Posts by Alex Fermin

PATH Act and Extenders – Key Tax Breaks for Businesses in 2015

Congress has once again extended the “extenders,” a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. This package of tax breaks has repeatedly been temporarily extended for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” Most of the tax breaks expired at the end of 2014, but now, in the recently enacted Protecting Americans from Tax Hikes Act of 2015 (i.e., the 2015 PATH Act), the extenders have been revived and extended once again, but this time Congress has taken a new tack. Instead of just rolling the package of provisions over for a year or two, it actually made some of the provisions permanent and extended the remaining provisions for either five or two years, while making significant modifications to several of the provisions.

I’m writing to give you an overview of the key tax breaks affecting business that were extended by the new law. Please call our office for details of how the new changes may affect you or your business.

The extended business credits and special depreciation and expensing rules include:


  1. . . . the research credit; made permanent; additionally, beginning in 2016 eligible small businesses ($50 million or less in gross receipts) may claim the credit against alternative minimum tax (AMT) liability, and the credit can be used by certain even smaller businesses against the employer’s portion of the Social Security portion of the employer’s payroll tax (i.e., FICA) liability;
  2. . . . the minimum low-income housing tax credit rate for nonfederally subsidized new buildings; made permanent;
  3. . . . the military housing allowance exclusion for determining whether a tenant in certain counties is low-income (differential wage payment credit); made permanent;
  4. . . . the Indian employment tax credit; extended through 2016;
  5. . . . the new markets tax credit; extended through 2019;
  6. . . . the railroad track maintenance credit; extended through 2016; the new law modifies the credit to apply to expenditures for maintaining railroad track owned or leased as of Jan. 1, 2015 (rather than Jan. 1, 2005, as under prior law);
  7. . . . the mine rescue team training credit; extended through 2016;
  8. . . . the employer wage credit for activated military reservists; made permanent; beginning in 2016, the provision modifies the credit to apply to employers of any size, rather than employers with 50 or fewer employees, as under prior law;
  9. . . . the work opportunity tax credit; extended through 2019; the new law also modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 50% of the first $6,000 of wages;
  10. . . . qualified zone academy bonds; extended through 2016;
  11. . . . three-year depreciation for racehorses; extended through 2016;
  12. . . . 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements; made permanent;
  13. . . . 7-year recovery period for motorsports entertainment complexes; extended through 2016;
  14. . . . accelerated depreciation for business property on an Indian reservation; extended through 2016; the new law also modifies the deduction to permit taxpayers to elect out of the accelerated depreciation rules;
  15. . . . 50% bonus depreciation; extended for property placed in service during 2015 through 2019 (but 2016 through 2020 for certain property with a longer production period and certain aircraft); the 50% rate is phased down to 40% for property placed in serviced during 2018 (but 2019 for the long production period property and aircraft) and 30% for property placed in serviced during 2019 (but 2020 for the long production period property and aircraft); phase down is also required for the $8,000 increase, for bonus-depreciation eligible cars, of the first-year depreciation and expensing dollar cap for cars; the provision makes qualified building improvements (no longer just qualified building leasehold improvements) bonus depreciation eligible and permits most plants bearing fruit or nuts to be eligible for bonus depreciation when planted or grafted rather than when income-producing;
  16. . . . the election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation; extended for property placed in service during 2015; the provision modifies the AMT rules beginning in 2016 by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation;
  17. . . . the enhanced charitable deduction for contributions of food inventory is made permanent; the new law modifies the deduction by increasing the limitation on deductible contributions of food inventory from 10% to 15% of the taxpayer’s adjusted gross income (15% of taxable income in the case of a C corporation) per year and also modifies the deduction to provide special rules for valuing food inventory;
  18. . . . increase in elective business expensing (up to $500,000 annual write-off of eligible business property costs that is phased out once those costs exceed $2,000,000 for the year) is made permanent; made permanent too is the allowance of expensing for computer software and qualified real property (certain leasehold improvement, retail improvement and restaurant property; the $500,000 and $2,000,000 limits are indexed for inflation for tax years beginning after 2015; expensing is allowed for air conditioning and heating units placed in service in tax years beginning after 2015; the $250,000 cap on the expensing of qualified real property is eliminated for tax years beginning after 2015; the election and the specifics of the election are made revocable;
  19. . . . the election to expense mine safety equipment; extended through 2016;
  20. . . . special expensing rules for certain film and television productions; extended through 2016; the new law modifies the rules to apply to the cost of live theatrical productions;
  21. . . . the deduction allowable with respect to income attributable to domestic production activities in Puerto Rico; extended through 2016;
  22. . . . the exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity; made permanent;
  23. . . . the special treatment of certain dividends of regulated investment companies (RICs); made permanent;
  24. . . . the definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act; made permanent;
  25. . . . exceptions under subpart F for active financing income; made permanent;
  26. . . . look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules; extended through 2019;
  27. . . . the exclusion of 100% of gain on certain small business stock; made permanent; the new law also permanently extends the rule that eliminates such gain as an AMT preference item;
  28. . . . the basis adjustment to stock of S corporations making charitable contributions of property; made permanent;
  29. . . . the reduction in S corporation recognition period for built-in gains tax; made permanent;
  30. . . . the empowerment zone tax incentives; extended through 2016; the new law modifies the incentive by allowing employees to meet the enterprise zone facility bond employment requirement if they are residents of the empowerment zone, an enterprise community, or a qualified low-income community within an applicable nominating jurisdiction; and
  31. . . . the American Samoa economic development credit; extended through 2016.

