Monday, August 25, 2008

EITC Due Diligence Rules

The Internal Revenue Service’s next Tax Talk Today Web cast on Tuesday, Sept. 9, 2008 at 2 p.m. focuses on “EITC Due Diligence - It’s Your Responsibility.” Practitioners who prepare Earned Income Tax Credit (EITC) claims must meet four due diligence requirements. For example, they must ask the required questions on Form 8867, Paid Preparer's Earned Income Credit Checklist, and probe further when information seems incorrect, inconsistent or incomplete. Failure to meet the due diligence requirements can result in a $100 penalty for each failure. The broadcast will be a good opportunity for return preparers to review the requirements and get the latest information from the IRS executive and technical staff responsible for this $43 billion program.

Moderated by Les Witmer, panelists for the September program are: Debra S. Holland, EITC program director; Sue Gaston, director of industry operations, H&R Block; Sherrill L. Gregory, an Orange County, Calif., tax practitioner; and Bridget E. Tombul, IRS counsel. Tax Talk Today is a Web cast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax Professionals are encouraged to watch and submit questions.

To access the Web cast at no charge, viewers can register online. Tax professionals in need of continuing education credits are eligible to receive one CPE credit by viewing the September 9 Web cast.

Change Of Address On Your Tax Return

If you have returned, file your return using your new address. If you have moved after your return , you should give the IRS clear and concise written notification of your change of address. Send the notice to the Internal Revenue Service. You can use form 8822--Change Of Address. If you are expecting a refund, make sure you contact the postal office of your this former address. This way will ensure the forwarding of refund to your new address (unless you elected the direct deposit option). Be sure to include your SSN (and the name and SSN of your spouse, if you filed a joint return) during any correspondance with the IRS.

It is important to not file your own returns; instead have a licensed rep prepare your returns to avoid an erroneous returns being filed and to ensure you receive the maximum refund possible.

How Do I Check On A Past Due Tax Refund?

Did you know that you could check on a past due refund that has yet to be paid? You can check on the status of your 2007 tax refund if it has been at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). The only thing you will need is a copy of your 2007 return available that shows the filing status, SSN, and exact whole dollar amount of the refund.

* Go to and click on Where's My Refund
* Call 1-800-829-4477 open 24 hours a day, 7 days a week for automated refund information
* Call 1-800-829-1954 during the hours shown in your form instruction

Interest On Refunds

I personally never thought of that interest is teid to your tax refund. If you are due a refund, you may get interest on it. If the refund is made within 45 days after the due date of your return, no interest will be paid. If you file your return after the due date (including extensions), no interest will be paid if the refund is made within 45 days after the date you filed. If the refund is made within 45 days-period, interest will be paid from the due date of the return or from the date you filed, whichever is later.
Accepting a refund check does not change your right to claim an additional refund and interest. File your claim within the period of time that applies. If you do not except a refund check, no more interest will be paid on the overpayment included in the check.Interest on erroneous refund- On the flip side, all the interest you were charged on an erroneous refund generally will be forgiven. Any interest charged fior the period before demand for repayment was made will be forgiven unless:

1. You caused the erronoius refund in any way
2.The refund is more than $50,000

Say for instance, the IRS send yo a refund for $1000 but it shoudl have been for only $100, you don't have to pay the interest but you will have to pay the $900 back to the IRS will they request it.

Sunday, August 24, 2008

Do you have a business with more than 25 vehicles?

Individuals and organizations with 25 or more trucks, tractors or other heavy vehicles used on highways now are required to make their excise tax filings with the Internal Revenue Service electronically, rather than by paper.

