IRS issues standard mileage rates for 2019

WASHINGTON — The Internal Revenue Service today issued the 2019 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, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 58 cents per mile driven for business use, up 3.5 cents from the rate for 2018,
  • 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Notice-2019-02.

The standard mileage rate for business use 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. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2010-51.

Notice 2018-02, posted today on IRS.gov, contains the standard mileage rates, 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.

Tax reform expands availability of cash accounting

Under the Tax Cuts and Jobs Act (TCJA), many more businesses are now eligible to use the cash method of accounting for federal tax purposes. The cash method offers greater tax-planning flexibility, allowing some businesses to defer taxable income. Newly eligible businesses should determine whether the cash method would be advantageous and, if so, consider switching methods.

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Now’s the time to review your business expenses

As we approach the end of the year, it’s a good idea to review your business’s expenses for deductibility. At the same time, consider whether your business would benefit from accelerating certain expenses into this year.

Be sure to evaluate the impact of the Tax Cuts and Jobs Act (TCJA), which reduces or eliminates many deductions. In some cases, it may be necessary or desirable to change your expense and reimbursement policies.

What’s deductible, anyway?

There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Sec. 162, which permits businesses to deduct their “ordinary and necessary” expenses.

An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It need not be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.

What did the TCJA change?

The TCJA contains many provisions that affect the deductibility of business expenses. Significant changes include these deductions:

Meals and entertainment. The act eliminates most deductions for entertainment expenses, but retains the 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? In a recent notice, the IRS clarified that such meals continue to be 50% deductible, provided they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.

Transportation. The act eliminates most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. This change may lead some employers to discontinue these benefits, although others will continue to provide them because 1) they’re a valuable employee benefit (they’re still tax-free to employees) or 2) they’re required by local law.

Employee expenses. The act suspends employee deductions for unreimbursed job expenses — previously treated as miscellaneous itemized deductions — through 2025. Some businesses may want to implement a reimbursement plan for these expenses. So long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.

Need help?

The deductibility of certain expenses, such as employee wages or office supplies, is obvious. In other cases, it may be necessary to consult IRS rulings or court cases for guidance.

For questions about tax deductions specific to your business, give Launch Consulting a call today.

Tax-free fringe benefits help small businesses and their employees

Tax-free fringe benefits help small businesses and their employees.

In today’s tightening job market, to attract and retain the best employees, small businesses need to offer not only competitive pay, but also appealing fringe benefits. Benefits that are tax-free are especially attractive to employees. Let’s take a quick look at some popular options.

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Accelerated Due Date for FinCEN Form 114

FinCEN Form 114, formerly referred to as “FBAR”, Report of Foreign Bank and Financial Accounts, is used to report a financial interest in or signature authority over a foreign financial account. The “FBAR” is due June 30 this year to report 2015 accounts, with no extensions allowed.

As part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, tax years beginning after December 31, 2015 (beginning Jan 1, 2016), will be due April 15 with a maximum extension of 6 months.

The IRS has done a pretty good job with assuming this role on behalf of the Financial Crimes Enforcement Network and the Department of the Treasury. The first step they took was the electronic filing mandate a few years ago, and now, matching the deadline to the individual taxpayer deadline and adding an extension makes for a smoother filing season.

For more information on whether you may be required to file FinCEN Form 114, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Due Date for Forms 1099 Quickly Approaching

Form 1099-MISC along with many other informational returns are due to recipients at the end of this month. Last year, I gave a brief outline of who may be be required to file.

Penalties for late filing range from $30-100 per late or incorrectly filed return. The maximum penalty is $250,000 per year. ($75,000 for small businesses).

These are pretty steep penalties for an informational return, and they are set to increase for the 2016 filing period ($50 for the minimum and up to $175,000 for small businesses).

 

For instructions on how to prepare Form 1099-MISC for the 2015 reporting tax year, visit the IRS website.

For information on due dates, and when and where to file, check out this IRS Publication.

If you have any questions about Form 1099-MISC contact Paul Glantz, CPA at paul@launchconsultinginc.com

Controversial Charitable Contribution Regulation Withdrawn

This past September, the IRS proposed a regulation that would require charitable organizations to collect personal information from its donors and file information returns with the IRS with this personal information for donations over $250. The IRS would, in turn, would use informational returns received from the donee to match the amounts with the social security numbers of the donors.

A few days ago, we received notice that the IRS has scrapped these regulations. (whew!) This could have only led to more paperwork for non-profit organizations and greater risks for individuals to become victims of identity theft.

As a reminder, the IRS still requires contemporaneous written acknowledgement of a contribution from a charitable organization if the donation exceeds $250.  The acknowledgement must state the amount of cash or a description (but not the value) of property other than cash contributed. The letter must also state whether the donee provided any “goods or services” in consideration for the contribution. Lastly, if the goods or services received were entirely intangible religious benefits, the letter must provide a statement to that effect.

For more information on charitable contributions, please contact Paul Glantz, CPA at paul@launchconsultinginc.com

 

IRS to Begin Contacting Employers with Late Payroll Tax Payments

Falling behind on payroll taxes? Expect a call from the IRS soon.

In a recent news release, the IRS announced its plans to launch a new initiative aimed at monitoring payroll deposit patterns. Employers that are falling behind on payments will receive a letter or automated phone message reminding them of their payroll tax responsibilities.

For more information on Employment Tax & Reporting due dates, visit the IRS website.

For questions about payroll reports or taxes, contact Paul Glantz, CPA at paul@launchconsultinginc.com

How to Choose a Tax Preparer

With the 2015 tax filing season quickly approaching, I thought I would share this article the IRS published earlier this month about how to “Make a Wise Choice when Selecting a Tax Preparer”. I summarized a few key points below, because lets face it, it’s 2015 and nobody has the attention span to read a full article.

Here are some key take-aways:

  • Select a professional you trust. Since they will have access to sensitive data, including your social security number along with income and investment data, make sure you aren’t handing an engagement over to someone who could compromise your personal data. At Launch Consulting, we safeguard your data and use a secure file exchange software to protect your privacy.
  • Ask about preparation fees upfront. No-one likes surprises, especially in April around deadline time. Avoid any preparer that charges a fee based on refund, or says they can get you a larger refund. If a CPA is telling you this, it’s 100% unethical and against the rules of the State Board holding their license.
  • Make sure your preparer doesn’t disappear after April. Sometimes questions arise and you need your preparer to clarify. At Launch Consulting, we are with you year round, not just for tax preparation, but for tax planning and business consulting. We want to see you succeed, and we promise to be there every step of the way to help.

Lastly, only Enrolled Agents (EA), Certified Public Accountants (CPA), and Attorneys have unlimited representation rights in front of the IRS. As a licensed CPA, I can represent you on any matters including audits, payment/collection issues, and appeals.

 

The full article can be read here.

For any questions about business or personal taxes, contact Paul Glantz, CPA at paul@launchconsultinginc.com

Where did your tax dollars go in 2014?

With the 2014 Tax filing season behind us, whitehouse.gov‘s  interactive tool shows you exactly where your tax dollars were spent. It’s no surprise that over 50% of your taxes went to health care and national defense, but I think one of the more interesting numbers is the 9% we pay just to cover net interest from our nations deficit. Curious to know where your money went? Check out the tax calculator below!