns filed during the 2015 calendar year and future tax years. Taxpayers receive a new IP PIN each December by postal mail. Based on instances of identity theft experienced by our clients, we highly recommend obtaining the IP PIN if you qualify, then provide it to us along with your 2014 income tax documents. The use of this PIN should eliminate or at least significantly reduce the possibility that a fake tax return is filed using your name(s) and social security number(s). .

Have the following information handy when applying for the IP PIN: Social security number

Date of birth E-mail address

Filing status and mailing address from your most recently filed tax return.

Look over the page that you were linked to carefully as it should answer any further questions that you have. If you prefer not to apply online, you may call the Identity Protection Specialized Unit at 1-800-908-4490, extension 245 or call the IRS Toll Free information line at 1-800-829-1040 to get a temporary replacement PIN.

32. SECTION 179 DEDUCTION, BONUS DEPRECIATION AND SOFTWARE EXPENSING

All businesses are allowed to expense up to $500,000 of the full cost of what would otherwise be depreciable personal property in 2014; however this amount begins to phase-out when total personal property acquisitions exceed $2,000,000. This Section 179 deduction also applies on up to $25,000 paid for vehicles having a gross loaded weight of more than 6,000 pounds (many SUV’s weigh enough to qualify). Off the shelf computer software qualifies for the 179 deduction through 2014. The 50% bonus depreciation rules apply to property placed in service during 2014. In order to qualify for bonus depreciation, the property must be new (not used).

33. STANDARD MILEAGE RATES

The standard mileage rates per mile for vehicles used for business, charitable work, medical and moving are as follows:

2014 2015

Business .56 .575

Charitable .14 .14

Medical and moving .235 .24

34. AUTOMOBILE DEPRECIATION

electric vehicles carry a higher amount):

Autos Trucks & Vans

Year 1 $11,160* $11,460*

Year 2 5,100 5,500

Year 3 3,050 3,350

Year 4 and thereafter until cost is recovered 1,875 1,975

If the business use percentage is less than 100% (which is often the case), your deductions are even smaller. You must multiply the above numbers by the business percentage.

* Applies unless taxpayer elects out of bonus depreciation; otherwise, the deduction is $3,160 for autos and $3,460 for trucks and vans.

35. FORM 1099 AND FORM W-2 REMINDERS

If you operate a trade or business (including the ownership of rental property) and make payments of $600 or more for rent or for services to any non-corporate entity, remember to report the payments to the payee in January. In addition, Form 1099's must be filed on all interest and dividend payments in excess of $10. Also remember that income reflected on Form W-2's must be grossed up to include the personal usage of vehicles and that FICA tax must be withheld.

Payers must insert on the Form 1099 the phone number of someone who can answer questions about information on the form. Form 1099's must be provided to the IRS by February 28, 2014, and Form W-2's must be sent to the Social Security Administration by February 28, 2015. If filing electronically with the IRS and Social Security Administration, the due date is March 31, 2015. Copies for recipients are to be provided to each recipient by January 31, 2015. Penalties for non-compliance with each information return reporting to the payee, the Social Security Administration and the IRS varies depending upon how far after the due date the taxpayer files:

Returns filed up to 30 days after the due date $30

Returns filed more than 30 days after the due date, but on or before August 1, 2015 $60

Returns filed after August 1, 2015 $100

Minimum penalty for intentional failure to file correct returns $250 or 10% of reportable amount For the 2015 tax year, employers with 250 or more employees are required to report the annual aggregate cost of coverage under any group health plan provided to employees on the employee's Form W-2. This is only an informational reporting requirement and will not change the tax-free treatment of employer-provided health coverage that exists under current law.

36. BACKUP WITHHOLDING

Aside from the requirement to file Form 1099's, a requirement also exists to withhold taxes from individuals to whom 1099's will be provided unless such individuals complete Form W-9's indicating their taxpayer identification numbers and that they are not subject to backup withholding.

We recommend that all businesses obtain a properly completed Form W-9 from all non-employees with whom they conduct business unless they are obviously incorporated entities. (The normal reporting requirements do not apply to incorporated entities.) When in doubt ask for the Form W-9. It will protect you from the requirement to withhold and will also serve as the basis for preparing Form 1099's at year-end. (It shows the recipient's name, address and ID number).

If you request but do not receive the Form W-9 within 30 days, or receive an incomplete Form W-9, commence withholding taxes at a rate of 28%. Report these amounts annually on Form 945, and remit taxes according to the instructions.

Failure to comply with these rules may result in liability for taxes not withheld plus penalties. 37. FEDERAL UNEMPLOYMENT TAXES

Employers are required to make quarterly deposits of federal unemployment taxes (FUTA) if the accumulated tax exceeds $500. Employers owe FUTA tax on the first $7,000 of wages paid to each employee during the calendar year. The effective federal unemployment tax rate in Georgia for 2014 and 2015 is .8%.

38. STATE UNEMPLOYMENT TAXES

Most employers liable for unemployment taxes are required by Georgia law to file tax and wage reports for each calendar quarter. The reports, and any payment due, must be filed on or before April 30th, July 31st, October 31st and January 31st. However, domestic employers must file an annual report on Form DOL-4A.

