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.

Read More » [IRS]

A 501(c)(3) organization is absolutely prohibited from participating in any political campaign at all levels, national, state and local.  Political intervention includes candidate endorsements, contributions to political campaign funds, public statements of support or opposition to candidates, distributing information/pamphlets, etc. made by others in support or opposition to candidates and any other similar activities that is in support or opposition of candidates.

Read the rest of this post »

In its FY 2011 work plan, the Exempt Organizations Division of the IRS announced that they are increasing their focus on Section 501 (c) (4), (5) and (6) organizations.  In their FY 2011 Annual Report and Workplan, the IRS stated that “with the additional information available on the new Form 990, we will look at issues including political activity, inurement and the extent of compliance with the requirements for tax exemption by organizations that self-identified themselves as a Section 501 (c) (4), (5), or (6) organization”.

Read the rest of this post »

Although it is doubtful the word “inurement” is used in normal conversations, the IRS has a particular fondness for its use and is one of the areas they plan to examine in their 2011 audit work plan.  However, even the IRS seems to have difficulty formulating an exact definition of the term, stating that, “Inurement is likely to arise where the financial benefit represents a transfer of the organization’s financial resources to an individual solely by virtue of the individual’s relationship with the organization, and without regard to accomplishing exempt purposes”.
The term appears to be used most frequently when the IRS is discussing organizations exempt under 501(c) (6) which code section states “no part of the net earnings” of an organization may “inure to the benefit of any private shareholder or individual”.  However, the term applies to a number of exempt organizations including 501 (c) (3), (4) and (5) organizations.

Read the rest of this post »

Omni Land Settlement Corporation said about $200,000 it paid in payroll taxes is missing after the payroll company it entrusted the money to declared bankruptcy on May 6.

Note: We generally only recommend the  use of the national companies, ADP or Paychex, if you are going to have the payroll taxes “impounded” and remitted by the payroll company on your behalf.  While there is no guaranty of the same with them, these are large national companies subject to much more governance, oversight, and scrutiny. These companies are service providers only.  Ultimately, the responsibility for remittance of the taxes to the government remains with the employer. You are able to verify payroll tax deposits with the government.  We would recommend doing this at least periodically as a safeguard. Should you receive any correspondence from the government about unpaid payroll taxes, act immediately.  As always, you can contact us with any questions.

Read More » [WBALTV]

On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed on taxpayers who receive rental income enacted as part of last year’s Small Business Jobs Act (PL 111-240). The Senate approved the bill on April 5, and the House voted in favor of it on March 3.

Read More » [Journal of Accountancy]

Tax day is over. Now it’s time to find the top of your desk.

If you’re like most people, your home office is littered with 1099s, W-2s, letters from charities and other detritus used to prepare a tax return. Most of us are terrified to dispose of these documents, and for good reason: In an IRS audit, “The dog ate my credit card receipt” is not an excuse. It’s not necessary to hang on to everything. In fact, keeping too many documents could make it difficult to find what you really need. Here’s a look at what you should save and what you can shred:

Read More » [USA Today]

Breast pumps and other lactation supplies are now tax deductible as medical expenses, the Internal Revenue Service said Thursday, reversing a long-held position.
The new ruling means that families can use pre-tax funds from their flexible spending accounts and health savings accounts for these supplies. Breast pumps typically cost more than $200 and, along with supplies, can run as high as $1,000 in the first year of a baby’s life.
Read More » [MSNBC]

“Wrap Fees” charged to IRA holders qualify for tax favored treatment are not counted as payins to the IRA if paid separately by the owner, IRS privately rules. The fee covers investment planning and broker commissions. Although the payment of broker commissions is usually treated as a IRA payin, that rule doesn’t apply to wrap fees because the charge doesn’t vary with the number of trades made. Instead it is based on a percentage of total assets under management. These wrap fees can be deducted as a miscellaneous itemized deduction on Schedule to the extent the total exceeds 2% of the filer’s adjusted gross income.

The issue of whether maintenance costs are deductible as incidental repairs or must be capitalized under IRC §263A continues to trip up taxpayers, despite guidance and proposed regulations from the Internal Revenue Service. Recently, the IRS issued an audit-technique guide that gives insight into how it will examine taxpayers’ treatment of repair and maintenance costs.

Read more » [Journal of Accountancy]