Form 2290, Heavy Highway Vehicle Use Tax Return, is used to report and pay highway-use excise taxes. Last year truckers and others filed over 700,000 Forms 2290 and paid over $1 billion in federal highway use taxes. E-filing of Form 2290 began in August 2007.
Electronic filing streamlines the processing of the Form 2290, is more safe and reliable than paper filing and reduces preparation and processing errors. Although electronically-filing Form 2290 is not required for taxpayers reporting fewer than 25 vehicles, all taxpayers are encouraged to file their forms electronically. Most Forms 2290 are due by August 31.
Another advantage of e-filing Form 2290 is that taxpayers don’t have to wait for a stamped version of the Schedule 1, Schedule of Heavy Highway Vehicles, to be returned by mail because they will almost instantly receive the equivalent of a stamped version electronically. This means truckers won't have to wait to register their vehicles with the appropriate state authority when obtaining the proper license tags.

Retirees....have you filed your 2007 return?

Just in the news, this past week was still the issue of many retirees and those drawing social security that have received their stimulus check because the lack of filing their 2007 return. Don't miss out on this qualifying opportunity to receive a payout.

The Internal Revenue Service today reminded qualifying retirees and veterans that it is not too late to file for an economic stimulus payment and announced it will send a second set of information packets to 5.2 million people who may be eligible but who have not yet filed for their stimulus payment.
The packages will contain everything needed by a person who normally does not have a filing requirement but who must file this year in order to receive an economic stimulus payment. There will be instructions, an example Form 1040A return showing the few lines that need to be completed, and a blank Form 1040A. The packages will be mailed over a three-week period starting July 21.
“All it takes is a few simple steps, and the payment can be on its way. It’s not too late to file, but the sooner people file, the faster they’ll receive their money,” said Doug Shulman, IRS Commissioner.People receiving only Supplemental Security Income are not eligible. Eligible people must have a Social Security number (unless their spouse is a member of the military) and be neither a dependent nor eligible to be a dependent on another’s tax return.
The mailing is part of an IRS summer campaign to reach out to those people who have no requirement to file a tax return but who may be eligible for a stimulus payment of up to $300 ($600 for married filing jointly). For those eligible for a payment for themselves, there also is a $300 per child payment for eligible children younger than 17.

Tuesday, August 19, 2008

Do You Qualify For Head Of Household?

To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. You can determine whether you paid more than half of the cost of keeping up a home by using the following worksheet.

Cost of Keeping Up a Home :

Property taxes
Morgage interest expense
Utility charges
Upkeep and repairs
Property insurance
Food consumed on the premises
Other household expenses

If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home.
Costs you include: the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.
If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost.
Costs you do not include: the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.

There are so many nuances that the average taxpayers negates to include when preparing tax returns. Before you cost yourself money, contact a licensed tax preparer to help prepare your returns.

Head Of Household-

If I moved out of my house on July 10, but was not divorced at the end of the year, can I file as head of household and take the earned income credit if I have a minor child? Can I also claim child care expenses?

You do not qualify for the head of household filing status because you and your spouse have not lived apart for the last 6 months of the taxable year and are not considered unmarried. Your filing status for the year will either be married filing separately, or married filing jointly. If it is married filing separately, you will not qualify for the Earned Income Credit and cannot claim a credit based on child care expenses. If you file a joint return with your spouse, you may be eligible to claim these credits. See Publication 503, Child and Dependent Care Expenses and Publication 596, Earned Income Credit

If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately.

How to file: If you file as head of household, you can use either Form 1040A or Form 1040. Indicate your choice of this filing status by checking the box on line 4 of either form. Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax.
Considered Unmarried
To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.
*You file a separate return (defined earlier under Joint Return After Separate Returns).
*You paid more than half the cost of keeping up your home for the tax year.
*Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances.
*Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Home of qualifying person, later, for rules applying to a child's birth, death, or temporary absence during the year.)
*You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described later in Children of divorced or separated parents under Qualifying Child or in Support Test for Children of Divorced or Separated Parents under Qualifying Relative. The general rules for claiming an exemption for a dependent are explained later under Exemptions for Dependents.

