MILEAGE DEDUCTION

Standard Mileage Rates

The standard mileage rates enable a taxpayer using a vehicle for specified purposes to deduct vehicle expenses on a per mile basis rather than deducting actual car expenses that are incurred during the year. The rates vary, depending on the purpose of the transportation.
Accordingly, the standard mileage rates differ from one another depending on whether the vehicle is used for business, charitable purposes, obtaining medical care  or relocating for employment.

It is very important that taxpayers keep accurate records when it come to deducting these uses of their personal vehicles in the form of mileage and or receipts for actual expenses.

Business Use of a Taxpayer’s Personal Vehicle

A taxpayer may deduct unreimbursed employee expenses, including unreimbursed expenses related to business use of a personal vehicle as "miscellaneous itemized deductions" to the extent the total of such expenses exceeds 2% of his or her adjusted gross income. In order for the expenses to be deductible, however, they must meet certain criteria. Thus, for expenses in connection with a vehicle’s business use to be deductible, such expenses must have been paid or incurred during the tax year for the ordinary and necessary purpose of carrying on the taxpayer’s trade or business as an employee, provided the paid or incurred personal vehicle expenses meeting these three criteria are not reimbursed. The deductible personal vehicle expenses include traveling:

        1. Between workplaces;
        2.To meet with a business customer;
        3. To attend a business meeting located away from the taxpayer’s regular workplace; or
            from the taxpayer’s home to a temporary place of work.

The 2015 standard mileage rate applicable to deduction of eligible personal vehicle expenses incurred while the vehicle is being used in an employer’s business is 57.5¢ per mile. In addition to using the standard mileage rate, a taxpayer may also deduct any business related parking fees and tolls paid while engaging in deductible business travel. However, parking fees paid by a taxpayer to park his or her vehicle at the usual place of business are considered commuting expenses and are not deductible.


Use of a Personal Vehicle for Charitable Purposes

A taxpayer may deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of a personal vehicle in providing services to a charitable organization. Alternatively, a taxpayer may use the standard mileage rate applicable to the use of a personal vehicle for charitable purposes. For 2015, the standard mileage rate for a taxpayer’s use of a personal vehicle for charitable purposes is 14¢ per mile.
As in the caseof other mileage deductions, the taxpayer may also deduct parking fees and tolls regardless of whether the actual expenses or standard mileage rate is used.

A related issue involves a taxpayer’s travel expenses incurred in providing services to a charity. Thus, in addition, a taxpayer may generally claim a charitable contribution deduction for travel expenses necessarily incurred while away from home performing services for a charitable organization provided there is no significant element of personal pleasure, recreation, or vacation in the travel, and the taxpayer must be on duty in a genuine and substantial sense throughout the trip.

Use of Personal Vehicle to Obtain Medical Care

A taxpayer may also deduct medical and dental expenses to the extent the total of such expenses exceed 10% of adjusted gross income for taxpayers younger than age 65 or 7.5% fpr taxpayers age 65 and older. The threshold for taxpayers age 65 or older remains at 7.5% through 2016, but beginning in 2017, medical and dental expenses will be deductible, regardless of the age of the taxpayer, only if they exceed 10% of the taxpayer’s adjusted gross income.

The vehicle expenses a taxpayer may include as medical and dental expenses are the amounts paid for transportation to obtain medical care for the taxpayer, a spouse or a dependent. A taxpayer may also include as medical and dental expenses those transportation costs incurred:

        1. By a parent who must accompany a child needing medical care;
        2. By a nurse or other person who can administer injections, medications or other treatment                     required by a patient traveling to obtain medical care and unable to travel alone.
         3.For regular visits to see a mentally-ill dependent, if such visits are recommended as a                      
  part of the mentally ill dependent’s treatment.

A taxpayer who uses a personal vehicle for such medical reasons is permitted to include the out-of-pocket vehicle expenses incurred the expenses for gas and oil, for example or deduct medical travel expenses at the standard medical mileage rate. For 2015, the standard medical mileage rate is 23¢ per mile. The taxpayer may also deduct any parking fees or tolls, regardless of whether actual expense or the standard mileage rate is used.


Use of a Taxpayer’s Personal Vehicle to Move

Many taxpayers change their residence each year, and many of those taxpayer relocations involve new jobs that can permit a taxpayer to deduct moving expenses by car. Thus, certain moving expenses incurred within one year of the date a taxpayer first reported to work at a new main job location, provided the new location is at least 50 miles farther from the taxpayer’s former home than the former main job location may be deducted as an adjustment to gross income. The deductible moving expenses include the expenses of traveling to a new home, including transportation and lodging enroute.

