State of CA Business personal property tax statements are due soon

February 25, 2016 · Posted in Accounting, Management Tips, Profitability Tips, Tax Planning · Comment 

We at Core Performance believe it is critical to understand the filing requirements to avoid penalties and over-assessments. Should you want to speak with us about this topic, please call the office at 949 381-5629, or send an email to info@coreperformance.net

This Article written by Kathryn Zdan, EA

Unlike real property, business personal property is reappraised annually. Business owners with taxable personal property having an aggregate cost of at least $100,000 must file a business property statement with the county assessor, detailing costs of all supplies, equipment, and fixtures at each business location.

Most counties have mailed their business personal property tax statements to business owners, and while the due dates for returning the completed statements vary by county, the deadline to avoid penalties is May 9, 2016. Most counties use Form BOE-571-L, Business Property Statement.

Find your local assessor

For your county assessor’s contact information, go towww.boe.ca.gov/proptaxes/assessors.htm.

Penalties

If a business is required to file the statement and fails to do so, the county assessor will estimate a value and add a penalty of 10% of the estimated assessed value of the unreported property.1 As a result, failure to return Form BOE-571-L can result in an overassessment.

The tax rate is usually a little more than 1% of the assessed value. However, the tax bill might also include special assessments voted into effect within the property’s taxing jurisdiction. Generally, using a rate of 1.2% will give a conservative estimate.

For example, if the assessed value is $12,000, the property taxes on the business asset will be about $144 ($12,000 × 1.2%).

Penalty abatement

Effective January 1, 2016, AB 571 (Ch. 15-501) changed the reasonable cause exception to the penalty for failure to file business personal property tax statements, and failure to report a change in ownership to the BOE.2

Penalty abatement will now be granted if the failure to file the property statement or change in ownership statement was “due to reasonable cause and circumstances beyond the assessee’s control, and occurred notwithstanding the exercise of ordinary care in the absence of willful neglect.”

Previously the exception simply stated, “due to reasonable cause and not due to willful neglect.”

Electronic filing

Many counties provide online filing for most businesses. In most of these counties, once a taxpayer chooses the e-file option, the taxpayer will no longer receive a paper copy of Form BOE-571-L unless one is specifically requested.

For a list of the counties participating in the e-file program, go to www.calbpsfile.org.

Which assets are subject?

Every business that owns taxable personal property (other than a manufactured home) having an aggregate cost of $100,000 or more for any assessment year must file a property statement with the county assessor.

Businesses with property below the threshold value are required to file only if the county assessor mails the business a property statement to complete. Alternatively, the assessor may use direct billing.3 Direct billing may be used for smaller, established businesses whose aggregate property cost is under $100,000 and the value of which changes very little from year to year. These businesses may only be required to file statements every three or four years.4

All machinery, office furniture, computers, equipment, and supplies are subject to tax. Business inventories, licensed vehicles, and intangible assets are exempt from assessment.5

Assessment begins with the cost of the asset, including sales tax, freight, and installation, but not including any trade-in value. The assessor applies an index factor to the asset’s cost and then applies a depreciation factor to the result, and this becomes the assessed value. The assessor’s depreciation schedule is different from the franchise or income tax depreciation schedule, as it is based on expected economic life.6

Payment dates

Property tax statements are due May 9. After the statements are filed, the counties will assess the businesses, and property tax bills will be issued. For taxpayers who do not own the real property where the business is conducted, the business personal property tax bill should arrive about the middle of July. Payment is due by the end of August.

For taxpayers who do own the real property, the assessed value of the business assets will be added to the value of the real property, and the tax will be paid in the December and April tax payments.

Audits

Remember that property listed on Form BOE-571-L should also be listed on the depreciation schedules on the tax return. At least once every four years, county assessors are required to audit the books and records of any trade or business whose business personal property and trade fixtures have a FMV of $400,000 or more.7

Property tax and the repair regulations

Because the IRC §263(a) repair regulations were never adopted for California property tax purposes, businesses preparing a California Business Property Statement may be required to keep separate sets of fixed asset records. For more information on this, see “IRC §263(a) repair regulations and California property taxes” in the November 2015 issue of Spidell’s California Taxletter®.

1 R&TC §§441, 463, 501
2 R&TC §§463(d), 483
3 R&TC §441
4 BOE Assessor’s Handbook, Section 504, available at: www.boe.ca.gov/proptaxes/pdf/ah504.pdf
5 R&TC §§212, 219, 224
6 BOE Assessor’s Handbook, Section 504
7 R&TC §469

What story does your Company’s financial statement tell ?

Narrative and Numbers:  Story Telling using Visionary Accounting tools, as well as solid number crunching

Are your financial statements in a strong position to tell an accurate reading of your Company, it’s past, present, and future?

Because we perform real-time business accounting using mature cloud accounting and reporting solutions, we are able to effectively leverage our traditional analytical and number crunching skills to paint an accurate picture of your Company. Given the current competitive landscape, more than ever, our clients are looking to their accounting adviser for guidance on how to grow their business and drive profitability.

With cloud accounting, time that was once spent keying in data can now be spent critically reviewing and analysing the information to draw out useful insights. This means the small business receives not only complete and accurate data, but also real insights on performance, facilitating more strategic and effective decision-making.  The benefits of the cloud are no secret. It enables our firm, and yours, to boost productivity with access to needed information from anywhere, at any time and on any device. Most importantly, it means you have access to a full picture of your business’ finances in real time so the advice we provide is based on accurate data.