Stipulations On An Offer In Compromise

Individuals Must File All Federal Tax Returns and Pay Required Estimated Tax Payments
The IRS expects a taxpayer requesting an OIC to file all delinquent tax returns and pay any required estimated tax payment. IRS will notify taxpayers and provide 30 days to file delinquent returns or make the required estimated tax payments. Failure to comply will cause the IRS to return the offer back to the taxpayer. The $150 application fee along with all TIPRA payments previously paid will be retained by the IRS and applied to the taxpayer’s liability.
Businesses Must File All Federal Tax Returns and Timely Pay all Required Federal Tax Deposits
The IRS is cautious to avoid providing financial advantages to operating businesses through the forgiveness of tax debt. This may create the appearance that the delinquent business has been able to profit from its failure to pay, giving it an advantage over other, fully compliant businesses.
Businesses that have employees are expected to have paid all required federal tax deposits for the current quarter in order for their offer to be evaluated. If the IRS determines that the required deposits have not been paid, the taxpayer will be provided with a reasonable amount of time to pay the deposits before the IRS proceeds with the investigation. In addition, the business will be expected to remain current on all filing and deposit requirements while the offer is being investigated.
Failure to either pay the deposits as requested, remain current with filing or pay all deposits that become due while the offer is under investigation will cause the IRS to return the offer back to the taxpayer. The $150 application fee along with all TIPRA payments previously paid will be retained by the IRS and applied to the taxpayer’s liability.
Statute of Limitations for Assessment and Collection is Suspended - The statute of limitations for assessment and collection of a tax debt is suspended while an OIC is "pending," or being reviewed.
The OIC is pending starting with the date an authorized IRS employee determines the Form 656 Offer in Compromise is ready for processing. The OIC remains pending until the IRS accepts, rejects, returns or acknowledges withdrawal of the offer in writing. If a taxpayer requests an Appeals hearing for a rejected OIC, the IRS will continue to treat the OIC as pending. Once the Appeals office issues a determination in writing to accept or reject the OIC then the pending status is removed.
Taxpayers Must File and Pay Taxes - In order to avoid defaulting an OIC once accepted by the IRS, taxpayers must remain in compliance in the filing and payment of all required taxes for a period of five years or until the offered amount is paid in full, whichever is longer. Failure to comply with these conditions will result in the default of the OIC and the reinstatement of the tax liability.
Federal Tax Liens are Not Released - If there is a Notice of Federal Tax Lien on record prior to filing Form 656, the lien is not released until the OIC terms are satisfied, or until the liability is paid, whichever comes first. A Notice of Federal Tax Lien may be filed during the course of an OIC investigation regardless of the type of offer being considered.

Is Your OIC (Offer In Compromise) Processable

As a result of TIPRA, beginning July 17, 2006 in order to be considered for an OIC, a taxpayer must have met all of the following requirements:
The taxpayer is not a debtor in an open bankruptcy proceeding.
The $150 application fee, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.
The 20 percent payment with the lump sum offer, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.
The first installment payment on a periodic payment offer, or a signed Form 656-A, "Income Certification for Offer in Compromise Application Fee and Payment" must be submitted.
An offer that is received with a payment that is less than 20 percent payment on a lump sum offer will be deemed processable but the taxpayer will be asked to pay the remaining balance in order to avoid having the offer returned. Failure to submit the remaining balance will cause the IRS to return the offer and retain the $150 application fee.
Taxpayers filing a periodic payment offer (e.g. short term periodic, or deferred periodic offer) are required to submit the full amount of their first installment payment in order to meet the processability criteria. If the full amount of the first installment payment is not provided, the IRS will deem the offer not processable and will return the $150 application fee to the taxpayer.
If during the OIC investigation the initial offer amount is determined to be insufficient and not reflective of the taxpayer's ability to pay, the taxpayer will in most instances, be contacted and asked to increase the offer and submit the corresponding 20 percent payment if the offer was filed as a lump sum cash offer, or the periodic payment if the offer is a short term or deferred payment offer. The IRS may reject the offer if a taxpayer fails to increase the offer and provide the additional payment(s). The IRS will credit the taxpayer's account(s) with any payment(s) submitted with the original offer.
The IRS will deem an OIC "accepted" that is not withdrawn, returned, or rejected within 24 months after IRS receipt. If a liability included in the offer amounts is disputed in any judicial proceeding that time period is omitted from calculating the 24-month timeframe.
Application Fee Required for OIC - All taxpayers who submit a Form 656, "Offer in Compromise" must pay a $150 application fee except in two instances:
The OIC is submitted based solely on "doubt as to liability;" or>
The taxpayer's total monthly income falls at or below 250% of the Department of Health and Human Services (DHSS) poverty income levels.

