Monday, February 2, 2015
Over the past several years, the IRS has been developing new accounting and reporting regulations for costs associated with tangible property used in business activities. The final regulations became effective January 1, 2014. Because these regulations are somewhat different than the guidelines required in the past, the adoption of these new regulations is considered a change in the method of accounting for such costs. As a result, it is necessary for us to prepare an additional form with this year’s return, a Form 3115.
In most cases, this form will not have an impact on the taxable income calculation and therefore will not affect the amount of tax paid. The one-time filing of this form is simply a protective measure to let the IRS know that you are aware of the new regulations and that you have adopted them as your new method of accounting for costs related to tangible property used in your business.
The Form 3115 is not only required to be attached to your 2014 return, but also must be filed separately to a different IRS service center. Unfortunately, the separately filed form cannot be electronically filed. As a result, it will be necessary for us to obtain original signatures from everyone associated with the return. We are very sorry for any inconvenience this may impose on you. Again, this additional filing should only be required for the 2014 tax year.
© 2015 Jeffrey McCormick, CPA, Partner
Wednesday, January 7, 2015
The Internal Revenue Service has issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
• 57.5 cents per mile for business miles driven, up from 56 cents in 2014
• 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
• 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
Tuesday, October 28, 2014
WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.
These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.
“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”
The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:
1. Call you about taxes you owe without first mailing you an official notice.
2. Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
4. Ask for credit or debit card numbers over the phone.
5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:
• If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or atwww.tigta.gov.
• You can file a complaint using the FTC Complaint Assistant; choose “Other” and then “Imposter Scams.” If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.
Remember, too, the IRS does not use unsolicited email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.
Thursday, August 7, 2014
The 2014 standard mileage rates for the use of a car (also vans, pickups or panel trucks) to be used to calculate the deductible cost of operating an automobile for business, charitable, medical or moving purposes are as follows:
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 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.
Tuesday, August 5, 2014
Starting a new business is a very exciting and busy time. There is so much to be done and so little time to do it in. If you expect to have employees, there are a variety of federal and state forms and applications that will need to be completed to get your business up and running. That’s where we can help.
Employer Identification Number (EIN)
Securing an Employer Identification Number (also known as a Federal Tax Identification Number) is the first thing that needs to be done, since many other forms require it. EINs are issued by the IRS to employers, sole proprietors, corporations, partnerships, nonprofit associations, trusts, estates, government agencies, certain individuals, and other business entities for tax filing and reporting purposes.
The fastest way to apply for an EIN is online through the IRS website or by telephone. Applying by fax and mail generally takes one to two weeks. Please note that as of May 21, 2012 you can only apply for one EIN per day. The previous limit was 5.
State Withholding, Unemployment, and Sales Tax
Once you have your EIN, you need to fill out forms to establish an account with the State for payroll tax withholding, Unemployment Insurance Registration, and sales tax collections (if applicable).
Payroll Record Keeping
Payroll reporting and record keeping can be very time consuming and costly, especially if it isn’t handled correctly. Also keep in mind, that almost all employers are required to transmit federal payroll tax deposits electronically. Personnel files should be kept for each employee and include an employee’s employment application as well as the following:
Form W-4 is completed by the employee and used to calculate their federal income tax withholding. This form also includes necessary information such as address and social security number. Click here for Form W-4…
Form I-9 must be completed by you, the employer, to verify that employees are legally permitted to work in the U.S. Click here for Form I-9…
If you need help setting up the paperwork for your business, give us a call. Letting our experts handle this part of your business will allow you to concentrate on running your business.
Tuesday, October 1, 2013
“The IRS has not announced the postponement of any return filing deadlines, such as the October 15th tax deadline for individual tax returns on extension.”
Oliver, Rainey & Wojtek, L.L.P.
“At 12:00 this morning, much of the federal government – including several tax administrative functions – came to a halt as Congress failed to pass a government funding bill. Approximately 800,000 federal workers, including more than 85,000 Internal Revenue Service employees, are now furloughed until spending is reauthorized. This special News Update is focused on helping members who provide tax services navigate the shutdown’s impact on the IRS and tax administration, in anticipation of the Oct. 15 filing deadline.”
AICPA “Special News Update”
The failure of Congress to agree on a continuing spending resolution on Monday led to the first federal government shutdown since 1995–1996. The shutdown involves a large number of federal government functions, including many affecting taxpayers and tax practitioners. As this item was posted, it was not clear how long the shutdown would continue.
Here is a look at the status of IRS and other government functions during the shutdown:
What remains open?
The IRS will continue to process tax returns that contain remittances and all e-filed returns. As noted above, The IRS has not announced the postponement of any return filing deadlines, such as the Oct. 15 deadline for individual tax returns on extension.
Update, 2:30 PM EDT: While the IRS contingency plan excepts employees in the Information Technology Services Enterprise Operations to ensure “refunds continue to process” and says that “Without this support, . . . refunds to America’s taxpayers would not occur,” the IRS’s Oct. 1 description of operations during the shutdown says that, “Tax refunds will not be issued until normal government operations resume.”