The new legislation also includes a two-year delay in a pair of new taxes installed as part of the healthcare reform law: a levy on medical devices (which would have started in 2016) and another on high-end health insurance plans, known as the “Cadillac tax,” which would have applied beginning in 2018.

I hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please do not hesitate to call.

Very truly yours,

Your Team at Monfalcone & Garris, P.C.




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IRS Guidance on Scam Phone Calls

Need guidance on Scam Phone Calls?

Telephone scams performed by individuals posing to be IRS personnel are becoming more and more of a prevalent issue.

Sometimes callers claim to represent the IRS and demand tax payments. Some try to convince you that you’re due a refund. Sometimes scam phone callers will ask you for sensitive financial information, like credit or debit card numbers.

This is a wide spread scam being executed all over the country.  In response to this issue we’ve provided a link to IRS guidance on scam phone calls. There’s plenty of information on how to identify and respond to these suspicious calls.

The IRS Guide on how to spot scam phone calls includes info for citizens like how to file a complaint and how to report an incident with a suspicious caller.

For example – one thing to keep in mind is that the IRS will never use unsolicited email, text messages or any social media to discuss any personal tax issue.

Please follow the link below to read further and do not hesitate to call us with any questions.

IRS Guidance on Scam Phone Calls; Five Easy Ways to Spot Suspicious Calls

-Monfalcone, Garris and Company, PC

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IRS Makes it Easier for Small Businesses to Apply Repair Regulations

We are forwarding the information that the AICPA and the IRS have published in regards to Form 3115.

“In a prepared statement, Barry Melancon, president and CEO of the AICPA, welcomed the changes announced in the revenue procedure, saying, “The AICPA and the state CPA societies have made numerous requests on behalf of our members and their small business clients for this relief over several months. We appreciate that the IRS understood how burdensome the regulations are for small business and acted to provide relief for 2014 and future year tax returns.”

“IR-2015-29, Feb. 13, 2015

WASHINGTON —The Internal Revenue Service today made it easier for small businesses to apply repair regulations to 2014 and future years.

Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014.

Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014.

“We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” said IRS Commissioner John Koskinen. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.”

The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20, posted today on

The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses. ”



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Exciting Changes at Garris and Company, P.C.

We are pleased to announce that effective February 1, 2015, Christina Monfalcone, CPA will merge her practice, Monfalcone Accounting Group with Garris and Company, P.C..  At that time, Christina will assume the position of president of the company and will be responsible for the future operations and management of the firm.

