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  • CPA Firms Haskell & White, Katherman Kitts & Co. Combine Practices to Enhance Client Services IRVINE, Calif. (Feb. 3, 2017) – Haskell & White LLP and Katherman Kitts & Co. LLP are proud to announce they have combined their practices, effective Feb. 1, 2017, and are now operating ...
    Posted Feb 6, 2017, 11:44 AM by Stacie Clifford Kitts
  • Katherman Kitts Mourns the Loss of Fallen San Jose Police Officer Michael Katherman All of us here at Katherman Kitts want to express our sincere condolences for the tragic loss of 34 year old San Jose Police officer Michael Katherman.  Michael Katherman was ...
    Posted Jun 23, 2016, 10:29 AM by Stacie Clifford Kitts
  • Expired Tax Laws Extended Late last evening, the Senate passed the bill that extends, through the end of 2014, several key tax provisions that had otherwise expired at the end of 2013. It is ...
    Posted Dec 29, 2014, 11:12 PM by Stacie Clifford Kitts
  • New Streamlined Filing Compliance Procedures OVDP 2014 - Don't Wait to Report Your Foreign Accounts On June 18, 2014, the IRS announced the expansion of the Offshore Voluntary Disclosure Program to include, for the first time, certain U.S. taxpayers residing in the United States ...
    Posted Sep 22, 2014, 1:17 PM by Stacie Clifford Kitts
  • Incorrect Reporting By Franchise Tax Board Results in Erroneous Letters To Corporate Taxpayers Spidell Publishing reports: The FTB recently encountered an error processing some submissions of Form 100S, California S Corporation Franchise or Income Tax Return, for the 2013 tax year. As a ...
    Posted Sep 22, 2014, 1:08 PM by Stacie Clifford Kitts
Showing posts 1 - 5 of 29. View more »

In The News Index

CPA Firms Haskell & White, Katherman Kitts & Co. Combine Practices to Enhance Client Services

posted Feb 6, 2017, 11:11 AM by Stacie Clifford Kitts   [ updated Feb 6, 2017, 11:44 AM ]

IRVINE, Calif. (Feb. 3, 2017) Haskell & White LLP and Katherman Kitts & Co. LLP are proud to announce they have combined their practices, effective Feb. 1, 2017, and are now operating under the Haskell & White name. The expansion bolstered the combined international tax practice and increased the team of highly skilled CPAs. The entire team at Katherman Kitts & Co. moved to Haskell & White and James Katherman and Stacie Kitts joined the firm as partners.

The unification of these two experienced and well-respected organizations comes at a time when the nation’s tax laws are on the brink of a major overhaul, and clients will require more guidance than ever. By combining the staffs and resources of both teams under the prestigious Haskell & White brand, all clients will have access to an extremely deep bench of hard-working and talented CPAs, now totaling more than 75 professionals.

“With this combination, Haskell & White enhances its already robust standing in the market. We will add more capabilities, including Katherman Kitts & Co.’s deep experience with technology companies and international tax expertise, to bring an even greater level of service to the clients of both firms,” said Haskell & White’s Managing Partner Wayne Pinnell. “Having worked in the same building with Katherman Kitts & Co. for several years, we have gotten to know them personally as well as professionally, and we believe the cultures of our teams will blend seamlessly while producing excellent results.”     

By joining Haskell & White, one of Southern California’s largest independently owned accounting, auditing and tax consulting firms, the clients of Katherman Kitts & Co. will gain access to Haskell & White’s superb team of professionals and numerous resources and benefits that have been a hallmark of Haskell & White for decades. These capabilities include a team of audit professionals able to provide reviews, financial audits and retirement plan auditing, as well as access to a world-wide network of CPA firms in the Leading Edge Alliance.

In a joint statement, Katherman and Kitts said, “We are very much looking forward to this new relationship with Haskell & White as it is an excellent move for our team at Katherman Kitts & Co. and – more importantly – it will bring even greater value to our clients, give our employees considerable growth opportunities and allow for operating efficiencies.”

Katherman emphasized that since Haskell & White shares similar client service philosophies, the business combination will not change the clients’ fee structure and the hands-on attention they are accustomed to receiving.    

