Issue Number:    IR-2011-69 IRS Increases Mileage Rate to 55.5 Cents per Mile  WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes. The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. "This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers." While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. The new rates are contained in Announcement 2011-40 on the optional standard mileage rates. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Mileage Rate Changes Purpose Rates 1/1 through 6/30/11    Rates 7/1 through 12/31/11  Business 51 55.5 Medical/Moving     19 23.5 Charitable 14 14   Issue Number:    IR-2010-126 Tax Season Starts on Time for Most Taxpayers; Those Affected by Late Tax Breaks Can File in Mid- to Late February WASHINGTON — Following last week’s tax law changes, the Internal Revenue Service announced today the upcoming tax season will start on time for most people, but taxpayers affected by three recently reinstated deductions need to wait until mid- to late February to file their individual tax returns. Taxpayers will need to wait to file if they are within any of the following three categories: Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February. Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students — covering up to $4,000 of tuition and fees paid to a post-secondary institution — is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit. Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16. For those falling into any of these three categories, the delay affects both paper filers and electronic filers. 2010 Tax Relief Act Additional information regarding this new tax law will be added shortly.  For immediate information on how this new law may affect you or your business, please call our office. IR-2010-119 IRS Announces 2011 Standard Mileage Rates WASHINGTON — The Internal Revenue Service today issued the 2011 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, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 51 cents per mile for business miles driven 19 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 as determined by the same study. Independent contractor Runzheimer International conducted the study. 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 any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.    Small Business Jobs Act of 2010   Tax breaks and incentives Enhanced small business expensing (Section 179 expensing). In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers can elect to write off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Under pre-2010 Small Business Jobs Act law, taxpayers could expense up to $250,000 of qualifying property—generally, machinery, equipment and certain software—placed in service in tax years beginning in 2010. This annual expensing limit was reduced (but not below zero) by the amount by which the cost of qualifying property placed in service in tax years beginning in 2010 exceeded $800,000 (the investment ceiling). Under the new law, for tax years beginning in 2010 and 2011, the $250,000 limit is increased to $500,000 and the investment ceiling to $2,000,000. The new law also makes certain real property eligible for expensing. For property placed in service in any tax year beginning in 2010 or 2011, the up-to-$500,000 of property expensed can include up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property). 100% exclusion of gain from the sale of small business stock for qualifying stock acquired after date of enactment and before Jan. 1, 2011. Before the 2009 Recovery Act, individuals could exclude 50% of their gain on the sale of qualified small business stock (QSBS) held for at least five years (60% for certain empowerment zone businesses). To qualify, QSBS must meet a number of conditions (e.g., it must be stock of a corporation that has gross assets that don't exceed $50 million, and the corporation must meet active business requirements). Under the 2009 Recovery Act, the percentage exclusion for gain on QSBS sold by an individual was increased to 75% for stock acquired after Feb. 17, 2009 and before Jan. 1, 2011. Under the new law, the amount of the exclusion is temporarily increased yet again, to 100% of the gain from the sale of qualifying small business stock that is acquired in 2010 after date of enactment and held for more than five years. In addition, the new law eliminates the alternative minimum tax (AMT) preference item attributable for that sale. General business credits of eligible small businesses for 2010 allowed to be carried back five years. Generally, a business's unused general business credits can be carried back to offset taxes paid in the previous year, and the remaining amount can be carried forward for 20 years to offset future tax liabilities. Under the new law, for the first tax year of the taxpayer beginning in 2010, eligible small businesses can carry back unused general business credits for five years. Eligible small businesses consist of sole proprietorships, partnerships and non-publicly traded corporations with $50 million or less in average annual gross receipts for the prior three years. General business credits of eligible small businesses in 2010 aren't subject to AMT. Under the AMT, taxpayers can generally only claim allowable general business credits against their regular tax liability, and only to the extent that their regular tax liability exceeds their AMT liability. A few credits, such as the credit for small business employee health insurance expenses, can be used to offset AMT liability. The new law allows eligible small businesses, as defined above, to use all types of general business credits to offset their AMT in tax years beginning in 2010. S corporation holding period. Generally, a C corporation converting to an S corporation must hold onto any appreciated assets for 10 years following its conversion or face a business-level tax imposed on the built-in gain