If have further questions or need IRS help, please contact someone who is a licensed professional and skilled at resolving tax resolution issues.

Offer In Compromise: IRS Criteria

Should the IRS determine that a taxpayer is unable to pay the liability in a lump sum or through an installment agreement and has exhausted the search for other payment arrangements the last option would be to file an Offer in Compromise (OIC).
An OIC allows taxpayers to settle their tax liabilities for less than the full amount. Taxpayers should use the checklist in the Form 656, Offer in Compromise, package to determine if they are eligible for an offer in compromise. The objective of the OIC program is to accept a compromise when it is in the best interests of both the taxpayer and the government and promotes voluntary compliance with all future payment and filing requirements. See IRS Policy Statement P-5-100 for the complete OIC policy statement.
Major Changes to the OIC Program
The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), created major changes to the IRS OIC program as it relates to lump sum offers, periodic payment offers, and a determination as to when an offer is accepted. These changes affect all offers received by the IRS on or after July 16, 2006.
TIPRA, section 509, amends Internal Revenue Code section 7122 by adding a new subsection (c) “Rules for Submission of Offers in Compromise" which establishes the following:
A taxpayer filing a lump sum offer must pay 20 percent of the offer amount with the application (IRC 7122(c)(1)(A)). A lump sum offer means any offer of payments made in five or fewer installments.
A taxpayer filing a periodic payment offer must pay the first proposed installment payment with the application and pay additional installments while the IRS is evaluating the offer. A periodic payment offer means any offer of payments made in six or more installments.

Payments are Non-refundable:

The IRS considers the 20 percent payment for a lump sum offer, and the installment payment on a periodic payment offer, as "payments on tax" and are not refundable regardless of whether the offer is declared not processable or is later returned, withdrawn, rejected or terminated by the IRS.
Taxpayers May Designate Payments:

Taxpayers may designate the application of the required TIPRA payments. The designation must be made in writing when the offer is submitted and must clearly specify how the partial payments are to be applied to a particular tax period(s) and to specific liabilities (e.g. income taxes, employment taxes, trust fund portions of employment, excise tax, etc.) Taxpayers may not designate how the $150 application fee is applied. The application fee reduces the assessed tax or other amounts due.
TIPRA and Application Fee Payment Exceptions
A taxpayer who qualifies for a low-income exception waiver or is filing a doubt as to liability offer is not required to pay the application fee, the 20 percent payment on a lump sum offer, or the initial payments required on a short term or deferred periodic payment offer. To determine low-income eligibility, refer to the section titled Application Fee Required for OIC.

Tax Exempt Organization Form

The Internal Revenue Service released the revised instructions that tax-exempt organizations will need to fill out the redesigned Form 990, which must be filed starting with tax year 2008 (filed in 2009).
Most charities and other tax-exempt organizations must file an annual informational return with the IRS to maintain their tax-exempt status. Information reported on Form 990 is made available to the public.
“These instructions are the final step in a tremendous effort to bring the Form 990 up to date and to reflect the diversity and complexity of the tax-exempt community,” said IRS Commissioner Doug Shulman. "The revised form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community.”
Form 990 had previously not seen major revisions since 1979. The revised instructions and redesigned Form 990 can be found on this Web site.
The revised instructions feature several new tools that make it easier to answer questions line-by-line and that facilitate uniform reporting. Input from the tax-exempt community played a major role in how the new instructions were designed.