 About Haskell & White LLP

Haskell & White LLP is one of the largest independently owned accounting, auditing and tax consulting firms in Southern California, servicing public and private middle-market companies. With locations in Irvine and San Diego, Haskell & White combines the expansive services, knowledge, experience and reach of national and international accounting firms with the personal attention, responsiveness and value of a local organization. Haskell & White works with companies in a broad range of industries including real estate, manufacturing, distribution, life science, technology and retail. The firm provides solid expertise and services to its clients in the tax and audit disciplines, including advising SEC registrants and consulting on mergers and acquisitions. Further information on Haskell & White can be found on the firm’s website, www.hwcpa.com. Connect with Haskell & White at www.facebook.com/haskellandwhite and www.twitter.com/haskellandwhite.

Katherman Kitts Mourns the Loss of Fallen San Jose Police Officer Michael Katherman

posted Jun 23, 2016, 10:29 AM by Stacie Clifford Kitts

All of us here at Katherman Kitts want to express our sincere condolences for the tragic loss of 34 year old San Jose Police officer Michael Katherman.  Michael Katherman was the beloved nephew of one of our founding partners, James Katherman.

Jim attended the touching memorial service this week in San Jose and was in awe of the love and support shown to his family by the San Jose police department and the community of San Jose.


Read more.....

Expired Tax Laws Extended

posted Dec 29, 2014, 11:12 PM by Stacie Clifford Kitts   [ updated Dec 29, 2014, 11:12 PM ]


Late last evening, the Senate passed the bill that extends, through the end of 2014, several key tax provisions that had otherwise expired at the end of 2013. It is expected to be signed by the President next week. These tax provisions include the following:

Business Tax Extenders
The Act extended the following business related tax credits and deductions through 2014:

• Bonus depreciation has been extended through 2014, allowing an additional first year deduction of 50 percent of the cost of the equipment.

• The Section 179 rules have been extended allowing for the expense of $500,000 on acquired property for business use.

• The exclusion from capital gains tax of 100 percent of small business stock sold by an individual.

• The practice of making a reduction in S corporation basis equal to the shareholders share of the adjusted basis of a charitable contribution.

• Reduction in S corporation recognition period for built-in gains tax to five years rather than 10 years.

• The Work Opportunity Tax Credit for hiring of military veterans and other qualified individuals

• The Research Tax Credit

• New Markets Tax Credit

• Enhanced deduction for charitable contributions of food inventory

Energy Tax Extenders
The Act extends through 2014 a number of energy credits and provisions that expired at the end of 2013. Some of the items extended include:

• Credit for nonbusiness energy efficiency property, extended one year.

• Biodiesel and renewable diesel credits are extended.

• The renewable electricity production credit. This includes the wind production tax credit.

• The above the line deduction for Energy efficient commercial buildings has been extended.

Individual Tax Rates
• All current individual marginal tax rates are retained (10, 15, 25, 28, 33 and 35 percent) including the recent increased top rate of 39.6 percent.

School Teacher Expenses Deduction
• Elementary and Secondary teachers can take an above-the-line deduction of $250 in out-of-pocket expenses for educational items for their classroom.
Deduction for State and Local Sales Taxes:

• Taxpayers are allowed an itemized deduction for state and local sales taxes.

• Taxpayers have to choose between deducting state income taxes or deducting state and local sales taxes.

• For the sales tax deduction, they can either keep track of their expenses or use the tables that the IRS provides.

Deduction for Qualified Tuition and Expenses
• This above the line deduction is extended through 2014.

• Taxpayers with income of up to $130,000 (joint) or $65,000 (single) can claim a deduction for up to $4,000 in expenses.

• For taxpayers with income over $130,000 but under $160,000 (joint) and over $65,000 but under $80,000 (single) can take a deduction up to $2,000.

• Taxpayers with income over those amounts are precluded from taking advantage of this deduction.

Mortgage Insurance Deductibility
Homeowners can deduct mortgage interest premiums as though they were mortgage interest payments.


New Streamlined Filing Compliance Procedures OVDP 2014 - Don't Wait to Report Your Foreign Accounts

posted Sep 22, 2014, 1:15 PM by Stacie Clifford Kitts   [ updated Sep 22, 2014, 1:17 PM ]

On June 18, 2014, the IRS announced the expansion of the Offshore Voluntary Disclosure Program to include, for the first time, certain U.S. taxpayers residing in the United States; reference IR-2014-73. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to five percent of the foreign financial assets that gave rise to the tax compliance issue.

