2011 IRS Mileage rates

On June 23, 20011, the Internal Revenue Service 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.

Business Miles:

The rate will increase to 55.5 cents a mile and apply to miles driven from July 1, 2011, through Dec. 31, 2011.

Medical and Moving miles rates:

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.

Charitable mile rate:

The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

Actual cost vs Mileage rate:

The optional business standard mileage rate and the actual cost are methods generally used to compute the deductible costs of operating an automobile for business use.

The mileage rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

Keep in mind that gasoline price is a significant factor in the mileage figure, but not the only factor to take into account. Other factors are depreciation and insurance and other fixed and variable costs of operating a vehicle.

Source: IRS.gov

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Tax Relief for Employers who wants to reclassify workers correctly

The IRS resently (7-21-2011) launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers-from self-employee to employees.

At low cost means:

..making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.

IRS Program objective is...

The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.

Who is elegible?The applicant must:

1- Consistently have treated the workers in the past as nonemployees,

2- Have filed all required Forms 1099 for the workers for the previous three years, and

3- is not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers.

Benefits for participating:

Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.

Source: IRS.gov






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Tax, Accounting, and Auditing: Bartering is taxable Income

Tax, Accounting, and Auditing: Bartering is taxable In come: In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. ...

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Bartering is taxable In come

In today’s economy, small business owners sometimes look to the oldest form of commerce – the exchange of goods and services, or bartering. The IRS wants to remind small business owners that the fair market value of property or services received through barter is taxable income.

Form to report income.

Whether this activity operates out of a physical office or is internet based, a barter exchange is generally required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, annually to their clients or members and to the IRS.

Income tax reporting.

Taxes Income from bartering is taxable in the year it is performed. Bartering may result in liabilities for income tax, self-employment tax, employment tax, or excise tax. Your barter activities may result in ordinary business income, capital gains or capital losses, or you may have a nondeductible personal loss.

Source: htpp://www.irs.gov

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Tax relief on reporting as Income any Cancelation of Debt

Debt discharge income is reported on the IRS form 1099-C of an individual or business from a taxpayer's personal residence, rental properties , business debts or personal debts (e.g., credit card debts).

What is the tax remedy?

The IRS regulations allows you to exclude all or a portion of the debt canceled (i.e., income reported on 1099-C), if the taxpayer is either insolvent or is Bankrupt. 

Do you need to do any calculations?

Yes, you not only need to file a form with the IRS but you need to run the numbers and consider what constitute your Insolvency by consiidering all your Assets and Liabilities at their Fair Market Value and oustanding liabilities.  For some taxpayers this calculations can involve lots of calculations and considerations.  So there is tax relief if you have to consider thousands of dollars as Income and you are not getting actual money.

Get some help from a tax professional it is well worth it.

Source: IRS.gov

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Self-employed individual

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners.

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040. But in some situations your loss is limited.  (See Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) for more information.)

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions.

Do not wait until year end to determine if you have net earnings of $400 or more; do the calculations every quarter; 'cause you may be required to sent quarterly estimated payments to the IRS.

Source: http://www.irs.gov/

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Employment news

According to the U.S. Dept of Labor Economic News release of Sept. 16, 2011, the national jobless rate for the month of August 2011 remained unchanged at 9.1 percent but was 0.5 percentage point lower than a year earlier. For the month; we noted that twenty-six states reported rate increases, twelve states reported decreases, tand he remaining twelve states reported no rate change.  

Non farm employment over-the-year results as follows:  25 states experienced statistically significant changes in employment, 24 of the 25 were increases.  The largest increases occurred in TEXAS (+232,200), followed by California (+171,300), New York (+83,400), and Michigan (+79,800).  The only state with an over-the-year statistically significant decreases in employment was Georgia (-29,500).

For the Month of August; Texas unemployment rate stand at 8.5% , California at 12.1%, Michigan at 11.2%, and New York at 8.0%.

The Metropolitan area employment and unemployment news release for August is scheduled to be released on Wednesday, Sept. 28.  

Source: US Bureau of Labor Statistics 


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Cancelation of debt is reportable income...

Cancellation of debt income is taxable as ordinary income. Internal Revenue Code section 61 provides that gross income means all income from whatever source derived.

Section 61(a)(12) specifically includes “income from discharge of indebtedness” as an item of gross income.

COD income can arise in a number of areas, such as:

        •Cancellation of credit card debt

        •Foreclosure of personal residence, or

        •Cancellation of an automobile loan

SOURCE: IRS.gov  http://www.irs.gov/

 

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U.S. Securities still attractive for foreign Investors..

Foreign residents increased their holdings of long-term U.S. securities in July — net purchases were $24.6 billion. Net purchases by private foreign investors were $10.4 billion, and net purchases by foreign official institutions were $14.2 billion. At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $15.1 billion.

Taking into account transactions in both foreign and U.S. securities, the net foreign purchases of long-term securities were $9.5 billion. After adjustments, such as estimates of unrecorded principal payments to foreigners on U.S. asset-backed securities, are included, the overall net foreign acquisition of long-term securities is estimated to have been negative $17.2 billion in July.

Foreign holdings of all dollar-denominated short-term U.S. securities and other custody liabilities decreased $36.5 billion. Banks’ own net dollar-denominated liabilities to foreign residents decreased $7.6 billion.

In sum, the net foreign acquisitions of long-term securities, the change in foreign holdings of short-term U.S. securities, and banking flows yielded monthly net TIC outflows of $51.8 billion. Of this, net foreign private outflows were $44.4 billion, and net foreign official outflows were $7.4 billion.

Source: US Dept of Treasury

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TAX RELIEF- Extended due date

Taxpayers who reside in, or have businesses in counties that were declared federal disaster areas can file certain returns late. This apply to the states of New York, New Jersey, North Carolina, and Puerto Rico.

Certain deadlines falling on or after August 25, and on or before October 31, have been postponed to October 31, 2011.  Includes corporations and other businesses that previously obtained an extension until September 15 to file their 2010 returns, and individuals and businesses that received a similar extension until October 17. 

The extended due date also applies to the estimated tax payment for the third quarter, normally due September 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after August 25, and on or before Sept. 9, as long as the deposits are made by September 9, 2011.

Source: IRS.gov

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Outsourcing the Payroll Functions?

Three Tips for Employers Outsourcing Their Payroll, according to the IRS website.

Background:

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities.  Recent prosecutions of individuals and companies who - acting under the guise of a payroll service provider - have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following: 

1. The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you - the employer - are the responsible party.  The IRS can also hold you personally liable for certain unpaid federal taxes.

2. If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business.

3. Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.

For more information; the IRS web site – www.irs.gov has more information.

Source: IRS.gov

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