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...
read moreIRS 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...
read more2017 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...
read moreAVOID 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...
read moreCapitalize 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...
read moreGenerous Energy Credits Available to Individuals and Businesses Through 2016
Conserving energy is a priority for many taxpayers. There are generous federal income-tax credits available to individuals and businesses that can help defray some of the cost of buying and installing certain energy efficient systems. Individuals The residential energy efficient property (REEP) credit is a tax credit of up to 30% of the expenses paid for solar electric, solar hot water, geothermal heat pump, small wind energy, and fuel cell property. In the case of fuel cell property, there is an additional cap on the credit of $500 for each...
read moreIRS Reduces Filing Requirements for Small Businesses Complying with Tangible Property Regulations
The IRS has announced that, for 2014, it will allow qualifying small businesses to account for tangible property on a go-forward basis for that year and without filing Form 3115. Essentially, the new rule makes it easier for small businesses to adopt the new tangible property regulations made effective for 2014. Background In 2013, the IRS issued long-awaited and wide-ranging final regulations concerning the proper method of accounting for the acquisition, maintenance, and improvement of tangible property. In 2014, the IRS issued additional...
read moreDoes Your Expense Reimbursement Plan Meet IRS Requirements?
Any employer reimbursing its employees for business-related expenses should consider whether the reimbursement arrangement meets the IRS’s requirements for an “accountable plan.” Meeting these requirements avoids the need to include the expense payments in employees’ gross income and avoids the employer’s share of any payroll taxes that otherwise would be due on the payments. General Requirements An accountable plan must meet several requirements. One is that the expense must have a “business connection,” meaning it must be allowable as a...
read more2015 Contribution Limits for Retirement Accounts
The IRS has announced the 2015 contribution limits for both employer-sponsored plans and individual retirement accounts (IRAs). Increased limits may provide individuals and businesses with opportunities for additional tax savings in the coming year. Employer-sponsored Plans 401(k), 403(b), and most 457 plans. In 2015, employees may defer up to $18,000 in earnings (up from $17,500 in 2014). For those 50 and older, the limit on supplemental “catch-up” contributions has increased from $5,500 to $6,000. Defined contribution plans. The dollar...
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