IRS REDUCES STANDARD MILEAGE RATES FOR 2017

The IRS has announced decreases in the standard mileage rates that taxpayers will use for calculating business, medical, and moving expenses in 2017. Use of the standard mileage rate is a popular alternative to using the actual expense method, which requires taxpayers to keep track of specific costs for maintenance, repairs, tires, gas, oil, insurance, etc.  Business Use According to the IRS, the standard mileage rate for use in calculating 2017 business travel expenses is 53.5¢, down from 54¢ in 2016. The new rate also applies where the employer maintains an “accountable” plan for reimbursing employees who use their own … Continue reading

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IRS ANNOUNCES NEW RELIEF FOR LATE ROLLOVERS

The IRS has released new guidance to help taxpayers avoid taxes and penalties for late rollovers of distributions from employer-sponsored retirement plans and individual retirement accounts (IRAs). Ordinarily, such rollovers must be completed within 60 days to be considered valid. The new guidance establishes a process for taxpayers who miss the 60-day rollover window for any one of 11 different reasons to correct the error.  Background Generally, a taxpayer who wants to roll funds tax free from a workplace retirement plan or IRA into another plan or IRA has two options: (1) Arrange for a direct trustee-to-trustee transfer of the … Continue reading

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2017 SOCIAL SECURITY WAGE BASE AND RETIREMENT PLAN CONTRIBUTION LIMITS

The Social Security Administration and the IRS have announced the cost-of-living adjustments that apply to the Social Security tax and retirement plan contribution limits for 2017. The most notable increase affects Social Security taxes.    Social Security Wage Base Wages and self-employment compensation are subject to a 6.2% Social Security tax. The tax is payable by both the employee and the employer, combining for a total tax rate of 12.4%. The self-employed pay both portions of the tax.  The tax applies only to wages and self-employment compensation up to an annually adjusted wage base. For 2017, the new Social Security wage … Continue reading

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AVOID MISCLASSIFYING EMPLOYEES AS INDEPENDENT CONTRACTORS

Businesses that use independent contractors must be careful to observe federal tax laws regarding who does and who does not qualify for that designation — or they risk incurring significant financial penalties. Though sometimes the line between the two categories of workers can blur, the problem of misclassified independent contractors remains a high priority issue for the IRS.  Distinct tax obligations For an employee, the business generally must withhold income and FICA (Social Security and Medicare) taxes from the employee’s pay and deposit the taxes with the government in a timely manner.   The business must also pay its own share … Continue reading

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Capitalize or Deduct? IRS Offers Simpler Rules

The tax law allows businesses to deduct ordinary and necessary expenses, including the costs of repairs and maintenance. However, amounts paid to acquire and improve buildings, equipment, and other tangible property must be capitalized and generally are deducted over time through depreciation. Reconciling the two rules has been difficult for many businesses. To help clarify how the rules apply, the IRS issued final regulations in 2013 for application beginning in the 2014 tax year. De minimis Safe Harbor The regulations include a safe harbor rule that allows eligible businesses to treat as “de minimis” (and therefore currently deductible) certain expenditures … Continue reading

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