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.

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.

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.