2015 SPECIAL EDITION!

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Muso & Co.CERTIFIED PUBLIC ACCOUNTANTS

Individuals must have health insurance coverage for the whole year of 2014. Individuals who do not have health insurance coverage in 2014 are subject to a penalty. This penalty must be reported and paid on the individual’s income tax return.

For 2014, the monthly penalty is $95 or 1% (or whichever is larger) on income in excess of $10,150 for those who are filing as single, and $20,300 for those who are Married Filing jointly.

A. Income Tax DeductionPersonal ExemptionFederal - 2014 personal exemption is $3,950 and $4,000 for 2015. California - Married Filing Jointly ! ! $216

Single, Married Filing Separately! $108 Head of House Hold ! ! $108 Dependent ! ! ! $333 Elderly/Blind ! ! ! $108

Personal Exemption is lower for higher income taxpayers, if your AGI is higher than the amount in chart, your personal exemption will be reduced by 2% for each $2,500 exceeding the threshold amount:

Filing Status 2014 AGI 2015 AGI

Single > $254,200 > $258,250

Head of Household > $279,650 > $284,050

Married Filing Jointly > $305,050 > $309,900

Married Filing Separately > $152,525 > $154,950

In This Issue:

INDIVIDUAL INCOME TAX2014 Health Insurance Penalty......1Personal Exemption.......................1Standard Deduction.......................2Itemized Deduction.......................3Medical Expenses...........................3Earned Income Credit...................3Child Tax Credit.............................3Annual Gift Tax Exclusion............4The IRA Contribution Limit.......4FICA and Self-Employment Tax..4Capital Gain Tax............................4Business Licenses & Tax................4

CORPORATE TAXATIONPayroll Tax Summary 2015.............5Affordable Care Act (Business).....5§179 and Bonus Depreciation.......5Standard Mileage Rate..................6Net Operating Losses....................6

OTHERContact Information ....................6

Tax Updates 2014-2015Individual Income Tax2014 Health Insurance Penalty - A Special Penalty for Taxpayers Who Do Not Have Health Insurance

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California personal exemption phase-out credit:

Higher income taxpayers, if AGI is higher than the Federal AGI threshold amount, for each $2,500 exceeding the threshold amount, exemption credit will be reduced by $6 for Single, Head of House Hold / Married Filing Separately, or $12 for Married Filing Jointly.

Example:Jane and Jackson are married filing jointly with no dependents for 2014. They have $350,000 AGI. They would only be allowed $5,056 personal exemption on their personal income tax return, instead of the full $7,900 ($3,950 x 2).

Step 1: How much does it exceed the threshold amount?($350,000-$305,050)/$2,500=17.98

Step 2: What percentage of personal exemption will be reduced? Step 1 will be round up to next non-decimal number.

2% x 18 = 36%Step 3: How much personal exemption is applied to your tax return?

$3,950 x 2 (two exemption) x (1-36%) = $5,056

For California tax return, total personal exemption would be $0.

Step 1: How much amount does it exceed the threshold amount?($350,000-$305,050)/$2,500=17.98

Step 2: How much reduction?$18 x $12 = $216

Step 3: How much personal exemption would be applied to your California tax return?$216 - $216 = $0

Standard DeductionFiling Status 2014 2015 Additional Deduction (Elderly (>65)/Blind)

Single $6,200 $6,300 $1,550

Head of Household $9,100 $9,250 $1,550

Married Filing Separately $6,200 $6,300 $1,200

Married Filing Jointly $12,400 $12,600 $1,200

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Itemized DeductionItemized deduction will be reduced for higher income tax payers. If your AGI is higher than the threshold amount, your itemized deduction will be reduced by the lessor of:

- 3% of the excess AGI over the threshold amount (California is 6%)- 80% of the itemized deduction otherwise allowable

Filing Status 2014 AGI 2015 AGI

Single > $254,200 > $258,250

Head of Household > $279,650 > $284,050

Married Filing Jointly > $305,050 > $309,900

Married Filing Separately > $152,525 > $154,950

Medical Expenses2014, medical expenses exceeding 10% of AGI are tax deductible as an itemized deduction. 7.5% for Individuals who are aged 65 or older. For California income tax, all taxpayer’s medical expenses exceeding 7.5% of federal AGI can be used for state itemized deduction.

B. Income Tax CreditThe followings are tax credits. You can reduce your tax liability or receive a tax refund.

Earned Income CreditEarned Income Credit is available to low income taxpayers:

Income LimitIncome Limit Maximum Earned Income CreditMaximum Earned Income Credit

2014 2015 2014 2015

No Qualifying Child < $14,590 if Single or < $20,020 if Married Filing Jointly (MFJ)

< $14,820 if Single or < $20,330 if Married Filing Jointly (MFJ)

$496 $503

1 Qualifying Child < $38,511 if Single or < $43,941 if MFJ

< $39,131 if Single or < $44,651 if MFJ

$3,305 $3,359

2 Qualifying Children < $43,756 if Single or < $49186 if MFJ

< $44,454 if Single or < $49,974 if MFJ

$5,460 $5,548

3 Qualifying Children < $46,997 if Single or < $52,427 if MFJ

< $47,747 if Single or < $53,267 if MFJ

$6,143 $6,242

Child Tax CreditChild Tax Credit of $1,000 for each qualifying child under the age of 17 as of the end of the tax year.Child Tax Credit is a refundable tax credit, which means if the credit is more than amount you owe before credit, you will get a refund. The refundable portion of Child Tax Credit is 15% of the amount by which the taxpayer’s earned income exceeds $3,000.