Many United States (U.S.) citizens and resident aliens receive income from foreign sources. If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S. This is true whether or not you receive a Form W-2 Wage and Tax Statement,  a Form 1099 (Information Return) or the foreign equivalents.

Additionally, if you are a U.S. citizen or resident alien, the rules for filing income, estate and gift tax returns and for paying estimated tax are generally the same whether you are living in the U.S. or abroad.

Hiding Income Offshore

Not reporting income from foreign sources may be a crime.  The IRS and its international partners are pursuing those who hide income or assets offshore to evade taxes. Specially trained IRS examiners focus on aggressive international tax planning, including the abusive use of entities and structures established in foreign jurisdictions.  The goal is to ensure U.S. citizens and residents are accurately reporting their income and paying the correct tax. 

Foreign Financial Accounts

In addition to reporting your worldwide income, you must also report on your U.S. tax return whether you have any foreign bank or investment accounts.  The Bank Secrecy Act requires you to file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if:

  • You have financial interest in, signature authority, or other authority over one or more accounts in a foreign country, and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Consequences for Evading Taxes on Foreign Source Income

You will face serious consequences if the IRS finds you have unreported income or undisclosed foreign financial accounts.  These consequences can include not only the additional taxes, but also substantial penalties, interest, fines and even imprisonment.

Incorrect Reporting By Franchise Tax Board Results in Erroneous Letters To Corporate Taxpayers

posted May 7, 2014, 11:56 AM by Stacie Clifford Kitts   [ updated Sep 22, 2014, 1:08 PM ]

Spidell Publishing reports:

The FTB recently encountered an error processing some submissions of Form 100S, California S Corporation Franchise or Income Tax Return, for the 2013 tax year. As a result, the FTB system reported to the BOE that these entities had a change of ownership during 2013. This information was used by the BOE to generate erroneous letters to as many as 2,600 corporations for failing to report their change in ownership. These corporations had not, in fact, had a change in ownership.

The FTB has resolved the error, and they are fixing their records and sending corrected data to the BOE. Taxpayers who were impacted by this will receive a letter from the FTB explaining the situation and apologizing for the error and any inconvenience it may have caused.

There is no action required on behalf of the corporations impacted. All records at the FTB and the BOE will be corrected to reflect accurate information from the 2013 Form 100S filed by the corporation.

If corporations have additional questions regarding this situation, they can contact the FTB at (800) 852-5711.

California Partial Sales Tax Exemption for Manufacturing and R&D Equipment

posted Apr 30, 2014, 5:53 PM by Stacie Clifford Kitts   [ updated Apr 30, 2014, 5:55 PM ]

A new California sales tax exemption that goes into effect later this year will generate significant savings for eligible businesses. California taxpayers engaged in manufacturing and certain types of research and development will pay a reduced sales and use tax rate of 3.3125% on qualifying equipment purchases. The exemption is effective on qualifying purchases on or after July 1, 2014, so eligible businesses should plan their equipment purchases accordingly to take advantage of the exemption.

Overview

Due to the enactment of S.B. 90 in the summer of 2013, California will allow businesses primarily engaged in manufacturing or in research and development ("R&D") in the fields of biotechnology or the physical, engineering and life sciences to purchase or lease manufacturing or R&D equipment at a reduced sales and use tax rate for purchases occurring on or after July 1, 2014. The partial exemption will reduce the state sales tax rate from 7.5% to 3.3125%.

"Qualifying tangible personal property" generally includes machinery and equipment and certain other items purchased for use in any stage of manufacturing or R&D activities including equipment used to operate, regulate or maintain the machinery, such as computers and items used in pollution control and any special purpose buildings integral to the manufacturing process. The exemption will also apply to property purchased by contractors for use in construction contracts that are integral to manufacturing and R&D activities. The exemption will not apply to consumables; furniture, inventory, and equipment used in the extraction process; or equipment used to store finished products that have completed the manufacturing, processing, refining, fabricating, or recycling process. Items used primarily in administration, general management, or marketing also are ineligible for the exemption. Note that a single taxpayer or combined reporting unit is limited to $200 million in exempt purchases per calendar year. The exemption is set to expire on June 30, 2022.      

