The IRS has 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 January 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, down from 56.5 cents per mile in 2013
• 23.5 cents per mile driven for medical or moving purposes, down from 24 cents per mile in 2013
• 14 cents per mile driven in service of charitable organizations, unchanged from 2013

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.

The Ohio Department of Taxation owes millions of dollars in tax refunds to businesses that inadvertently overpaid their taxes. Now department officials are making contact with the businesses to make sure they are refunded every dollar owed to them.

The department has identified about $30 million owed to business taxpayers and will be contacting those businesses and helping them apply for their refund. This new wave of refunds involves three taxes:

• Sales and use
• Corporate franchise
• Employer and school district withholding

Find out whether your business is eligible for a refund by calling 800-304-3211, or contact the department via email.

The tax department’s practice of not notifying taxpayers of overpayments came to light through an investigation by the Ohio Inspector General. A report released in mid-November cited the department for failure to make refunds even after requests were submitted. In addition, the department did not have standard written policies or procedures for handling overpayments.

State law does not require the department to notify taxpayers of overpayments; however, the law stipulates that overpayments are refundable upon request within three or four years, depending on the type of tax. Money not requested within the statute of limitations is kept by the state.

Overpayments are common because businesses generally make payments in advance based on estimates of what they will owe.

Ohio Tax Commissioner Joe Testa was surprised by the investigation’s findings and directed department officials to immediately make arrangements for tax refunds. He indicated the practice of not making refunds was part of the culture of the department and had been going on for years.

To address the issue, Reps. Mike Duffey, R-Worthington and Michael Stinziano, D-Columbus, are co-sponsoring legislation requiring the Ohio Department of Taxation to notify businesses when they have overpaid their taxes and qualify for a refund. Governor Kasich supports their initiative.

Nearly a year ago, the Department of Taxation discovered there were overpayments associated with the commercial activity tax (CAT) and began issuing refunds totaling $14 million to 3,500 companies that had overpaid.

Many of our firm’s clients are family-owned businesses so we were delighted to learn that two clients were recently honored by the Conway Center for Family Business at its 15th annual awards program.

Joe Dager, chairman of the board of Velvet Ice Cream, Inc., received the organization’s Lifetime Achievement Award, which recognizes a family business leader who has made a significant contribution to his or her industry or the central Ohio business community.

Receiving the organization’s Communication Award was Laser Reproductions and the Bordner family. The award recognizes family businesses that have developed effective communication within their family business or with family members regarding the business.

Located in Utica, Ohio, Velvet Ice Cream has been a family-owned and operated business for nearly 100 years. Founded in 1914 by family patriarch Joseph Dager, Velvet has been run by four generations of the Dager family. Each year Velvet produces more than five million gallons of ice cream, which can be found in freezer cases throughout the Midwest. The historic Ye Olde’ Mill, which houses the company headquarters, an ice cream museum and restaurant, attracts more than 150,000 visitors a year.

Over the years Dager family members have worked together to contribute to the growth, success and sustainability of Velvet Ice Cream, and today is no different. While third-generation family member Joe serves as chairman, his three daughters, Luconda, André and Joanne run day-to-day operations with the goal of carrying on their grandfather’s dream. Their mother Tatla serves as board treasurer.

Laser Reproductions is a leading provider of rapid prototyping, manufacturing, product development and stereolithography services to industrial design firms, original equipment manufacturers, inventors and architects.

Paul “Jerry” Bordner, CEO and board chairman, fed his entrepreneurial spirit by starting his company, Bordner & Associates, as a plastics molding manufacturers sales agency in 1982. His technical creativity fostered many innovations and led to the inception of Laser Reproductions in 1994 to produce three-dimensional prototypes from computer designs. Jerry retired in 2007.

Sons Paul and Bret, president/CEO and vice president/COO, respectively, encouraged their father to break into the rapid prototyping industry and have been involved with the company for more than 25 years. They continue to stay true to their father’s founding principles and core values while merging innovation and technology.

In 2012 the company received the Conway Center’s Milestone Achievement Award for 30 Years in Business.

The Conway Center for Family Business provides educational, networking and professional development opportunities to many of the leading family businesses in central Ohio. Velvet Ice Cream has been a Conway Center member for more than 10 years, and Joe says that Velvet relies on the Center as a great resource for networking with other family business leaders who understand the unique challenges and issues facing family businesses.

Paul Border appreciates the access to expert resources that the Conway Center provides. Their advice has led to substantial savings for the company.

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include…

Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You don’t get paper statements anymore? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.

Healthcare benefit information. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long-term care policy? Gather the policies together in your new retirement command center and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.

Life insurance information. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you want to keep paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums in your file.

Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.¹

Social Security basics. If you haven’t claimed benefits yet, put your Social Security card, last year’s W-2 form, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork or and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship if applicable. Social Security no longer mails people paper statements tracking their accrued benefits, but e-statements are available via its website. Take a look at yours and print it out.²

Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.

Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.

Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.

Tax returns. Should you only keep last year’s 1040 and state return? How about those for the past seven years? At the very least, you should have a copy of last year’s returns in this collection.

A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course.

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

Citations.
1 – fpanet.org/ToolsResources/ArticlesBooksChecklists/Articles/ Retirement/10EssentialDocumentsforRetirement/ [9/12/11]

2 – cbsnews.com/8301-505146_162-57573910/planning-for-retirement-take-inventory/ [3/18/13]

If you are a planner, you may be interested in the IRS’s announcement in late October regarding annual inflation adjustments for tax year 2014. The adjustments affect more than 40 tax provisions and the tax tables for 2014.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts:

• The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.

• The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.

• The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).

• The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)

• The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).

• The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.

• Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.

• The annual exclusion for gifts remains at $14,000 for 2014.

• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.

• The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.

• The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.