at the highest corporate rate of 35%. This holding period is reduced where the 7th tax year in the holding period preceded the tax year beginning in 2009 or 2010. The 2010 Small Business Jobs Act temporarily shortens the holding period of assets subject to the built-in gains tax to 5 years if the 5th tax year in the holding period precedes the tax year beginning in 2011. Extension of 50% bonus first-year depreciation. Businesses are allowed to deduct the cost of capital expenditures over time according to depreciation schedules. In previous legislation, Congress allowed businesses to more rapidly deduct capital expenditures of most new tangible personal property, and certain other new property, placed in service in 2008 or 2009 (2010 for certain property), by permitting the first-year write-off of 50% of the cost. The new law extends the first-year 50% write-off to apply to qualifying property placed in service in 2010 (2011 for certain property). Special rule for long-term contract accounting. The new law provides that in determining the percentage of completion under the percentage of completion method of accounting, bonus depreciation is not taken into account as a cost. This prevents the bonus depreciation from having the effect of accelerating income. Boosted deduction for start-up expenditures. The new law allows taxpayers to deduct up to $10,000 in trade or business start-up expenditures for 2010. The amount that a business can deduct is reduced by the amount by which startup expenditures exceed $60,000. Previously, the limit of these deductions was capped at $5,000, subject to a $50,000 phase-out threshold. Limitation on penalty for failure to disclose certain reportable transactions (including listed transactions) on a return. The new law limits the penalty to 75% of the decrease in tax resulting from the transaction. The minimum penalty is $10,000 for corporations and $5,000 for individuals (for failure to report a listed transaction, the maximum penalty is $200,000 and $100,000, respectively). These changes are retroactively effective to penalties assessed after Dec. 31, 2006. Deductibility of health insurance for the purpose of calculating self-employment tax. The new law allows business owners to deduct the cost of health insurance incurred in 2010 for themselves and their family members in calculating their 2010 self-employment tax. Cell phones removed from listed property category. This means that cell phones can be deducted or depreciated like other business property, without onerous recordkeeping requirements. Offsets (revenue raisers) Information reporting required for rental property expense payments. For payments made after Dec. 31, 2010, the new law requires persons receiving rental income from real property to file information returns with IRS and service providers reporting payments of $600 or more during the tax year for rental property expenses. Exceptions are provided for individuals renting their principal residences on a temporary basis (including active members of the military), taxpayers whose rental income doesn't exceed an IRS-determined minimal amount, and those for whom the reporting requirement would create a hardship (under IRS regs). Increased information return penalties. Effective for information returns required to be filed after Dec. 31, 2010. Application of continuous levy to tax liabilities of certain federal contractors. For levies issued after date of enactment, the new law allows IRS to issue levies before a collection due process (CDP) hearing on Federal tax liabilities of Federal contractors (taxpayers would have an opportunity for a CDP hearing within a reasonable time after a levy is issued). Allow participants in governmental 457 plans to treat elective deferrals as Roth contributions. For tax years beginning after Dec. 31, 2010, the new law will allow retirement savings plans sponsored by state and local governments (governmental 457(b) plans) to include designated Roth accounts. Contributions to Roth accounts are made on an after-tax basis, but distributions of both principal and earnings are generally tax-free. Allow rollovers from elective deferral plans to designated Roth accounts. The new law allows 401(k), 403(b), and governmental 457(b) plans to permit participants to roll their pre-tax account balances into a designated Roth account. The amount of the rollover will be includible in taxable income except to the extent it is the return of after-tax contributions. If the rollover is made in 2010, the participant can elect to pay the tax in 2011 and 2012. Plans will be able to allow these rollovers immediately as of date of enactment. Crude tall oil (a waste by-product of the paper manufacturing process) is excluded from eligibility for the cellulosic biofuel producer credit. The new law limits eligibility for the tax credit to fuels that are not highly corrosive (i.e., with an acid number of 25 or less), effective for fuels sold or used after Dec. 31, 2009. Nonqualified annuity contracts. The new law permits holders of nonqualified annuities (annuity contracts held outside of a qualified retirement plan or IRA) to elect to receive part of the contract in the form of a stream of annuity payments, leaving the remainder of the contract to accumulate income on a tax-deferred basis. Guarantee fees. Amounts received directly or indirectly for guarantees of indebtedness of a U.S. payor issued after date of enactment are sourced, like interest, in the U.S. As a result, amounts paid by U.S. taxpayers to foreign persons will generally be subject to U.S. withholding tax. Please keep in mind that I've described only the highlights of the most important changes in the new law. If you would like more details about any aspect of the new legislation, please do not hesitate to call.    