In 2015, Various Tax Benefits Increase Due to Inflation AdjustmentsFor tax year 2015, the Internal Revenue Service announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these annual adjustments. Continue reading
On December 29, the Internal Revenue Service announced that it anticipates opening the 2015 filing season as scheduled in January. The IRS will begin accepting tax returns electronically on January 20. Paper returns will begin processing at the same time.
The decision follows Congress renewing a number of extender provisions of the tax law that expired at the end of 2013. These provisions were renewed by Congress through the end of 2014. The final legislation was signed into law on Dec. 19, 2014. (See “Passage of Tax Extenders Contains Key Breaks Tax Breaks.”)
“We have reviewed the late tax law changes and determined there was nothing preventing us from continuing our updating and testing of our systems,” said IRS Commissioner John Koskinen in a statement. “Our employees will continue an aggressive schedule of testing and preparation of our systems during the next month to complete the final stages needed for the 2015 tax season.”
Source: AccountingToday
New Standard Mileage Rates Just Announced by IRS ; Business Rate to Rise in 2015WASHINGTON — The Internal Revenue Service today 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:
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.
A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.
Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan.
Notice 2014-79 provides the optional standard mileage rates for substantiating the amount of deductible expenses for using an automobile for business, moving, medical, or charitable purposes. For 2015, the standard mileage rates are 57.5 cents for business use of an automobile, 14 cents for use of an automobile as a charitable contribution, and 23 cents for use of an automobile as a medical or moving expense.
Notice 2014-79 also provides the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.
The rules for using the optional standard mileage rates to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51.
Notice 2014-79 will be in IRB IRB 2014-53, dated December 29, 2014.
WealthManagement.com provides insight to Estate Planning for 2015.The consensus at 48th Annual Heckerling Institute on Estate Planning was that because 2014 is an election year, there’s unlikely to be any major tax reform this year. The year 2015, however, could be a different story.
Franchise Tax Board Warns Public of Scams10.22.2013
Sacramento – The Franchise Tax Board (FTB) today warned taxpayers of theft ploys involving scammers attempting to use FTB’s likeness for their personal gain.
“If you receive a questionable solicitation, contact FTB immediately and talk to a live agent to review your account,” said State Controller and FTB Chair John Chiang. “Taxpayers should protect their personal information and treat any unsolicited phone calls or emails with caution.”
Police have recently reported that scammers are contacting elderly people in Beverly Hills and informing them they received a red light traffic ticket last February that has been referred to FTB for collections. The scammer instructs the victim to load money on a prepaid debit card and send it to a bogus address. The scammer refers victims to an actual FTB phone number for reference.
Other scams claiming to represent FTB attempt to lure people into revealing personal and financial information, such as Social Security, bank account, or credit card numbers. This type of scam is referred to as “phishing” and is a technique aimed at getting personal information for the purpose of identity theft. Scams of this nature often involve an email that masquerades as offering to check the status of your state income tax refund.
FTB takes the safety and security of taxpayer information very seriously. If anyone receives a questionable contact from FTB, they should keep the following in mind:
Taxpayers who receive a questionable contact should call FTB at 800.852.5711.
FTB’s Information Privacy policy is available online at ftb.ca.gov.
For more information on other taxes and fees in California, visit taxes.ca.gov.
Affordable Care Act has provisions for individuals who need to purchase Health Care.New IRS Publication Helps You Find out if You Qualify for a Health Coverage Exemption
Taxpayers who might qualify for an exemption from having qualifying health coverage and making a payment should review a new IRS publication for information about these exemptions. Publication 5172, Health Coverage Exemptions, which includes information about how you get an exemption, is available on IRS.gov/aca.
The Affordable Care Act calls for each individual to have qualifying health insurance coverage for each month of the year, have an exemption, or make an individual shared responsibility payment when filing his or her federal income tax return.
You may be exempt if you:
On IRS.gov/ACA, you can find a comprehensive list of the coverage exemptions.
How you get an exemption depends upon the type of exemption. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS when you file your income tax return, and others from either the Marketplace or the IRS.
Additional information about exemptions is available on the Individual Shared Responsibility Provision web page on IRS.gov. The page includes a link to a chart that shows the types of exemptions available and how to claim them. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.
Tips and Techniques to Improve Your Restaurant and Increase Your Profits
This event is presented by the U.S. Small Business Administration, the City Heights Business Association and other Business Associations in the Area.
WHEN: Thursday, November 13th—7:30 a.m. to 10:30 a.m.
WHERE: 4305 University Avenue, 6th Floor Conference Room, San Diego, CA 92105
You’ll Learn:
* How to Improve Your Operating Efficiency
* How to Control Costs
* How to Increase Profits
* How to Best Market Your Restaurant
To view announcement as web page:
http://content.govdelivery.com/accounts/USSBA/bulletins/d4d0c5
| Presenters: Sigmund Penn is a recognized expert in the food service industry and has helped over 120 restaurant chains and many individual-owned establishments improve the quality of their food and beverage services and update marketing techniques to fill their business with customers and increase their profits.Cyndi Darlington, of Darlington Marketing will provide you with great tips on cost effectively marketing your restaurant. Her company specializes in restaurant and hospitality industries. |
Register Online at: http://events.sba.gov
Contact: Rosa Rodarte, 619-727-4877
According to Accounting Today the answer is yes. In their article “An IRS Error in Your Favor; businesses need help in fixing agency mistakes”, the IRS may be suffering from an accuracy problem.