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Annual Gift Tax ExclusionIn 2014, the annual gift tax exclusion is $14,000 per donation. For example, if you have 3 children, you and your spouse can make a tax free gift up to $84,000 ($14,000 x 3 x 2).

The IRA Contribution Limit

2014 2015

Basic Contribution $5,500 $5,500

Additional Contribution for 50 years old or older $1,000 $1,000

The IRS requires a senior taxpayer (70 ½) to withdraw minimum distribution from an IRA account. The distribution amount is determined by the IRS. A table prepared by the IRS can be found online. Failure to take a required minimum distribution (RMD) from your traditional IRA will incur a 50% penalty for the amount by which the amount is less than the RMD.Example: Your RMD for 2014 is $5,000, but you only made a distribution of $3,000, so your penalty is $1,000 (($5,000 - $3,000) x50%).

2015 FICA and Self-Employment Tax• Maximum FICA (Social Security) wage base is $117,000 in 2014 and $118,500 in 2015.• FICA (Social Security and Medicare) tax rate is 7.65% for both employer and employee. • Medicare health insurance rate is 1.45%, plus 0.9% if wages are above $200,000.• Self-employment tax rate is 15.3%.

Capital Gain Tax

Tax Bracket 2014 2015 (with HI)*

10-15% 0% 0% N/A

25-28% 15% 15% 15%

33% 15% 15% 18.8%*

39.6% 20% 20% 23.8%*

*3.8% Additional Health Insurance Tax only applies to Net Investment Income.California taxes capital gains just like ordinary income.

Business Licenses & TaxCompanies that are registered with the California Secretary of State’s Office are required to have a business license, even if it is not “doing business”. Failure to apply for a business license with the city may incur a penalty.

Individuals who worked temporally as an independent contractor may be subject to

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PAYROLL TAX SUMMARY 2015

Employee Employer Wage Limit

Federal Income Tax (FIT) Yes No No

Social Security Tax (FICA SS) 6.2% 6.2% $118,500

Medicare Tax (FICA MED) 1.45% 1.45% No

Federal Unemployment Insurance Tax (FUTA) No 0.6% $7,000

State Income Tax (PIT) Yes No No

State Disability Insurance (SDI) 0.9% No $104,378

State Unemployment Insurance (SUI) No 1.5%-6.2% $7,000

State Employment Training Tax (ETT) No 0.1% $7,000

Affordable Care Act (Business)Large employers (50+ employees) may be subject to penalties if they do not provide affordable health insurance for their employees, while small employers who are proving insurance to their employees may receive a tax credit.

Small businesses (1-24 employees) may get a credit of up to 50% of the amount of health insurance premium paid for the employees.

§179 and Bonus Depreciation

2013 2014 California

Bonus Depreciation (New Equipment Only) 50% 50% N/A

§179 Depreciation $500,000 $500,000 $25,000

§179 Depreciation Phaseout range $2million - $2.5million $2million - $2.5million $200,000 - $225,000

2014-2015 CORPORATE TAXATION

local business tax. Check with your city’s finance office to find out if you need to report 1099-Misc earnings.

Direct Pay Options from IRSIRS’s new Direct Pay system is now working. You can pay your tax bill or estimated tax payment online. To access to Direct Pay, go to: http://www.irs.gov/Payments/Direct-Pay.

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Standard Mileage Rate

2013 2014 2015

Business Mileage 56.5 cents 56 cents 57.5 cents

Charitable Mileage 14 cents 14 cents 14 cents

Medical and Moving Mileage 24 cents 23.5 cents 23 cents

Net Operating Losses (NOL)The IRS allows taxpayers to apply a loss to the past tax year. Generally there is a two-year period carry-back. Also, instead of using your carry-back period, you can waive it and use all your losses going forward for up to twenty years. California, beginning in 2013, you can carry NOL back two years, or make an election to carry it forward (up to 20 years).

! 50% for NOL incurred in 2013, remaining 50% can carry forward.! 75% for NOL incurred in 2014, remaining 25% can carry forward.! 100% for NOL incurred in 2015.

NOL must carry back first and then forward unless the taxpayer has made an election to carry the loss forward.

Muso & Co. Texas Head Office P: 210-369-9083

20119 Bella Glade, San Antonio, TX 78256

Los Angeles Branch Office P: 323-526-9700 F:323-526-9711901 Corporate Center Dr. #411 MontereyPark, CA 91754

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