The needed 990 form can be found at the following link

Monday, August 11, 2008

Taxpayers Assistance

In 2005, Congress requested the IRS develop a five-year plan for taxpayer service. The IRS implemented the Taxpayer Assistance Blueprint (TAB) project as a two-phase effort designed to answer questions about the service needs and preferences of individual taxpayers. TAB is a collaborative effort of the IRS, the National Taxpayer Advocate and the IRS Oversight Board.
TAB Phase 1 included significant stakeholder and employee engagement, as well as preliminary research relative to taxpayer needs, preferences and behaviors. The TAB Phase 1 report, delivered to Congress in April 2006, included a baseline of current taxpayer services and outlined key strategic improvement themes.
TAB Phase 2 built on the themes identified in Phase1 with extensive additional research, including taxpayer surveys. The significant stakeholder engagement begun in TAB Phase 1 continued throughout Phase 2. The TAB Phase 2 report was completed after careful analysis of a large body of research and a rigorous quality review process to ensure that conclusions and recommendations were supported by the data. Because of the extensive research completed for the Blueprint, IRS now knows more than ever before about taxpayer needs, preferences and behaviors.
Delivered to Congress in April 2007, the TAB 2 report outlines the Strategic Plan for taxpayer service that will help us enhance the services we deliver to taxpayers and partners. The Strategic Plan includes:
A comprehensive portfolio of service improvement recommendations.
A sound implementation strategy to ensure that taxpayer service remains a key consideration in IRS budget and strategic planning processes.
A recommended set of future research studies to further enhance understanding of taxpayer and partner service needs, preferences and behaviors.
A governance structure to facilitate and monitor implementation of TAB recommendations.

Deduction Mortgage Payments if jointly owned following a divorce/separation

Did you know that you could deduct mortgage payments and other household costs paid on a home jointly owned following divorce or separation?

If the terms of the divorce/separation require you to pay the entire amount of each mortgage payment (both principal & interest) and or other household expenses, such as real estate taxes, property insurance, and utilities under what is defined as "alimony" , then you can deduct half of these as alimony. You former spouse will have to include these alimony payments as income.
Secondly, you will only be able to deduct mortgage interest and real estate taxes if you itemize deductions.

Deducting a Mortgage That Is Rent-Free By a Former Spouse

Did you know that you could deduct a mortgage payment and other household costs paid on a home you own and that is lived in rent-free by your former spouse following divorce or separation?

You will not be able to deduct the the mortgage or real estate tax payments you make as alimony, nor you are allowed to claim the fair rental value of the home as alimony, nor are you allowed to claim the fair rental value of the home as alimony, you can deduct qualifying mortgage interest and real estate taxes, if you itemize deductions.
While the mortgage and real estate tax payments do not qualify as deductible alimony, you can however make up for it utilities on behalf of a former spouse who is using the home under the specified terms of the separation/divorce. However, your former spouse will have to include these utilities payments in income.

Alimony Payments

Did you know that you can deduct mortgage payments and other household costs paid on a home owned by your former spouse post a divorce or separation?

You can deduct payments you make in cash to your spouse or former spouse under a divorce or separation agreement if those payments meet the definition of alimony, aligned with the tax law. The deduction is allowed as an adjustment in figuring your adjusted gross income; therefore it reduces your taxable income, whether you itemize or not.
Alimony includes payments made both directly to your spouse or former spouse and even to a third party on behalf of your current or former spouse. However, your current or former spouse will have to include these alimony payments in income.

If you have any questions pertaining to taxes and in accordance to divorce and separation, contact a professional tax consultant who can serve you on even the smallest nuances that the average taxpayer may not know.