Small Business Health Care Tax Credit IR-2010-38, April 1, 2010 WASHINGTON ? Many small businesses and tax-exempt organizations that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service. Included in the health care reform legislation, the Patient Protection and Affordable Care Act, approved by Congress and signed by President Obama on March 23, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers. The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less. Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit. The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify. More information about the credit, including tax tips, guides and answers to frequently asked questions, is now available on the IRS Web site, IRS.gov. HIRE Act Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today. Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify. In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement. Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit. Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks. New Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, is now posted on IRS.gov, along with answers to frequently-asked questions about the payroll tax exemption and the related new hire retention credit. The new law requires that employers get a statement from each eligible new hire, certifying under penalties of perjury, that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for anyone during the 60-day period. Employers can use Form W-11 to meet this requirement. Reporting Foreign Bank and Financial Accounts   FS-2010-11, January 2010 Report of Foreign Bank and Financial Accounts (FBAR) If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund or other type of financial account, you may be required to report the account yearly to the Department of the Treasury. Under the Bank Secrecy Act, each United States person must file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. A United States person is not prohibited from owning foreign accounts but civil and criminal penalties may apply for failures to properly file FBARs when required. The information reported on an FBAR may be used for governmental purposes, including law enforcement and tax compliance purposes. Due June 30 The annual due date for filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), is June 30. The FBAR must be received by the IRS on or before June 30. Unlike tax returns, the FBAR is considered filed on the day it is received by the IRS. Postmarks are not considered evidence of timely filing.   IRS Announces 2010 Standard Mileage Rates WASHINGTON — The Internal Revenue Service today issued the 2010 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, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 50 cents per mile for business miles driven 16.5 cents per mile driven for medical or moving purposes 14 cents per mile driven in service of charitable organizations The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago. 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 as determined by the same study. Independent contractor Runzheimer International conducted the study. 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 any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.   Issue Number:    IR-2009-108 Inside This Issue -------------------------------------------------------------------------------- First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify  WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers. The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase. But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns. A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405. Income Limits Rise The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify. New Requirements Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law: Dependents are not eligible to claim the credit. No credit is available if the purchase price of a home is more than $800,000. A purchaser must be at least 18 years of age on the date of purchase. For Members of the Military Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.   The American Recovery and Reinvestment Act of 2009 provides a variety of new credits for individuals and businesses. A few of these credits are: "Making Work Pay" credit. The new law provides an individual tax credit in the amount of 6.2% of earned income not to exceed $400 for single returns and $800 for joint returns in 2009 and 2010. The credit is phased out at adjusted gross income (AGI) in excess of $75,000 ($150,000 for married couples filing jointly). Expanded and revised higher education tax credit. The new law creates a $2,500 higher education tax credit that is available for the first four years of college. Expanded credit for first-time home buyers. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10% of the purchase of a home (up to $7,500) by first-time home buyers. The provision applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit were required to repay any amount received under this provision back to the government over 15 years in equal installments (or earlier if the home was sold). The credit phases out for taxpayers with AGI in excess of $75,000 ($150,000 in the case of a joint return). The new law enhances the credit by eliminating the repayment obligation for taxpayers that purchase homes on or after January 1, 2009. It also extends the credit through the end of November 2009, and bumps up the maximum value of the credit from $7,500 to $8,000. Tax break for new car purchasers. The new law allows taxpayers to deduct State and local sales taxes paid on the purchase of a new automobile, including light trucks, SUVs, motorcycles, and motor homes. The tax break phases out starting with taxpayers earning $125,000 per year ($250,000 for joint returns). The deduction is allowed to both those who itemize their deductions as well as to nonitemizers. However, the deduction cannot be taken by a taxpayer who elects to deduct state and local sales taxes in lieu of state and local income taxes. Extension