Preparations for next filing season, such as design and printing of tax forms and the completion and testing of filing-related computer programs, will also continue.
During the shutdown, the IRS will take steps to protect ongoing bankruptcy, lien, and seizure cases and to prevent lapses in the statute of limitation.
The IRS website (irs.gov) will stay up, with a skeleton staff of six to maintain it. This staff will focus on ensuring the site stays up, that emergency messages are posted, and changes can be made. It is not clear if any new content will be posted to the site.
IRS criminal law enforcement and undercover operations will continue.
While the IRS says legal counsel functions are not excepted from the shutdown, the personnel in the Office of Chief Counsel are excepted. The Office of Chief Counsel’s primary responsibility during the shutdown is managing litigation and the time-sensitive filing of motions, briefs, answers, and other pleadings related to the protection of the government’s material interests.
The federal judiciary has announced that federal courts will remain open for approximately 10 business days. All scheduled proceedings and deadlines remain in effect, and the electronic case management system will stay in operation.
Around Oct. 15, the federal judiciary will reassess its situation and determine whether courts can stay open. If the federal courts do shut down, the IRS Chief Counsel personnel would be placed on nonduty status.
Forty-five employees of the National Taxpayer Advocate Service will remain on the job. They have been identified as necessary for ensuring that statutory deadlines are met.
The government will continue to mail out Social Security checks, since they are funded out of an indefinite appropriation. IRS employees who support this function will continue to work during the shutdown (even though their salaries are paid by annual appropriations).
The U.S. Postal Service will continue to function during the shutdown because it acts as an independent agency and is not funded by the federal government.
What is closed?
The shutdown brings a stop to all IRS taxpayer services, such as responding to taxpayer inquiries.
During the shutdown, all IRS audits and examinations will stop. All nonautomated collection activity will also stop.
The IRS will not process paper returns that do not contain remittances.
All IRS headquarters and administrative functions will shut down (although the commissioner will not be furloughed).
The IRS will enter into no new contracts and will not issue any purchase orders during the shutdown.
Approximately 86,000 IRS employees will be furloughed, that is, placed “in a temporary status without duties and pay because of lack of work or funds or other nondisciplinary reasons.”
The IRS’s contingency plan covers the first five business days of the shutdown (i.e., through next Monday). After that, if the shutdown continues, the IRS deputy commissioner for operations support will assess what needs to be done.
© 2013 AICPA “Special News Update”
Tuesday, September 17, 2013
Claiming a child can provide significant tax benefits. When couples divorce or separate, or even if the parents were never married, the question arises: who gets to claim the kids?
This sometimes presents a nightmare for tax preparers. This is because often both parents will claim the same child, and in this modern era of e-filing, the first one to file and claim the child will be accepted for e-file and the second to file will be rejected regardless of who is rightfully entitled to claim the child. If the second parent to file is legally eligible to claim the child, then that parent must file a paper return and provide proof of eligibility to claim the child’s exemption. This sometimes requires an elaborate array of documentation and can be quite a pain.
Another leading cause of problems are family court judges who will award the child’s tax exemption to the parent who is not qualified to claim the child under federal tax law. Rulings by family court judges cannot trump federal tax laws.
So, who legally, according to federal tax law, is entitled to claim the child? Well, the Internal Revenue Code says the parent with whom the child resided for the longer period of time during the tax year gets to claim the child’s exemption. This seems simple enough, but some parents have joint custody and they begin counting time by the hour and minute. However, when it comes to determining with whom the child resided the longest, the IRS looks at the number of nights the child sleeps in each parent’s home. If that turns out to be an equal number of nights, the tax rules include a tiebreaker that gives the child’s exemption to the parent with the higher adjusted gross income (AGI). However, a child is treated as the qualifying child of the noncustodial parent if the custodial parent releases a claim to the exemption to the non-custodial parent. The custodial parent can do this on an annual basis or for multiple years.
However, the custodial parent should be cautious about releasing the exemption for multiple years. The release can be revoked but the revocation does not become effective until the tax year following the year the non-custodial parent was provided a copy of the revocation. The IRS provides Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, for this purpose.
A number of tax benefits are at stake by claiming the child, including:
• The child’s exemption that produces a $3,900 tax deduction in 2013.
• A potential $1,000 child credit for children under the age of 17.
• For children attending college, the education credit (up to as much as $2,500) goes to the parent who claims the child’s exemption regardless of who pays the tuition.
• For children under age 13 the parent that claims the child’s exemption is the one that gets to claim a tax credit for childcare expenses while working.
• Claiming a child under the age of 19 can substantially increase the earned income tax credit if the taxpayer otherwise qualifies.
• Claiming a child can also help a single individual qualify for the more beneficial head of household filing status.