There are no application requirements or any fee requirements. Sellers of qualifying property will have to obtain a timely exemption certificate from the purchaser. According to Special Notice L-372, the California State Board of Equalization ("BOE") will have exemption certificates available on its website by July 2014. Additionally, the BOE is developing a regulation that will provide further guidance on which equipment qualifies for the exemption.

See http://www.boe.ca.gov/sutax/manufacturing_exemptions.htm#Overview for more information on the exemption.

Observations

This partial exemption will be a significant benefit to taxpayers in California that primarily engage in manufacturing and R&D activities. Eligible purchasers will be able to take advantage of a 4.1875% rate reduction in state sales tax. Note that the exemption will not apply to local city, county or district taxes. For example, In Los Angeles, California, the combined state and local tax rate is 9%. Therefore, after factoring the exemption, the combined state and local sales and use tax on the purchase of qualified property is 4.8125%.

Currently, taxpayers are not allowed any exemption (full or partial) on the purchase of machinery and equipment and other non-consumable tangible personal property that it uses in its manufacturing and R&D activities unless those items were incorporated into the finished manufactured article. Given the significant benefits associated with the partial exemption, we recommend that eligible taxpayers delay purchases of qualified tangible personal property until July 1, 2014, if feasible, to take advantage of the reduced state sales and use tax rate.

 

2014 Standard Mileage Rates

posted Mar 21, 2014, 4:51 PM by Stacie Clifford Kitts

WASHINGTON — The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The business, medical, and moving expense rates decrease one-half cent from the 2013 rates.  The charitable rate is based on statute.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.  In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.  Notice 2013-80 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

What do I need to know about the Health Care Law for my 2013 Tax Return?

posted Mar 20, 2014, 8:30 PM by Stacie Clifford Kitts   [ updated Mar 20, 2014, 8:30 PM ]

For most people, the Affordable Care Act has no effect on their 2013 federal income tax return. For example, you will not report health care coverage under the individual shared responsibility provision or claim the premium tax credit until you file your 2014 return in 2015. 

However, for some people, a few provisions may affect your 2013 tax return, such as increases in the itemized medical deduction threshold, the additional Medicare tax and the net investment income tax.

Proposition 30 California Tax Increase –Tax Penalty Waiver

posted Jan 13, 2013, 3:35 PM by Stacie Clifford Kitts

The Franchise Tax Board has announced that taxpayers affected by the retroactive personal income tax increase (Proposition 30), may pay the amount due with their 2012 tax return.   Taxpayers subject to underpayment of estimated tax penalties may request relief by completing Form 5808 Underpayment of Estimated Taxes by Individual and Fiduciaries and completing Part 1, question 1 with the explanation that the underpayment is due to Proposition 30.

2012 American Taxpayer Relief Act

posted Jan 4, 2013, 10:36 AM by Stacie Clifford Kitts   [ updated Jan 4, 2013, 10:38 AM ]

Yesterday, the President signed the American Taxpayer Relief Act, which was passed on New Year’s Day. Here is brief summary of selected portions of it, for your review. We can help answer any questions that you may have.

 Individual Tax Rates

The Act preserves and permanently extends the Bush-era income tax cuts except for single individuals with taxable income above $400,000; married couples filing joint returns with taxable income above $450,000; and heads of household with taxable income above $425,000.  Income above these thresholds will be taxed at a 39.6 percent rate, effective January 1, 2013. The $400,000/$450,000/$425,000 thresholds will be adjusted for inflation after 2013.

The new law, however, does not extend the payroll tax holiday. Effective January 1, 2013, the employee-share of Social Security tax withholding increased from 4.2% to 6.2% (its rate before the payroll tax holiday).