Sell Of Property

Worthless Securities:
Did you know that you can claim a capitol loss on a security, such as stocks, stock rights and bonds that become worthless during the year? The security is treated as if it had been sold on the last day of the year for purposes of determining whether your loss is short-term or long-term. You are permitted to claim the loss only in the year the security actually becomes worthless. However if you hold securities that are on the verge of becoming worthless, consider selling them and now and take your capitol loss in the new year you sell, rather than have to discover proof that securities have in fact become worthless. According to the IRS your the securities need to be sold to an unrelated buyer, otherwise your loss may be disallowed.

Non Business Bad Debt:

If you are owed money and you can no longer collect on that debt, you may be able to deduct the amount still owed to you as bad debt. If the debt came about from operating your trade or business, the bad debt deduction is an ordinary loss. An non business bad debt on the other hand can only be deducted as a short-term capitol loss. You are entitled to claim a bad debt deduction only in the year the debt becomes totally worthless. As a result, you should claim the bad debt deduction at the earliest time you believe the debt to be worthless.

Sunday, August 10, 2008

Industry Resolution Problem

Businesses and associations have until Aug. 31 to submit tax issues to the Internal Revenue Service to be included in the Fall 2008 review in the Industry Issue Resolution (IIR) Program.
IIR is an IRS program to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues submitted by associations and others representing both small and large business taxpayers, resulted in tax guidance that has affected thousands of taxpayers.
Recent submissions accepted into the IIR program include:
Integrated Public Utilities - regarding an optional method to be used by integrated utility companies in computing their qualified production activities income under IRC section 199(c).
Auto Last In First Out - for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars.
Recent guidance issued as a result of the IIR program includes:
A safe harbor pooling method, the Vehicle-Pool Method, is available for resellers of cars and light-duty trucks under the last-in, first out (LIFO) inventory method effective for tax years ending on or after December 31, 2007, (Revenue Procedure 2008-23)
Valuation of Parts Inventory by Heavy Equipment Distributors (Revenue Procedure 2006-14)
Clarification regarding circumstances when facsimile signatures may be used to sign employment tax forms. (Revenue Procedure 2005-39)
Explanation of the circumstances under which insurance companies that make incentive payments to health care providers will be permitted to include those payments in unpaid losses. The revenue procedure also provides procedures under which taxpayers may obtain automatic consent of the Commissioner to change their accounting method for those payments. (Revenue Procedure 2004-41)
For each issue selected, an IIR team of IRS and Treasury personnel gather relevant facts from taxpayers or other interested parties affected by the issue. The goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through examinations. IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36.

Thursday, August 7, 2008

Tax Breaks & Other Deductions: Disasters

I lieu of many disasters since 911, there have been questions centered around disaster relief compensation. Actually the Internal Revenue Service does allot for relief payments and grants to those taxpayers that qualify:

1. Disaster Relief Grants:
You can exclude from your gross income a grant you receive under the Disaster Relief and Emergency Assistance Act if the grant payments are used to help you meet certain serious needs, such as housing, transportation and medical expenses. In light of the disasters over the past few years, this should help those who have suffered greatly.
2.Disaster Relief Payments:
Qualified disaster relief payments you receive are not subject to income tax, social security, or Medicare taxes. Qualified amounts paid as a result of a qualified disaster to reimburse or pay reasonable and necessary personal, family, living or funeral expenses from what is considered a qualified disaster. Other qualified payments might be repair on your personal residence or to replace damaged personal contents.
3.Damaged Mitigation Payments:
You can also exclude from income tax payments, mitigation payment grants that you receive from a state ans local government for use of potential damage from natural disasters.

If you have questions concerning tax breaks and deductions, contact a tax consultant.