Christina’s career in public accounting began in Charlottesville in 1999 with Joseph Saunders III, CPA Inc.  In 2008, Wills & Associates bought Joseph Saunders, III CPA and Christina assisted with the transition to Wills & Associates where she was a partner until 2013.  During 2013, Christina opened her own firm, Monfalcone Accounting Group.  She is a well-respected local accountant who has many resources and talents that you will benefit from.

With this transition, the things that you are familiar with will not change, although the firm name will change to Monfalcone, Garris and Company, PC.  The location, telephone number, email addresses and billing structure will all remain the same.  Ed Garris will continue to work with us during tax season to assist in ensuring each client’s needs are met.

We are all very eager and excited about moving forward into tax season and we will now be able to offer the preparation of audited financial statements.

Christina would love to meet you so stop by and introduce yourself, especially if you have any questions or concerns.


Thank you,

Garris and Company, P.C.



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Business Use of Home Tax Deduction

Many of us have a home office where we conduct our business or utilize part of our home for business purposes; however, you may not know this can conjure up tax savings.  To qualify you must use part of your home exclusively and regularly as your principal place of business.  According to the IRS, exclusively is defined as use of a specific area of your home only for your trade or business.  You do not qualify for the deduction if you use the area for both business and material personal use purposes.

Upon determining that you qualify for the deduction, you must choose a method to determine the amount of your deduction. There are two methods, the simplified method and the actual expense method to compute the business use of home tax deduction.  Utilizing the simplified method, you multiply the square footage by the prescribed rate. The allowable square footage is the portion of your home attributable to the business use of your home, but cannot exceed 300 square feet and the prescribed rate is $5.00.

For example, Suzzy Jean uses 65 square feet of the home exclusively and regularly for her designer jean company.  Her tax deduction for business use of home would be $325 (65 square feet X $5 = $325).

If you elect to use the simplified method you cannot deduct any of the actual expenses or depreciation related to the business use of your home.

If you elect to claim the deduction based on your actual expenses you may deduct, in full, any expenditure that is directly related to the business use portion of your home.  For example, painting or repairs in the area used for business.  You may also deduct the indirect expenses of keeping up your home such as rent, mortgage interest, insurance, taxes, utilities, repairs and general maintenance.  These indirect expenses must be deducted based on the percentage of your home used for business.  For example, if your home office space is 200 square feet and the entire home is 2,000 square feet then you may deduct 10% of your total indirect expenses.

It is important to note that you may not deduct business expenses in excess of the gross income limitation (your net income from the business).  Under the actual expense method, you may be able to carry forward some of these business expenses to the next year that were subject to the gross income limitation.  Under the simplified method there is no carryover provision; however, you may elect in and out of the simplified method in any given year.

This is a mere summary of how to claim a deduction for business use of your home; however, there are many exceptions and unique situations.  Please contact your tax adviser with any inquires you may have regarding business use of your home or other tax information.


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Electronic Payment of Federal Estimated Income Taxes

for homepage slideshow gov contract acct_capitolMany of us have gotten comfortable with paying our monthly bills online, so it is surprising that, in our practice, we see very few clients electronically making their quarterly estimated tax payments.  It is very easy to do so, and every bit as secure as paying your credit card or electric bill.  Recently the IRS rolled out the new Direct Pay service for individuals to make their quarterly estimated tax payments.  This service can also be used to pay an individual tax bill, but is available only for taxpayers who use a Social Security Number (SSN) rather than a Taxpayer Identification Number (TIN).  For more information, including plans for enhancements to Direct Pay, click here:,000-Individuals-Pay-Their-Taxes-with-IRS-Direct-Pay

To sign up, follow this link:

Of course, electronic payment of federal estimated income taxes through the Electronic Federal Tax Payment System (EFTPS) has been available for quite a while.  The service is free and you can pay by phone as well as by using the Internet.  Additionally, the service is available for payment of all federal taxes, not just quarterly estimated taxes.  EFTPS can also be used for paying business taxes.

