Month: January 2014

IRS Announces 2014 Standard Mileage Rates

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) used for business, charitable, medical or moving purposes is:

  • 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 remains unchanged from 2013 and 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, whereas the rate for medical and moving purposes is based on the variable costs.

As always, taxpayers have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates; however, 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.

Let us know if you have any questions about standard mileage rates and which driving activities you should keep track of as tax year 2014 begins.

Tax Brackets, Deductions, and Exemptions for 2014

In 2014, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2014 returns, filed by most taxpayers in April 2015, include the following:

    • The value of each personal and dependent exemption, available to most taxpayers, is $3,950, up $50 from 2013.
    • The new standard deduction is $12,400 for married couples filing a joint return, up $200, $6,200 for singles and married individuals filing separately, up $100, and $9,100 for heads of household, also up $150. The additional standard deduction for blind people and senior citizens is $1,200 for married individuals and $1,550 for singles and heads of household. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions such as mortgage interest, charitable contributions and state and local taxes.
    • Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $73,800, up from $72,500 in 2013.

We’ll be glad to help with all of your tax planning needs in 2014. Give us a call today!

How to Get Paid on Time

Due to current economic conditions, it’s likely that collecting on your accounts receivables is becoming more and more of a challenge. Strengthening your collection procedures may allow you to improve collection rates and shorten the aging days of your accounts receivables.

The following suggestions will help your business improve its cash flow and tighten up its credit and collections policies. Some of the tips discussed here may not be suitable for every business, but can serve as general guidelines to give your company more financial stability.

Define Your Policy. Define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway salespeople have to vary from these guidelines in attempting to attract customers.

Tip: You should have a system of controls for checking out a potential customer’s credit, and it should be used before an order is shipped. Further, there should be clear communication between the accounting department and the sales department as to current customers who become delinquent.

Clearly Explain Your Payment Policy. Invoices should contain clear written information about how much time customers have to pay, and what will happen if they exceed those limits.

Tip: Make sure invoices include a telephone number and website address so customers can contact you with billing questions. Also include a pre-addressed envelope.

Tip: The faster invoices are sent, the faster you receive payment. For most businesses, it’s best to send an invoice with a shipment, rather than afterward in a separate mailing.

Follow Through on Your Stated Terms. If your policy stipulates that late payers will go into collection after 60 days, then you must stick to that policy. A member of your staff (but not a salesperson) should call all late payers and politely request payment. Accounts of those who exceed your payment deadlines should be penalized and/or sent into collection, if that is your stated policy.

Train Staff Appropriately. The person you designate to make calls to delinquent customers must be apprised of the seriousness and professionalism required for the task. Here is a suggested routine for calls to delinquent payers:

  • Become familiar with the account’s history and any past and present invoices.
  • Call the customer and ask to speak with whoever has the authority to make the payment.
  • Demand payment in plain, non-apologetic terms.
  • If the customer offers payment, ask for specific dates and terms. If no payment is offered, tell the customer what the consequences will be.
  • Take notes on the conversation.
  • Make a follow-up call if no payment is received and refer to the notes taken as to any promised payments.
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