of bonus depreciation. Last year, Congress temporarily allowed business to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write off 50% of the cost of depreciable property acquired in 2008 for use in the United States. The new law extends this temporary benefit for qualifying property purchased and placed into service in 2009. Extension of enhanced small business expensing (Section 179). In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write off the cost of these expense in the year of acquisition in lieu of recovering these costs over time through depreciation. Last year, Congress temporarily increased the amount that small businesses could write off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The new law extends these temporary increases for capital expenditures incurred in 2009. Expanded loss carryback of net operating losses for small businesses. Under pre-Act law, net operating losses (NOLs) may be carried back to the two years before the year that the loss arises and carried forward to each of the succeeding twenty years after the year that the loss arises. For 2008, the new law extends the maximum NOL carryback period from two years to five years for small businesses with gross receipts of $15 million or less. We hope this information is helpful. If you would like more details about these or any other aspects of the new law, please do not hesitate to call. New Law Waives Required Minimum Distributions (RMDs) for Calendar Year 2009 A new law enacted in late 2008 provides that retirement plan account participants, IRA owners, and their beneficiaries do not have to take RMDs for 2009. Thus, taxpayers who can take advantage of this change won't be forced to sell stock or mutual fund shares held in retirement accounts when their value is exceptionally depressed. This change helps retired taxpayers who do not need to rely on the RMDs for living expenses. By not making the RMD for 2009 (or withdrawing less than the RMD) from their qualified plan accounts and/or IRAs, they will wind up with less taxable income for 2009, and, possibly, avoid (or mitigate the effect of) AGI-based phaseouts of tax breaks. They will also have more tax-sheltered amounts to leave to their beneficiaries. There's no need to show that a retirement plan account or IRA is "in distress" because of stock market conditions in order to qualify for the 2009 RMD suspension. Thus, for example, the RMD suspension applies equally to IRAs invested entirely in FDIC-insured bank-CDs as well as IRAs invested in depressed-in-value stocks or mutual funds. The suspension of RMDs for 2009 doesn't help those older taxpayers who must make regular withdrawals (sometimes in excess of the RMD) from their retirement plan accounts and IRAs in order to get by each month. Additional rules apply to taxpayers who turned 70 1/2 in 2008 and/or 2009. Conversions from an IRA to a ROTH IRA are allowed if the taxpayer is eligible. Please call your CPA regarding possible IRA planning options.   Issue Number:    IR-2008-131 Inside This Issue IRS Announces 2009 Standard Mileage Rates WASHINGTON — The Internal Revenue Service today issued the 2009 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, 2009, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) will be: 55 cents per mile for business miles driven 24 cents per mile driven for medical or moving purposes 14 cents per mile driven in service of charitable organizations The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008. The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half. The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation. 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 as determined by the same study. Independent contractor Runzheimer International conducted the study. 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 any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Revenue Procedure 2008-72 contains additional information on these standard mileage rates. Issue Number: IR-2008-088 Inside This Issue Scammers Use e-Mail, Fax to Pose as IRS WASHINGTON — The Internal Revenue Service cautions taxpayers to be on the lookout for a new wave of scams using the IRS name in identity theft e-mails, or phishing, that have circulated during the last two months.  In May and June alone, taxpayers reported almost 700 separate phishing incidents to the IRS. In 2008 so far, taxpayers have reported about 1,600 phishing incidents to the IRS.      “Taxpayers should take steps to keep their personal information out of the hands of identity thieves,” said IRS Commissioner Doug Shulman. “That includes not falling for any of the phony e-mails or faxes now in circulation pretending to come from the IRS.” The most common scams involve tax refunds and, this year, economic stimulus payments. Although most of these scams consist of e-mails requesting detailed personal information, the IRS generally does not send e-mails to taxpayers, does not discuss tax account matters with taxpayers in e-mails, and does not request security-related personal information, such as PIN numbers, from taxpayers.  Refund e-Mail Scam There are several variations of the refund scam, in which an e-mail claiming to come from the IRS falsely informs the recipient that he or she is eligible for a tax refund for a specific amount. The bogus e-mail instructs the recipient to click on a link to access a refund claim form. The form requests personal information that the scammers can use to access the e-mail recipient’s bank or credit card account.  