With EFTPS, you can schedule payments up to 365 days in advance and access up to 16 months of payment history.  The system is secure and includes verification steps which allow taxpayers to review their information before it is sent.  EFTPS is available 24 hours a day, 7 days a week, whether you are making payments by Internet or phone.

For a complete description of the EFTPS and to enroll, click on this link:

Currently in Virginia, there is no system equivalent to the federal Direct Pay system, but taxpayers can access VATAX Online for payment of taxes.  VATAX Online offers many of the same features as EFTPS and divides its services between individuals and businesses.

For individuals, information can be found here:

For businesses, information can be found here:

Electronic payment of some business taxes is already required and it is possible that more taxes, including individual taxes, will require electronic payment in the future, so why not get started?

James W. Bell, CPA

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How to Track Your Business Mileage

In today’s world, even with the growing popularity of telecommuting and teleconferencing, there are times when you need to travel for business. In order to deduct your travel expenses on your tax return, you need to keep adequate records. There are many strategies to track your business mileage.

The IRS allows a deduction of either the actual business related costs or a standard mileage rate. Either way, you need to maintain accurate mileage records. Sounds cumbersome, right? Well, it doesn’t have to be.

A simple yet effective mileage recording method is to use an inexpensive small wire-bound notepad. They can be found at many retail outlets for around $1. You’ll just want to make sure it is large enough to record the following information:

  • Date
  • Destination (City, Town, or Area)
  • Business Purpose
  • Beginning Odometer Reading
  • Ending Odometer Reading
  • Miles This Trip

Many office supply stores sell Auto Mileage Log and Expense Record books. They usually run around $8 each, and have pre-printed pages with space for recording mileage and maintenance/repair expenses.

Of course, like everything these days, if you have a smart phone, there is “an app for that”. The ones I looked at ranged in price, from free for very basic tracking to around $12. Some of the better ones calculate your business mileage and download the totals to an Excel report you can email to your accountant (and your accountant will love you for it – trust me). Like any other mobile application, be sure to read the user reviews before downloading. This can save a lot of time and frustration down the road.

One caveat – commuting miles (the miles driven from your home to your normal place of business and back) are not considered business miles. However, trips from your normal place of business to pick up office supplies, visit a client, or between normal places of business are business related.

Happy (business-related) Motoring!


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Be on the Alert and Protect our Personal Identity

You may hrecord keepingave heard recently about proposals in Congress to require the Treasury Department to contract with private collection agencies to collect amounts owed to the Internal Revenue Service. One concern arising is how the debt collectors will be able to identify themselves as legitimate. Whether or not the measure passes in some form or another, this discussion can serve as a reminder that we should be on the alert and protect our personal identity and our financial assets from thieves claiming to be an agent of the IRS.

Attempts to defraud come in various forms including e-mails, phone calls, letters, texts or other social media contacts, and can be very convincing with logos, addresses, and lingo as the scammer tries to stay one step ahead of detection. Don’t be misled by an imposter that wants you to believe that they are an agent of the IRS in order to get personal or financial information from you. Recent aggressive phone scams have used intimidation as a motivator to make their target turn over personal information to them. They can manipulate caller ID information, use fake names and IRS agent identifying information, and employ other increasingly sophisticated methods to lure you into their deception.

The IRS does not initiate contact with taxpayers by phone or electronic means (including e-mails, texts or other social media) to request personal, tax, or financial data. You should not reply to, open attachments, or click on a link in any unsolicited e-mail that claims to come from the IRS. You can help to stop scams by forwarding any suspicious e-mail you receive to The IRS compiles such information to alert taxpayers about fraudulent schemes through news releases and on its website at

Let us know if you have any concerns that you cannot resolve, especially if you receive a notice from the IRS. We can help you determine authenticity and advise if you should take any further action.

-Nancy B. Corley, EA


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3.8 Percent Net Investment Income Tax (NIIT)

futa tax blog_jrs_Jan 2012Beginning in 2013, pursuant to the Affordable Care Act, a new 3.8 percent net investment income tax (NIIT) applies to taxpayer’s with a modified adjusted gross income (MAGI) above the applicable thresholds below (not indexed for inflation).