But before I go any further, I’d like you to keep these numbers in mind that I’ll explain further down: 20, 10, 4, 6 = $81,578
What Accounting Today is alluding to is that because of the level of complexity of what the IRS is supposed to “check for”, and the sheer volume of returns processed, is exactly what sets the ball in motion for the IRS to make an error. They are examining returns for tax obligations and requirements, meeting the IRS rules concerning tax deductions, exceptions, return due dates, estimated installment amounts, and employment tax liability due dates, etc.. “There is a very real possibility that the IRS has miscalculated, resulting in many taxpayers unknowingly walking away from overpayments.” They also point out that start-ups and young companies “are at particular risk for error” because navigating can be especially challenging and they often fail to discover IRS errors or make their own mistakes. But the bad news doesn’t end there.
It isn’t just the IRS that has an accuracy problem. It’s tax preparers too. Seasonal front-window tax preparation services can be risky. A large segment of my business comes from child care providers. I specialize in their tax preparation. Just how well versed is a “seasonal tax preparer” to know their specific business, deductions and exceptions that need to be included for child care providers? I’ll wager not too many.
But remember the numbers I mentioned above… 20, 10, 4, 6 = $81,578? And what do they mean?
20 = The last 20 new clients that came into my office.
10 = Of the 20, 10 were Childcare Professionals.
4 = Of the 20, 4 were people who owned real estate rentals.
6 = Miscellaneous
$81,578 = Overpaid tax thru incorrect tax preparation.
The 20 returns were all incorrect preparation. Of the 20 only one was ‘self-prepared’. The others had used either a wholesale / front-window service or someone who claimed to know how to accurately prepare taxes. This is a much bigger problem than the IRS not calculating penalties correctly.
As practitioners, one of the first *benefits* we bring a client is in examining and scrubbing their previous returns. Depending on the history, it can be one to three years. It can be more if history warrants it. If there has been an error – we will find it.
Today you cannot be too careful. You are in a need to know capacity – and you need to have trust in the person who is doing your taxes. Always err on the side of caution. There is no way a wholesale /front window tax preparation service and its preparers that operate “seasonally” is going to be available if you get a letter from the IRS. Why risk it?
When we meet with a prospective client, what I want them to know is that 85% of our clients are from referrals. Of those 85% – more than 50% are “lifetime clients” (meaning more than 15-20 years) and now we have THEIR children and relatives as clients; generational referred clients.
End Point: Keep that in mind when selecting someone who is going to prepare your taxes. You want consistency, trustworthiness, experience and knowledge – and someone you can reach if you are contacted by the IRS. You want an Enrolled Agent.
Source: http://www.accountingtoday.com/ato_issues/28_10/An-IRS-error-in-your-favor-72213-1.html
Anyone that qualifies as a “First Time Home Buyer” can take up to $10,000 out of their IRA penalty free for certain purchase costs. BUT did you know it doesn’t have to be for your home purchase? Call for more information at (619) 589-8680 or use our contact form.
Entity creation has a cost!If you are thinking of forming an LLC or corporation PLEASE call me before you do anything. Over 90% of the entities we see are dissolved within the first 4 years of existence. When creating an entity you will incur ongoing addition business expenses that may not be necessary. You can reach me at 619-589-8680.
Under The Magnifying GlassThe IRS is taking a closer look at 1040’s, specifically Line 21 – OTHER INCOME. They are scrutinizing CoD’s aka “Cancellation of Debt”. I’ll have more information for you by November. In the meantime, If you think this affects you, give me a call at 619-589-8680.
Take Advantage of Credits and Deductions Are you, your spouse or a dependent off to college? If so, here’s a quick tip from the IRS: some of the costs you pay for higher education can save you money at tax time. Here are several important facts you should know about education tax credits:
WASHINGTON ― With another school year now in full swing, the Internal Revenue Service reminded parents and students that now is a good time to see if they will qualify for either of two college tax credits or any of several other education-related tax benefits when they file their 2014 federal income tax returns. Continue reading
Getting Married Can Affect Your Premium Tax CreditThe IRS reminds newlyweds to add a health insurance review to their to-do list. This is particularly important if you receive premium assistance through advance payments of the premium tax credit through a Health Insurance Marketplace.
If you, your spouse or a dependent gets health insurance coverage through the Marketplace, you need to let the Marketplace know you got married. Informing the Marketplace about changes in circumstances, such as marriage or divorce, allows the Marketplace to help make sure you have the right coverage for you and your family and adjust the amount of advance credit payments that the government sends to your health insurer. Continue reading
WASHINGTON — The Internal Revenue Service today reminded truckers and other owners of heavy highway vehicles that in most cases, their next federal highway use tax return is due on Tuesday, Sept. 2, 2014.
