1. 2016 TAX UPDATE BBB Presentation Barbara Bass, CPAShane Rohrbach, CPA

2. BUSINESS TAX IMPACT 2

3. Depreciation – Extenders  Section 179 – $500,000 threshold- PERMANENT  Bonus depreciation –New qualified equipment and leasehold improvements  Extended bonus depreciation under a phase-down schedule through 2019 *50% for 2015-2017 *40% for 2018 *30% for 2019 3

4. Other Business Changes  Mileage rate decreased to.54 (2015 was.575)  Cafeteria plan health reimbursement limited to $2,550 for out- of-pocket medical expenses  Research credit – PERMANENT  15 year straight line cost recovery for qualified leasehold improvements, restaurant property and retail improvements- PERMANENT  Reduced recognition period for S-corporations built in gains tax- PERMANENT 4

5. Other Business Changes Return Due Dates (Years beginning after December 31, 2015)  Partnership and S Corp tax returns-March 15 th for calendar year entities. 15 th day of the third month after close of the fiscal year for others  C Corporation tax return -April 15 th for a calendar year-the 15 th day of the fourth month after the close of the fiscal year, except special rule if June 30 year-end (see below)  FinCEN report 114-changed from June 30 th to April 15 th *An extension is available for 2016 Business returns can have a six month extension with exceptions for certain corporations through 2026. All changes apply to returns for tax years beginning after December 31, 2015 with one exception: C Corps with fiscal year ending June 30th have ten extra years (yes, ten) to make the change. 5

6. Other Business Changes Extension Due Dates 6 FormExtension Due Dates 1065September 15 th 1041September 30th 5500, 990November 15 th 4720, 5227, 6069, 88706 months period beginning on the due date for filing the return 3520-A, 35206 month period FinCEN 1146 month period ending on October 15th

7. ACA Health Insurance Highlights  Employers with less than 50 FTE’s  Not subject to employer mandate (If >25 employees & >$50,000 may qualify for credit)  Not subject to reporting requirements  Employers with 50 – 99 FTE’s  Subject to penalty in 2016 (2015 will be the year considered when calculating number of FTE’s)  Employers with 100 or more FTE’s  Subject to information reporting requirements in 2015. Forms 1095-B/1094-B and 1095-C/1094-C  Subject to penalty in 2015 (Only have to cover 70% of FTE’s in 2015 and 95% in 2016 and beyond) 7

8. ACA Eligible Small Employer Tax Credit Up to 25 employees  2014 – 2015 up to 50% credit for coverage purchased thru state insurance exchange’s Small Business Health Options Program (SHOP)  Other policies do not count  RESTRICTIONS apply … Of Course 8

9. ACA Large Employer PENALTIES  Imposed on no coverage of full time employees only  $2,000 penalty for not providing coverage  $3,000 penalty inadequate coverage  In 2015 there is transition relief that may allow you to be exempt from penalty for the first 80 employees. 9

10. Texas Franchise Tax Changes  Tax rates have permanently been reduced by  1.0% rate is now 0.75%  0.5% rate is now 0.375%  E-Z rate of 0.575% is now 0.331%  Revenue threshold for E-Z computation has increased from $10 Million to $20 Million  Beginning in 2016, ‘No Tax Due Filers’ will be required to file electronically.  States granted a waiver, this year only, to paper file 10

11. Planning Opportunities Retirement Plans  Simplified Employee Plans SEPs  SIMPLE IRAs  401(k)  Profit Sharing Plans Health Insurance  Group Policies  Pay Out of Business Succession Planning Fringe Benefit Management Financial and Estate Planning 11

12. INDIVIDUAL TAX IMPACT 12

13. Fraud and Identity Theft Suggestions to safeguard your identity:  Always use security software with firewall and anti- virus protection.  Encrypt sensitive files-use strong passwords  Learn to recognize and avoid scams-don’t click on a link or download attachments from unknown sources  Protect your personal data-Treat your personal information the same as cash 13

14. Regular Tax Rate SingleMFJMFSHoH LT Cap Gains & Qual Div Rate 10%$9,275$18,550$9,275$13,2500% 15%$37,650$75,300$37,650$50,4000% 25%$91,150$151,900$75,950$130,15015% 28%$190,500$231,450$115,725$210,80015% 33%$413,350 $206,675$413,35015% 35%$415,050$466,950$233,475$441,00015% 39.6%$415,050+$466,950+$233,475+$441,000+20% 2016 Income Tax Brackets 14

15. Other Tax Increases Personal exemption phase-out – 2016  Reduced by 2% for each $2,500 which AGI exceeds: $311,300 – joint filers or $259,400 – single filers Itemized deduction phase-out – 2016  Reduced by 3% of the amount AGI exceeds: $311,300 – joint filers or $259,400– single filers  Reduction of up to 20% of allowable itemized deductions  Certain exclusions apply (i.e. medical expenses, investment interest, casualty & theft losses) 15

16. Other Changes – PERMANENT  State & local sales tax deduction – BIG DEAL for Texas  Educator deduction up to $250  Tax-free RMDs from IRAs to qualifying charitable organizations up to $100,000  American Opportunity Tax Credit  Child Tax Credit  Earned Income Credit 16

17. Other Changes – Two Year extenders thru 2016  Mortgage Insurance Premium deduction  Mortgage Debt Exclusion  Qualified Tuition/related expenses deduction 17

18. Estate, Gift & GST – Permanent since 1-1-14  2016=$5,450,000 inflation adjusted exemption  Portability for Surviving Spouse  Unused exemption on 1 st -to-die carries to surviving spouse  Estate, Gift and GST tax rate for 2016 – 40%  Gifts: 2016 annual exclusion is $14,000 per person/per recipient 18

19. Individual Considerations  Review Wills and other legal documents such as Power of Attorney, HIPPA, etc. periodically  Review beneficiaries for life insurance polices, 401-k, 403-b, IRA, etc. periodically or when a life event occurs (marriage, divorce, birth or adoption of a child or grandchild)  Review retirement plans to ensure you are maximizing your contributions and investments 19

20. AFFORDABLE CARE ACT (ACA) INDIVIDUAL IMPACT 20

21. Individual Tax Impact – Effective since 1-1-13  Medicare Surtax on Net Investment Income  Tax is 3.8% of the lesser of –  Annual net investment income, or  The excess of modified AGI over a threshold Joint $250,000 OR Single $200,000 21

22. Individual Tax Impact – Effective since 1-1-13  Medicare Hospital Insurance Tax – High Earner  Tax is additional.9% on wages & self- employment income exceeding a threshold  Threshold – Joint $250,000 or Single $200,000  Employer withholds on all employees at $200,000  Regardless of marital status  No employer matching  TAX liability paid with personal tax return 22

23. 23 The information presented today is not intended to be used, nor can it be used, for the purpose of avoiding U.S., state or local tax penalties. You should always consult your tax professional before acting on the information presented.

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25. QUESTIONS? Presenters Shane Rohrbach, CPA shane@gmpcpa.com Barbara Bass, CPA bass@gmpcpa.com 25