Employers are required to pay SUTA tax on the first $9,500 paid to each individual during the calendar year. New employers are assigned a tax rate of 2.7%, but the rate may be adjusted in later years based on the employers experience rating. A new employer could have a tax liability of up to $256.50 per employee for the calendar year depending on the amount of wages paid.

39. GEORGIA WITHHOLDING DEPOSIT RULES

Deposits of Georgia withholding taxes must be made monthly by the 15th day of the following month if taxes withheld exceed $200 per month. The State of Georgia has withholding remittance schedules similar but not identical to those of the Internal Revenue Service (described below). The state requirements can be found at:

http://www.etax.dor.ga.gov/inctax/withholding/whgeninfo.aspx.

40. FEDERAL PAYROLL TAX DEPOSIT REQUIREMENTS

You must use electronic funds transfer to make all federal tax deposits. If an employer incurs an employment tax liability of $50,000 or more for the period July 1, 2013 to June 30, 2014 it is a "semi-weekly" depositor for 2015, and must always deposit taxes by either a Wednesday or a Friday. Taxes must be deposited on or before Wednesday if the payroll was dated on the previous Wednesday, Thursday or Friday. Taxes must be deposited on or before Friday if the payroll was dated on the previous Saturday, Sunday, Monday or Tuesday. If an employer has less than $50,000 in annual tax liabilities or is a new employer without any prior experience, taxes for each month must be deposited by the 15th day of the following month. If at any time within a deposit period accumulated employment taxes reach $100,000 or more, they must be deposited on the next banking day and thereafter deposited semi-weekly. The penalties for failure to make a required deposit on time are: 2% of underpayment if made 1 to 5 days late, 5% of underpayment if made 6 to 15 days late and 10% of underpayment if made 16 or more days late. However, a penalty of 15% is imposed if the payment is not made within 10 days of the date of the first delinquency notice to the taxpayer. There is also a 10% penalty if amounts are subject to electronic deposit requirements, but are mailed directly to the IRS or mailed with the tax return.

Employers who owe less than $2,500 per quarter are generally not required to make tax deposits. Instead they pay when they file their quarterly returns. If you have any questions concerning tax deposits that are not explained here, please call us.

41. CASH PAYMENTS OF $10,000 OR MORE

One matter that we mention every year in this newsletter is that the receipt of cash, cashier's checks, bank drafts, travelers checks and money orders from a single source in the amount of $10,000 or more while conducting a trade or business requires that a Form 8300 be filed with the IRS. Criminal penalties can apply for failure to file the form or for aiding others in attempting to circumvent the filing of the form. The rule also applies if cumulative amounts exceed $10,000 in “related transactions”.

42. CREDIT CARD CHARGES

If you operate a business, charges to credit cards before year-end can be deducted in the year charged, even if you don’t pay the bill until a later year. This applies to general-use charge cards (Visa, MasterCard, American Express, etc.), not store cards.

43. BUSINESS PERSONAL PROPERTY TAX RETURNS/BUSINESS LICENSES

Each Georgia county and many out-of-state counties require the filing of an annual business personal property tax return in order to calculate property taxes due on tangible personal business assets including inventory. No tax is due with the filing of the return; each county bills businesses during the summer based on its respective millage rate and the amounts shown on the returns as filed. The filing dates for the returns vary. Gwinnett, Cobb, DeKalb and Fulton county returns are due April 1st.

If you operate a new or existing business that owns tangible personal property and did not file a business personal property tax return in 2014, please contact us to discuss this requirement further.

It is becoming more difficult for small businesses, including those operating from home and with few personal property assets to avoid being singled out by taxing authorities. Non-filers should be aware that penalties for non-filing would likely be assessed if the failure to file is detected by taxing authorities.

All businesses are generally required to purchase an annual business license from their local city or municipality. 44. OPTIONAL RULES FOR HOME OFFICE EXPENSES

A “safe-harbor” deduction may generally be elected for home office expenses. The deduction is $5 per square foot with a $1,500 maximum deduction. If using the safe harbor, depreciation cannot be taken and mortgage interest and real estate taxes can be deducted on Schedule A without allocation to home office. This is an annual election.

45. NEW DEPRECIATION REGULATIONS

New depreciation regulations issued in 2013 contain extensive provisions but three basic provisions are especially note-worthy: a. Beginning in 2014 any item costing $500 or less can be fully deducted if the taxpayer keeps the following statement in

their files for 2014 and attaches a copy to their tax return:

“Section 1.263(a)-1(f) deminimus election – we are using the safe harbor rule under this Section for items we purchase for the business in 2014 that cost $500 or less.”

Date the statement January 1, 2014 and sign, showing business name, address, and tax identification number. Revise the same statement for each tax year.

b. If there are multiple items on an invoice, notify the provider to identify the price of individual items in order to qualify them under the $500 rule. For example: 20 chairs at $400 each.

c. Businesses that have an independent audit qualify for a higher $5,000 expensing threshold rather than the $500 threshold. Contact us with any questions you have on these new complex regulations.

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Note that this newsletter presents in general form information that needs to be tailored to your circumstances. We try conscientiously to convey accurate and current information, but in an environment of continuous change, such information must not be construed as rendering legal, accounting or other professional services and no liability can be assumed in connection with its use. You will need professional guidance to apply this information to your best advantage so please call us with any questions you have.