Caution: Some of the benefits phase out for higher income taxpayers. Where possible, parents should seek professional assistance to determine what makes sense financially for both parents. Please contact this office for additional information
Friday, May 17, 2013
If an individual or business entity wants to deduct charitable deductions on their tax return, federal tax rules require that those deductions be made to “qualified” organizations. What makes an organization qualified is its ongoing recognition by the Internal Revenue Service (IRS) as an organization that carries on an exempt charitable purpose.
IRS qualified organizations are listed in their annual publication 78- Cumulative List of Organizations described in Section 170© of the Internal Revenue Code. The IRS makes it easy to search their publication by offering it as an online database. The IRS database allows searches by name, city, state or deductibility status (how to treat donations for tax purposes). This listing is updated quarterly, but only reflects organizations that have received a ruling on their charitable status. The IRS publishes revocation of tax-exempt status notices as announcements in the Internal Revenue Bulletin (also available at www.irs.gov). Some exempt organizations may be excluded from the list even though their tax-exempt status has not been revoked. For example, some small charities that are only required to file a “postcard” return may not be listed.
Why should you care if a charitable organization is listed in this IRS Publication? Inclusion of an organization in Publication 78 generally insures that your charitable contribution tax deduction will be recognized by the IRS. If the organization is not listed in this publication, or if the IRS publishes a notice citing the revocation of the organization’s tax-exempt status, then any contributions to that organization may not be tax deductible.
If a contribution is made before the publication of an organization’s tax-exempt status revocation, it is still deductible for tax purposes, unless the contributor:
• had knowledge of the revocation of the ruling or determination letter;
• was aware that the revocation was imminent; or
• was in part responsible for, or was aware of, the activities or deficiencies on the part of the organization that gave rise to the loss of qualification.
If the charity is not listed in the IRS database, it may be qualified and an organization can request a copy of its determination letter to make sure it is qualified.
Charitable giving requires some due diligence on the part of the contributor as the IRS continually revokes the tax-exempt status of organizations. If your organization is considering any significant charitable donations it is advisable to confirm the tax-exempt status of the organization before you make the donation. If there is ever any doubt as to the deductibility of a charitable donation you should consult a qualified tax professional.
Thursday, January 24, 2013
During the waning hours of 2012 and early into January 1, 2013, Congress and the White House worked to avert the so-called fiscal cliff that was due to strike on the first of the New Year. The result of these efforts is The American Taxpayer Relief Act of 2012 (the Act). This new tax law does several things relating to the fiscal cliff, including a deferral of sequestration. Sequestration is the set of mandatory across-the-board spending cuts that were to take effect January 1. As a result of the Act, these spending cuts have been deferred until March, when once again Congress and the White House will have to address them.
The following is a summary of the more significant tax changes effected by the Act. If you would like more information regarding any of the following topics or your own unique situation, please contact us.
Individual tax rates
Under the Act, the tax rates for individuals will generally remain at 2012 levels. The lowest tax rate of 10 percent will remain at 10 percent for years after 2012. As well, the 25 percent, 28 percent, 33 percent and 35 percent rates. will remain at the lower rates for years after 2012. This extension of the lower rates applies to individual taxpayers making less than $400,000, $425,000 if filing as head-of-household, and married couples making less than $450,000 ($225,000 for each married spouse filing separately). The new top rate of 39.6 percent applies to taxable income over $400,000 for single filers, $425,000 if filing as head-of-household, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately). For those individuals who exceed the limits previously mentioned, the tax rate will be at the top percentage of 39.6.
Capital gains and dividends
Under the Act, a 20 percent rate applies to long-term capital gains and qualified dividends for taxpayers who are taxed at the 39.6 percent rate; the 15 percent rate continues for taxpayers in the 25 percent, 28 percent, 33 percent and 35 percent brackets. With respect to taxpayers in the 10 and 15 percent brackets, the 0 percent rate remains.
Personal exemptions and itemized deductions
Under current law, taxpayer’s personal exemptions are phased out at certain income levels. The Act permanently eliminates this phase-out for individuals making less than $250,000, $275,000 for heads of household, and married couples making less than $300,000 ($150,000 for married spouses filing separately).
In addition, current law limits the amount of itemized deductions that certain taxpayers are allowed to claim. The Act permanently eliminates these limitations for individuals making less than $250,000, heads of household earning less than $275,000, and married couples making less than $300,000 ($150,000 for married spouses filing separately).
Alternative minimum tax
The Act permanently indexes the individual alternative minimum tax (AMT) exemption amount for inflation. For 2012, the exemption amounts are $78,750 for married taxpayers filing jointly and $50,600 for single filers.
Pursuant to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRAA), prior law granted relief from the AMT for nonrefundable credits; this relief is retained under the Act.
Monday, November 19, 2012
The Internal Revenue Service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving expenses.
Beginning on January 1, 2013, the standard mileage rates for the use of a vehicle will be:
• 56.5 per mile for business miles driven
• 24 cents per mile driven for medical or moving expenses
• 14 cents per mile driven in service of charitable organizations
The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.
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