We do not believe that the only things that matter are the numbers and that imagination/creativity are dangerous distractions. Both are critical to tell the story – – problem is, most Accountants and Bookkeepers are so buried in the details of the Accounts and the data entry process, that they’re not available to do the analysis, interpretation, and address the big picture.

We also do not believe that the full story is found just by story tellers, who build on the stories that can be told about companies and how these stories will bring untold wealth. In our view, you need both sides persisting to lead the storyline; and being used to cross-check and audit the other side of the story. Stories matter, but only if they are connected with numbers, and numbers are empty, unless they are connected with narratives. In our firm, we have designed accounting practices and procedures by which we help you build your Company’s narrative, we check them against reality and transition them into passionate business stories that capture the imagination.

We’re passionate about Small Businesses with less than 25 Employees !

Understanding the Small Business Health Care Tax Creditisplogo_premreseller

The Affordable Care Act includes the small business health care tax credit, which can benefit small employers who provide health coverage for their employees.

The small business health care tax credit benefits employers who:

  • have fewer than 25 full-time equivalent employees
  • pay an average wage of less than $51,600 a year
  • pay at least half of employee health insurance premiums

Here are some facts that will help you understand this tax credit and how it may affect your small business or tax-exempt organization:

  • Credit percentage is 50 percent of employer-paid premiums; for tax-exempt employers, the percentage is 35 percent.
  • Small employers may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
  • For 2015, the credit is phased out beginning when average wages equal $25,800 and is fully phased out when average wages exceed $51,600. The average wage phase out is adjusted annually for inflation.
  • Generally, small employers are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit.  Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years prior to 2014.   Employers who were eligible to claim this credit for prior years – but did not do so – may consider if they are still eligible to amend prior year returns in order to claim the credit.

Gathering the following information will assist you in completing Form 8941,Credit for Small employer Health Insurance Premiums.

  • SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
  • Numbers of full-time and part-time employees and numbers of hours worked
  • Average annual wages for employees
  • Employer premiums paid per employee, if applicable
  • Relevant K-1s and other pass-through credit information
  • Cost of coverage for each employee
  • Payroll tax liability – for tax-exempt organizations only
  • Pass-through credit info – for K-1s of other small employers

For more information about the Affordable Care Act visit IRS.gov/aca.

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We’re Experts at Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

CoreGroupWe know all the Details of the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

Congressional leaders unveiled a massive comprehensive package last week, which will not only keep the government funded through September 2016, but also addresses the extension of many valuable tax provisions. Some of the most relevant provisions of the new legislation are summarized below. As always, consult your Marcum Tax professional to discuss how these provisions can benefit you and your business for 2015 and future years.

PROVISIONS 

CHANGES

KEY INDIVIDUAL TAX PROVISIONS
Tax-free IRA contributions to charity after age 70 1/2 Made permanent
State and local sales taxes itemized deduction Made permanent
American Opportunity Tax Credit (College Costs) Made permanent with new restrictions to claim credit
Enhanced Child Tax Credit Made permanent with new restrictions to claim credit
Basis adjustment to stock of S corporations making charitable contributions of appreciated property Made permanent
Income exclusion for discharged mortgage debt Extended for two years (2015 through 2016)
Deduction of mortgage insurance premiums Extended for two years (2015 through 2016)
Deduction of qualified tuition & fees “above-the-line” Extended for two years (2015 through 2016)
KEY BUSINESS TAX PROVISIONS
Research Tax Credit   •   Made permanent
•   The credit is refundable up to $250,000 against employer payroll taxes for any business under five years of age and with less than $5 million in annual gross receipts
•     Private companies with less than $50 million in gross receipts can use the credit against Alternative Minimum Tax
Five-year holding period for S Corporation built-in gains for dispositions Made permanent
Subpart F exception for active financing income Made permanent
Qualified small business stock gain exclusion Made permanent
Work Opportunity Tax Credit   •   Extended through 2019
•   Increases the credit to 40% of first $6,000 of wages for individuals who have been unemployed for 27 weeks or more and have received unemployment compensation
CFC-related payment look-through rule Extended through 2019
Energy Efficient Commercial Building Deduction Extended for two years (2015 through 2016)
New Markets Tax Credit Extended through 2019 with an annual allocation of $3.5 billion and extends the carryover period to 2024
Production Tax Credit for Renewables Extended for five years (2015 through 2019)
Affordable Care Act “Cadillac Tax” Postponed the starting date from 2018 to 2020
Affordable Care Act Medical Device Tax Two year moratorium
KEY DEPRECIATION PROVISIONS
Bonus depreciation   •   Extended for property placed in service through 2019 (2020 for certain long-lived and transportation property)
•   50% rate for 2015-2017, 40% rate for 2018, and 30% rate for 2019
Section 179 depreciation (first year expensing)   •   Made permanent
•   $500,000 expensing allowance and $2 million phase-out threshold which will be indexed for inflation for years after December 31, 2015
•   Computer software and HVAC units made eligible
•   Elimination of the Section 179 expensing cap for qualified real property beginning in 2016
15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements Made permanent

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