This notification is phony. The IRS does not send unsolicited e-mail about tax account matters to taxpayers. Filing a tax return is the only way to apply for a tax refund; there is no separate application form. Taxpayers who wish to find out if they are due a refund from their last annual tax return filing may use the “Where’s My Refund?” interactive application on the IRS Web site at IRS.gov, the only official IRS Web site. Economic Stimulus Payments Scam In this scam, a taxpayer receives an e-mail pretending to come from the IRS which tells the recipient he or she is eligible for an economic stimulus payment. The message recommends direct deposit into the taxpayer’s checking or savings account. To receive the payment, recipients must click on a link to complete and submit an online form by a certain date; otherwise, the e-mail warns, payment may be delayed. The form requests personal and financial data, including checking or savings account numbers that the scammers can use to gain access to the accounts. In reality, the way members of the public receive their economic stimulus payment is to file a tax return with the IRS, not a special form. Additionally, the IRS does not request personal or financial information via e-mail. Information on how to obtain an economic stimulus payment may be found in the Economic Stimulus Payment Information Center on the IRS Web site (www.irs.gov). For more information on stimulus-related scams, see IR-2008-11. Substitute Form 1040 Fax Scam This scam consists of a cover letter and form that are faxed, rather than e-mailed. The cover letter is addressed “Dear Valued Tax Payer (sic)” and appears to be signed by an IRS employee. The letter says that the IRS is updating its files and that recipients who supply the requested information will receive a nominal tax refund. It also states that those who fail to immediately return the completed form risk additional tax and withholding. The attached form is labeled a substitute Form 1040 and is titled “Certificate of Current Status of Beneficial Owner For United States Tax Recertification & Withholding.” It requests a large amount of detailed personal and financial information, such as mother’s maiden name (often used in security screening), bank account numbers, estimated assets and more. It asks the recipient to sign and fax back the completed form, as well as a copy of the recipient’s driver’s license and passport. The letter, signature and form are all fraudulent. Moreover, the IRS does not send unsolicited faxes to taxpayers and does not request such detailed personal and financial information.       This is a variant of earlier scams. For more information, see news releases IR-2004-104 and IR-2004-75.  Company Report Scam This e-mail appears to come from an IRS.gov e-mail address, addresses recipients by name and references the company the recipient works for. These personalized details may convince the recipient that the e-mail is legitimate. The e-mail says that the IRS has a report on the company and asks the recipient to review a copy by clicking on a link to download the report. However, when the link is clicked, malware is downloaded to the recipient’s computer. There are various types of malware, which can hijack a victim’s computer hard drive to give someone remote access to the computer, search for passwords and other information and send them to the scammer, or cause other types of identity theft or damage. The IRS does not compile reports on companies or send e-mails to company staff asking them to review a report. Generally, the IRS does not send unsolicited e-mails to taxpayers. Tax Court Scam In this scam, an e-mail that appears to come from the U.S. Tax Court contains a petition involving a court case between the IRS and the recipient. The document instructs the recipient to download other files. The downloads transfer malware, or malicious code, to the recipient’s computer. There are various types of malware, which, for example, can hijack a victim’s computer hard drive to give someone remote access to the computer, or can search for passwords and other information and send them to the scammer. The truth is that the Tax Court is not e-mailing notices to anyone who currently has a case before the court. Visit the court’s Web site at http://www.ustaxcourt.gov/ for more information. Recipients are advised to avoid clicking on any links in the e-mail and to delete the e-mail. How Scams Work To lure their victims, phishing scams use the name of a known institution, such as the IRS, to either offer a reward for taking a simple action, such as providing information, or threaten or imply an unpleasant consequence, such as losing a refund, for failing to take the requested action.       The goal of the scams is to trick people into revealing personal and financial information, such as Social Security, bank account or credit card numbers, which the scammers can use to commit identity theft. Typically, identity thieves use a victim’s personal and financial data to empty the victim’s financial accounts, run up charges on the victim’s existing credit cards, apply for new loans, credit cards, services or benefits in the victim’s name, file fraudulent tax returns or even commit crimes. Most of these fraudulent activities can be committed electronically from a remote location, including overseas. Committing these activities in cyberspace allows scammers to act quickly and cover their tracks before the victim becomes aware of the theft. People whose identities have been stolen can spend months or years — and their hard-earned money — cleaning up the mess thieves have made of their reputations and credit records. In the meantime, victims may lose job opportunities or may be refused loans, education, housing or cars. What to Do Anyone wishing to access the IRS Web site should type www.irs.gov  into their Internet address window, rather than clicking on a link in an e-mail or opening an attachment, either of which may download malicious code or send the recipient to a phony Web site. Those who have received a questionable e-mail claiming to come from the IRS may forward it to the following address: phishing@irs.gov. Use the instructions contained in an article on IRS.gov titled “How to Protect Yourself from Suspicious E-Mails or Phishing Schemes.” Following the instructions will help the IRS track the suspicious e-mail to its origins and shut down the scam. Find the article by visiting IRS.gov and entering the words “suspicious e-mails” into the search box in the upper right corner of the front page. Those who have received a questionable telephone call that claims to come from the IRS may also use the phishing@irs.gov mailbox to notify the IRS.   