Tuesday, August 5, 2008

The IRS Increases Company Reimbursement's

With gas prices on the rise, there are more people concerned with travel. For those who operate an automobile for business, charitable, medical, or moving expenses there is a benefit from the IRS to offset some of the pain at the pump (so to speak). Those that are truly affected by the higher costs of fuel will appreciate the recent news from the IRS in regards to increased reimbursement. The good news is that for individuals that use their car for business, there will be an increase to 58.5 cents a mile from July 1, 2008 through December 31, 2008. Previously the rate was 50.5 cent/mile for the first half of 2008. 05 Section 62(a)(2)(A) of the IRS manual states that allows an employee in determining the adjusted gross income, a deduction for the expenses allowed by Part VI (§ 161 and following),subchapter B, chapter 1 of the Code, paid or incurred by the employee in connection with the performance of services as an employee under a reimbursement or other expense allowance arrangement with a payor.
This increase of eight cent will I’m sure help generate a boost in travel for most companies. One can see the reflectance to travel over the past several months, with the higher fuel costs causing a vast effect on our economy. I commend the IRS on coming to the aid of taxpayers in this crucial economical strain. .
In recognizing the recent gasoline prices, the IRS has made this special adjustment for the final months of 2008. According to the IRS Commissioner Doug Shulman, the IRS wants the reimbursement rate to be fair to the taxpayer. Though gasoline is most important factor in the economical reimbursement there are other factors that 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 by eight cents to 27 cents a mile, for the next 6 months; this is up from 19 cents /mile. However the rate for providing services to charitable organizations will not change; this rate will stay 14 cents a mile.

According to the IRS, taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Tax Break -Part 2

Another tax break in filing status is filing as head of household. This can save you quite a bit of money on taxes. In order to qualify for the lower rates, and other benefits, you must meet the following requirements:

1.You must be unmarried or considered unmarried on the last day of the year.

2.You paid more than half the cost of keeping up a home for the year; and

3. A "qualifying person" lived with you in the middle for more than half the year. But if the qualifying person is your dependent parent he or she does not have to live with you.

Taxable Breaks & Deductions

There are so many taxpayers that don't file their taxes when they could claim deductions such as personal exemptions and dependant. You can claim a deduction for yourself, called personal exemption. You can claim a deduction for your spouse on joint return. And you can claim a deduction for each of your dependents. In 2006 and 2007, the exemption amount is $3300.

Normally the most favorable filing statues is married filing joint, but in some causes its married filing separately. For example, if one of you has very substantial medical or employee business expenses, you may be able to reduce your combined tax liability by filing separate tax returns. In addition, if one of the spouses has tax liability, the other spouse wants no part of then it would behove the couple to file separately.

Tax-Free Distribution from IRA's for Charity

In 2006 and 2007 a person who is 70 1/2 years or older takes a distribution from an IRA, contribute it to a charity and not recognize any income. This is however limited to$100,000 . If the IRA account contains nontaxable amounts for example, nontaxable contributions, the taxable portion is considered to come out first, followed by nontaxable amounts.

A deduction for contributing clothing and household items (furniture, furnishings, electronics, appliances, linens) is not allowed unless the item is in good condition or better unless the deduction claimed is more than $500 and you get an appraisal.

Permanent IRA Changes

There are a number of changes to pensions and IRA's such as higher limits on contributions and Roth 401 (k) plan, they were scheduled to expire after 2010 but a new law makes these provisions permanent.

Under the current law, you can't roll over money from an employer retirement plan (except a ROTH 401 (k) directly into a ROTH IRA, if you qualified. However, after 2007, you'll be able to roll employer retirement plan directly into a ROTH IRA. Though you'll only be able to do this if your modified adjusted gross income is below $100,000 and you'll have to include the distribution in your taxable income.

Distributions from IRA's or 401 (k) plans to people called up to active reserve duty after September 11, 2001 and before before 2008 are not subject to the 10% early distributions penalty. A person in reserves has two years from the end of active duty to roll over such a distribution into an IRA and avoid tax.