 Capital Gains and Dividend Tax Rate

Effective January 1, 2013, the maximum tax rate on qualified capital gains and dividends rises from 15 to 20 percent for taxpayers whose taxable incomes exceed the thresholds set for the 39.6 percent rate (the $400,000/$450,000/$425,000 thresholds discussed above). The maximum tax rate for all other taxpayers remains at 15 percent; and moreover, a zero-percent rate will continue to apply to qualified capital gains and dividends to the extent income falls below the top of the 15- percent tax bracket. Note – The 2010 Affordable Care Act imposes a 3.8% Medicare tax on interest, dividends, capital gains, and other passive income, starting in 2013, and it applies at taxable income over $200,000 for single filers and over $250,000 for joint filers.

 Estate and Gift Tax

Federal transfer taxes (estate, gift and generation-skipping transfer (GST) taxes) seem to have been in a constant state of flux in recent years. The Act provides some certainty. Effective January 1, 2013, the maximum estate, gift and GST tax rate is generally 40 percent, which reflects an increase from 35 percent for 2012. The lifetime exclusion amount for estate and gift taxes is unchanged for 2013 and subsequent years at $5 million (adjusted for inflation). The GST exemption amount for 2013 and beyond is also $5 million (adjusted for inflation). The new law also makes permanent portability and some enhancements made in previous tax laws.

 Other Act Elements Affecting Individuals

·         AMT (Alternative Minimum Tax) – Higher exemptions are made permanent, and indexed for inflation

·      IRA distributions to charitable organizations, (for those over age 70) – restored through 2013

·      Exclusion for cancellation of debt on principal residence – extended through 2013

·      Reduction of itemized deductions for incomes over certain levels, (which was not in place since 2010) – will apply starting in 2013

 Business Tax Provisions

Code Sec. 179 business equipment expensing.  In recent years, Congress has repeatedly increased dollar and investment limits under Code Sec. 179 to encourage spending by businesses.  For tax years beginning in 2010 and 2011, the Code Sec. 179 dollar and investment limits were $500,000 and $2 million, respectively. [This means that you can expense up to $500,000 of equipment or software purchased, so long as you don’t spend more than $2 million in total. Expenditures over the $2 million level reduces the allowable expense amount dollar-for-dollar.] The Act restores the dollar and investment limits for 2012 and 2013 to their 2011 amounts ($500,000 and $2 million) and adjusts those amounts for inflation. However, this increase is temporary.  The Code Sec. 179 dollar and investment limits are scheduled, unless changed by Congress, to decrease to $25,000 and $200,000, respectively, after 2013.  The new law also provides that off-the-shelf computer software qualifies as eligible property for Code Sec. 179 expensing. The software must be placed in service in a tax year beginning before 2014.  Additionally, the Act allows taxpayers to treat up to $250,000 of qualified leasehold and retail improvement property as well as qualified restaurant property, as eligible for Code Sec. 179 expensing.

Bonus depreciation. Bonus depreciation of business equipment is one of the most important tax benefits available to businesses, large or small. In recent years, bonus depreciation has reached 100 percent, which gave taxpayers the opportunity to write off 100 percent of qualifying asset purchases immediately. For 2012, bonus depreciation remained available but was reduced to 50 percent.  The Act extends 50 percent bonus depreciation through 2013. The Act also provides that a taxpayer otherwise eligible for additional first-year depreciation may elect to claim additional research or minimum tax credits in lieu of claiming depreciation for qualified property.

 While not quite as attractive as 100 percent bonus depreciation, 50 percent bonus depreciation is valuable.  For example, a $100,000 piece of equipment with a five-year MACRS life would qualify for a $55,000 write-off: $50,000 in bonus depreciation plus 20 percent of the remaining $50,000 in basis as “regular” depreciation, with the half-year convention applied in the first and last year.

Bonus depreciation also relates to the passenger vehicle depreciation dollar limits under Code Sec. 280F. This provision imposes dollar limitations on the depreciation deduction for the year in which a taxpayer places a passenger automobile/truck in service within a business and for each succeeding year.  Because of the new law, the first-year depreciation cap for passenger automobile/truck placed in service in 2013 is increased by $8,000.

Bonus depreciation, unlike Code Sec. 179 expensing, is not capped at a dollar threshold. However, only new property qualifies for bonus depreciation.  Code Sec. 179 expensing, in contrast, can be claimed for both new and used property and qualifying property may be expensed at 100 percent.

 Research Tax Credit. The research tax credit was restored for 2012 and extended through 2013.

 

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