The IRS has issued previous warnings on scams that use the IRS name to lend the scam legitimacy. More information on identity theft, phishing and telephone scams using the IRS name, logo or spoofed (copied) Web site is available on the IRS Web site at IRS.gov. Enter the terms “phishing,” “identity theft” or “e-mail scams” into the search box in the upper right corner of the front page. Related Information: FS-2008-9, Identity Theft E-Mails Scams a Growing Problem IR-2007-109, IRS Warns Taxpayers of New E-mail Scams Suspicious e-Mails and Identity Theft Issue Number: IR-2008-084   Inside This Issue Filing Extensions Changing for Some Business Taxpayers Later this Year  WASHINGTON — Internal Revenue Service officials today announced a change in the extended due date on certain business returns to help individuals better meet their filing obligations. The change, which reduces the extension period from six to five months, eases the burden on taxpayers who must report information from Schedules K-1 and similar documents on their individual tax returns. Income, deductions and credits from partnerships, S corporations, estates and trusts are reported to partners, investors and beneficiaries on Schedules K-1 and other similar statements. The recipients then use that information to complete their own tax returns. Currently, the extended due date for both businesses and individuals often falls on the same date, generally Oct. 15. This creates a burden for individual taxpayers who rely on the information from Schedule K-1 and other similar statements to prepare and file their personal tax returns in a timely manner. "We are eliminating the same-day deadline for these returns, which causes needless hardship and puts the individual taxpayer in an awkward position," said IRS Commissioner Doug Shulman. "We want to correct this timing issue to ensure that all taxpayers have the information they need to file timely and stay in compliance with the law." The IRS today issued temporary and proposed regulations that will reduce the extension of time to file tax returns for certain businesses that generate Schedules K-1 and other similar statements from six months to five. Requiring these statements to be issued one month earlier, generally by Sept. 15, will provide recipients time to prepare and file returns within the extended time frames. This change will be effective for extension requests with respect to tax returns due on or after Jan. 1, 2009, and applies to business entities that file the following returns and forms that have a tax year ending on or after Sept. 30, 2008: 1. Form 1065, U.S.Return of Partnership Income 2. Form 1041, U.S. Income Tax Return for Estates & Trusts 3. Form 8804, Annual Return for Partnership Withholding Tax (Section 1446) The regulation does not change the process for requesting an extension of time to file, nor does it affect extensions of time to file other types of business returns, such as those used by S corporations. “The regulations will bring the extended time frames of certain business entities with flow-through items in line with other similar businesses, such as S corporations," said Jodi Patterson, director of IRS’s Office of Taxpayer Burden Reduction. “S corporations have a return due date of March 15 and, under a regular 6-month extension of time to file, their extended due date already falls on September 15.” The IRS initiated the proposal to reduce the extension of time to file, carefully weighing the impact on partnerships and other affected entities against the burden the existing deadline puts on individuals, who need this information to file timely and accurate returns. Comments on the proposed regulations can be sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (IRS REG-115457-08). For further information on commenting on the proposed regulations, see REG-115457-08. The IRS is committed to reducing unnecessary taxpayer burden and welcomes input from tax and payroll professionals, business owners and the general public on opportunities to make it easier to comply with the tax laws. More information, including a link to Form 13285A, Reducing Tax Burden on America's Taxpayers, can be found on the TBR page of IRS.gov, Office of Taxpayer Burden Reduction.     Issue Number: IR-2008-082     Inside This Issue   IRS Increases Mileage Rates through Dec. 31, 2008  WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. "Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers." While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. The new rates are contained in Announcement 2008-63 on the optional standard mileage rates. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Mileage Rate Changes Purpose    Rates 1/1 through 6/30/08    Rates 7/1 through 12/31/08  Business 50.5 58.5   Medical/Moving     19 27 Charitable 14 14       IRS Announces 2010 Standard Mileage Rates WASHINGTON — The Internal Revenue Service today issued the 2010 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, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 50 cents per mile for business miles driven 16.5 cents per mile driven for medical or moving purposes 14 cents per mile driven in service of charitable organizations The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago. 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 as determined by the same study. Independent contractor Runzheimer International conducted the study. 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 any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.