  • Single filers – $200,000
  • Married filing jointly (including surviving spouses) – $250,000
  • Married filing separately – $125,000
  • Head of household (with qualifying person) – $200,000
  • Trusts and estates – $11,950 (for 2013) on undistributed net investment income

Investment income generally includes gross income from the following sources:

  • Interest, dividends, non-qualified annuities and royalties
  • Rents (unless received in the ordinary course of a trade or business which is not a passive activity)
  • Capital gains on stocks, bonds, mutual funds and investment real estate (including a second home)
  • Income from a passive activity trade or business

However, the aforementioned gross investment income items are reduced by certain expenses/deductions to arrive at the amount subject to the 3.8% NIIT.  The following expenses properly allocable to items of gross investment income include:

  • Investment interest expense (to the extent allowed as an itemized deduction)
  • Investment advisory and tax preparation fees
  • Expenses related to rental and royalty income
  • Business deductions allocable to a passive activity trade or business
  • State and local income taxes
  • Penalties on early withdrawal of savings
  • Capital losses and capital loss carryovers to the extent of gains on stocks, bonds, mutual funds and investment real estate

For example, if a married couple filing jointly has $200,000 of wage income and $100,000 of interest and dividend income after allocable deductions (MAGI totaling $300,000), the 3.8% tax on net investment income applies to the $50,000 (the amount over the $250,000 MAGI threshold).

There are many tax planning ideas that should be considered by taxpayers subject to the 3.8% NIIT.  A few of the more prevalent considerations are as follows:

  • Tax loss harvesting becomes more important, especially for taxpayers in the new 39.6% tax bracket
  • Tax exempt income investments may be more desirable
  • Owners of pass-through entities may want to take action to materially participate
  • Aggregation tax election for taxpayer with multiple rental properties may be necessary

This is only a brief overview of the 3.8% NIIT and is not intended to be exhaustive, so please contact us to discuss the various tax planning strategies available to your unique situation.

-John Scaglione, RTRP

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The Patient Protection and Affordable Care Act

Many of us have heard on the news or read on social media sites various opinions of the Patient Protection and Affordable Care Act also known as “Obamacare.” There is a lot of confusion on what this new Act truly means and what the effect will be on us: the citizens. The main question is: what is Obamacare? With the Act being so vast it is hard to get a clear understanding of the new law and the effect it can have on you.

First, check to see if your health care plan was in existence before March 20, 2010, if so it could be “grandfathered in” therefore it does not have to provide the required Obamacare benefits. If your health care plan does not meet this criterion, your insurance plan under Obamacare must cover:

  • Children up to age 26 can be added to your health insurance plan
  • It cannot limit the coverage you receive over your lifetime
  • It cannot deny coverage to children with pre-existing conditions
  • If you or another adult has a pre-existing condition, you will get the same protection as your child starting in 2014
  • No co-pay for wellness or pregnancy exams

By 2014, everyone will be required to have health insurance. You will be required to purchase insurance or pay a penalty of up to 1% of your income. In 2014, if your income is 133% or less than the “Federal poverty level” (in 2013 it was $15,281 for an individual and $31,321.50 for a family of four) you qualify for Federal government funded insurance: Medicaid. If you are a small business owner, with 25 employees or less, you can get a tax credit of 35% of the costs of health insurance and this can go up to 50% in 2014. If you are a small business owner, with 50 employees or less, you do not have to pay a fine if your workers get tax credits through the Health Insurance Marketplace also known as the “exchange”. With 50 or more employees you must provide health insurance or pay a penalty of $2,000 per employee (excluding the first 30 employees) starting January 2015.

Starting in 2014, if you get your health insurance coverage through the Health Insurance Marketplace, you may be eligible for the Premium Tax Credit. The open enrollment period to purchase health insurance coverage for 2014 through the Marketplace runs from October 1, 2013, through March 31, 2014.

This is only a summary of the health care law and how it can affect you. To find out more about this new law please visit:

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