Last month’s article covered the important tax calendar dates for the first quarter of 2014. Since we are midway through that first quarter you may want to refer back to that article and the due dates that were covered. This month I will write about the second quarter of 2014 and what important dates are on the tax calendar.
The second quarter of the calendar year runs from April 1 (no foolin’) to June 30 and has some very important dates to plan for.
April 15 is the biggest tax return due date of the year. Individuals filing Form 1040, 1040A, or 1040EZ are required to pay any tax due for 2013 on April 15, 2014. They may obtain an extension to file a tax return, but the tax still needs to be paid on this day. About 60% of our firm’s clients are individuals – that’s a lot of work with a single due date. The moral of that story is if you are an individual, get your tax information gathered up and into your CPA as soon as possible to allow ample time for the preparation process to occur. If there are entities that must be done before your individual taxes can be done, get information for those in to your CPA even sooner so that process can occur too. In most firms, entity and individual tax returns can occur simultaneously so don’t wait for the entity work to be completed before you turn in your individual information.
In addition to individual tax returns being due on April 15, there are several other significant tax returns due that same day. Calendar year 2013 trusts (Form 1041) and partnerships (Form 1065) are also due April 15, 2014. In our firm, this group of clients accounts for approximately 20% of all clients. These entity returns are also commonly referred to as “pass-through” entities. This name refers to the fact that certain tax information (income, deductions, credits, etc) is reported to trust beneficiaries (Form 1041, k-1) and to partners/members of a partnership/LLC (Form 1065, k-1) for inclusion on their individual tax returns. The information generally retains its character (interest, dividends, income/(loss) from rental real estate, income/(loss) from trade or business) as it is passed through to the individual. The respective form k-1 is the communication device and the information included will be used in the preparation of the individual tax return. The preparation of trust and partnership entity tax returns involves a significant amount of accounting work. All transactions for the year need to be accounted for prior to completing the tax return. Accounting for all transactions may require the client to furnish a complete set of bank statements for the year and not just the December statement. The accounting work will result in a balance sheet and an income statement in order to facilitate the preparation of the respective tax returns. This process differs greatly from the preparation of an individual tax return. Individual tax returns involve items of income and only certain “deductible” expenses. The preparation of an individual tax return will generally not involve accounting for all transactions for the year and will not result in a balance sheet or an income statement.
April 15 is also the date for paying the first installment of your 2014 estimated tax if you are an individual (using Form 1040-ES and Oregon form 40-ESV) or if you are a C corporation (using the Electronic Federal Tax Payment System – EFTPS).
After April 15 most CPAs need a little break. Think about it, 90 percent of our clients have tax returns due on either March 15 or April 15. What would your business be like if you had to provide medical services to 95 percent of your patients in the 74 days from February 1 through April 15. Take one day a week for rest and the 74 days is actually 63 days.
May 15, 2014 is the due date for calendar year nonprofit organizations and private foundations to file their annual reports with the Internal Revenue Service (Forms 990, 990-T, and 990-PF) and the Oregon Department of Justice (Form CT-12).
June 16, 2014 is the due date for the payment of the second installment of estimated tax for individuals (using form 1040-ES and Oregon form 40-ESV) and calendar year C corporations (using the EFTPS).
Those are the important dates for the second quarter for tax return filing and tax payments.
To conclude this month’s article I will provide some of the inflation-adjusted items for 2014 that most frequently impact tax planning. As we are preparing 2013 tax returns, you need to be mindful of the opportunities for financial success and tax efficiency in the new year, 2014.
- Standard Deduction: Joint – $12,400; Unmarried – $6,200; Head of Household – $9,100; Married filing separate – $6,100
- Limitation on Itemized Deductions for 2014: Joint – $305,050; Unmarried – $254,200; Head of Household – $279,650; Married filing separate – $$152,525
- Contributions to health flexible spending arrangements (FSA) is $2,500
- Personal exemption amount is $3,950 with phaseout occurring as follows:
- Between $305,050 and $427,550 – Joint
- Between $254,200 and $376,700 – Unmarried
- Between $279,650 and $402,150 – Head of Household
- Between $152,525 and $213,775 – Married filing separate
- Adoption credit is the amount of qualified adoption expenses up to $13,190 with phaseout occurring between $197,880 and $237,880 of AGI
- Pension plans and other retirement-related items:
- Deferral of wages to 401(k), 403(b) and most 457 plans remains $17,500
- Catch-up contributions to these plans remains $5,500
- IRA contribution remains $5,500
- Catch-up contributions to IRAs remains $1,000
- Limitation for defined contribution plans is increased from $51,000 to $52,000 and the annual compensation limit for consideration in figuring contributions increased from $255,000 to $260,000
- Key employee definition in a top-heavy plan increased from $165,000 to $170,000
- Highly compensation definition amount remains at $115,000
- Deferral limitation regarding SIMPLE accounts remains $12,000 and the related catch-up amount remains $2,500
- Standard mileage rates:
- Medical purposes (itemized deduction) is 23.5 cents per mile
- Business purposes is 56 cents per mile
- Charitable deduction (itemized deduction) is 14 cents per mile
There are a lot of new rules and taxes that will be considered this tax season. Gather your entity tax return information early (prior to February 20) and follow it up quickly with your individual tax return data. Your CPA will thank you for getting the information together early and giving him/her plenty of time to prepare a complete and accurate return. Expect questions this year that you may not have heard before. This year marks the start of the third federal tax system (Net Investment Income Tax), adding to the Regular Tax and the Alternative Minimum Tax systems.