This year’s Sept. 2 due date, pushed back two days because the normal Aug. 31 deadline falls on a Sunday, generally applies to Form 2290 and the accompanying tax payment for the tax year that begins on July 1, 2014, and ends on June 30, 2015. Returns must be filed and tax payments made by Sept. 2 for vehicles used on the road during July. For vehicles first used after July, the deadline is the last day of the month following the month of first use.
Though some taxpayers have the option of filing Form 2290 on paper, the IRS encourages all taxpayers to take advantage of the speed and convenience of filing this form electronically and paying any tax due electronically. Taxpayers reporting 25 or more vehicles must e-file. A list of IRS-approved software providers can be found on IRS.gov.
Paper returns must be mailed and postmarked by midnight on Sept. 2. As usual, IRS offices will be closed on Labor Day, Monday, Sept. 1.
The highway use tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. This generally includes trucks, truck tractors and buses. Ordinarily, vans, pick-ups and panel trucks are not taxable because they fall below the 55,000-pound threshold. The tax of up to $550 per vehicle is based on weight, and a variety of special rules apply, explained in the instructions to Form 2290.
More information can be found in the Trucking Tax Center at IRS.gov/truckers.
Author’s Note: This post explains why we advocate that taxpayers select a professional tax practitioner who is either a CPA, attorney or Enrolled Agent. If you don’t, you may end up the victim of fraud and the problems attached to it.
Timing is everything, and the National Taxpayer Advocate Service (an independent *watchdog* group within the IRS ) just presented its mid-year report to Congress revisiting its 2002 Congressional recommendation to authorize the IRS to establish *minimum standards* for tax return preparers. Continue reading
payer Bill of Rights 10 Provisions to be Highlighted on IRS.gov, in Publication 1 IR-2014-72, June 10, 2014 WASHINGTON ― The Internal Revenue Service today announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.
A 2012 taxpayer survey conducted by the Taxpayer Advocate Service (TAS) showed that less than half of U.S. taxpayers believed they had rights – and only 11% said they knew what the rights were.
The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on IRS.gov.
Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.
“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”
The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate’s top priority in her most recent Annual Report to Congress.
“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,'” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”
The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:
The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future.
The timing of the updated Publication 1 with the Taxpayer Bill of Rights is critical because the IRS is in the peak of its correspondence mailing season as taxpayers start to receive follow-up correspondence from the 2014 filing season. The publication initially will be available in English and Spanish, and updated versions will soon be available in Chinese, Korean, Russian and Vietnamese.
The IRS has also created a special section of IRS.gov to highlight the 10 rights. The web site will continue to be updated with information as it becomes available, and taxpayers will be able to easily find the Bill of Rights from the front page. The IRS internal web site for employees is adding a special section so people inside the IRS have easy access as well.
As part of this effort, the IRS will add posters and signs in coming months to its public offices so taxpayers visiting the IRS can easily see and read the information.
“This information is critically important for taxpayers to read and understand,” Koskinen said. “We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”
“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly.
Koskinen added, “The Taxpayer Bill of Rights will serve as an important education tool, and we plan to highlight it in many different forums and venues.”
What would happen if the IRS re-classified your business as a hobby?It can happen. The IRS defines a hobby as a revenue-generating activity that lacks a profit motive. But what does that mean to you?
Most start-ups and small businesses have good years and not-so-good years. There are those that will say that if your business continually functions in the red, maybe you really need to rethink your business strategy. The IRS, on the other hand, will be looking at whether your business is really a for-profit business or is actually a hobby and the deductions or losses you have taken. “The IRS will generally assume an activity is a business if it generates a profit 3 of 5 consecutive years…“.¹ If the business has a loss for 3 of 5 consecutive years, the IRS will take a closer look at what they consider the “facts and circumstances” to evaluate whether the activity is actually a hobby or qualifies as a for-profit business.
Why is this important? Because if the IRS determines that your business doesn’t have a solid profit motive, they will re-classify your business as a hobby, then your past returns will be reviewed and deductions will be re-evaluated. If they feel your *activity* is actually a hobby, they will add back the losses claimed by you that will result in back-taxes, penalties and interest.
So here are a few tips that you should consider in support of your for-profit business in the event you are ever reviewed by the IRS. You want to be able to substantiate your business, and therefore entitled to any business losses you have claimed. These practices include being properly licensed, have separate bank accounts and credit cards, payment of business taxes, good accounting and record keeping, appropriate insurance, a separate business phone line, log or business journal of time devoted to the business and documented actions taken to help make the activity profitable.²
¹ Brett Hersh, http://www.hbsbusiness.com
² Ibid.
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Electronic Recordkeeping, Hard Copies and the IRSEven if your system crashes, you still must be able to RECONSTRUCT your records to their specifications. Do you know what they are?
Read about what you can and can’t do if you plan on storing your tax records electronically. In many cases you need to keep hard copies – in print. The IRS must be able to access your electronic media at any time it wants. You need to know what you can and cannot do. One thing you CAN’T DO is use the excuse “my computer hard drive crashed.”
Read our post on the use of electronic media for saving tax & business records.