A taxpayer who uses his or her personal vehicle to transport the taxpayer, members of the taxpayer’s household or the taxpayer’s personal effects to a new home may deduct such costs, provided the move is eligible for the deduction of moving expenses. In addition to any parking fees and tolls paid, the taxpayer is permitted to deduct the actual vehicle expenses incurred, such as the expenses for gas and oil  or the standard mileage rate.
The standard mileage rate for 2015 applicable to moving expenses is 23¢ per mile.

TAX SCAMS CONTINUE

This is the third time I have felt compelled to post something on the subject of tax scams. The problem continues and the scammers are finding new ways to take advantage of the public's lack of knowledge of the Internal Revenue Service's practices and procedures. The following is another bulletin released today by the IRS warning people to be aware of these scammers. Please be careful to guard your personal information especially social security numbers and credit card numbers. If you receive a communication claiming to be from the IRS and you are unsure of its legitimacy, consult a tax professional or go to the IRS website at irs.gov and call them directly at 1-800-8291040 to find out about it. Get the name and ID number of the IRS employee before you give any information.

Here is the bulletin:

IRS Warns Taxpayers to Guard Against New Tricks by Scam Artists; Losses Top $20 Million

WASHINGTON — Following the emergence of new variations of widespread tax scams, the Internal Revenue Service today issued another warning to taxpayers to remain on high alert and protect themselves against the ever-evolving array of deceitful tactics scammers use to trick people.

These schemes – which can occur over the phone, in e-mails or through letters with authentic looking letterhead – try to trick taxpayers into providing personal financial information or scare people into making a false tax payment that ends up with the criminal.

The Treasury Inspector General for Tax Administration (TIGTA) has received reports of roughly 600,000 contacts since October 2013. TIGTA is also aware of more than 4,000 victims who have collectively reported over $20 million in financial losses as a result of tax scams.

“We continue to see these aggressive tax scams across the country,” IRS Commissioner John Koskinen said. “Scam artists specialize in being deceptive and fooling people. The IRS urges taxpayers to be extra cautious and think twice before answering suspicious phone calls, emails or letters.”

Scammers posing as IRS agents first targeted those they viewed as most vulnerable, such as older Americans, newly arrived immigrants and those whose first language is not English. These criminals have expanded their net and are now targeting virtually anyone.

In a new variation, scammers alter what appears on your telephone caller ID to make it seem like they are with the IRS or another agency such as the Department of Motor Vehicles. They use fake names, titles and badge numbers. They use online resources to get your name, address and other details about your life to make the call sound official. They even go as far as copying official IRS letterhead for use in email or regular mail.

Brazen scammers will even provide their victims with directions to the nearest bank or business where the victim can obtain a means of payment such as a debit card. And in another new variation of these scams, con artists may then provide an actual IRS address where the victim can mail a receipt for the payment – all in an attempt to make the scheme look official.

The most common theme with these tricks seems to be fear. Scammers try to scare people into reacting immediately without taking a moment to think through what is actually happening.

These scam artists often angrily threaten police arrest, deportation, license revocation or other similarly unpleasant things. They may also leave “urgent” callback requests, sometimes through “robo-calls,” via phone or email. The emails will often contain a fake IRS document with a telephone number or email address for your reply.

It is important to remember the official IRS website is IRS.gov. Taxpayers are urged not to be confused or misled by sites claiming to be the IRS but ending in .com, .net, .org or other designations instead of .gov. Taxpayers should never provide personal information, financial or otherwise, to suspicious websites or strangers calling out of the blue.

Below are five things scammers often do that the real IRS would never do:

The IRS will never:
• Angrily demand immediate payment over the phone, nor will the agency call about taxes owed without first having mailed you a bill.
• Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone.

Here’s what you should do if you think you’re the target of an IRS impersonation scam:
• If you actually do owe taxes, call the IRS at 1-800-829-1040. IRS workers can help you with a payment issue.
• If you know you don’t owe taxes or do not immediately believe that you do, you can report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
• If you’ve been targeted by any scam, be sure to contact the Federal Trade Commission and use their FTC Compliant Assistant at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

www.haroldjblotchertaxes.com

TAXES NOT FILED

Many people become non-filers each year for a number of reasons. They lose the paperwork, they couldn’t pay, or they forgot about it. Sometimes illness, family crisis or depression plays a role. The list goes on and on.  

 If you are a non-filer, don’t procrastinate any longer. You may be hoping the IRS has forgotten about you, but that rarely happens. In truth, the longer you wait, the more costly it will be if you owe money. And if you are due a refund, the statute of limitations on that refund expires three years from the date the return should have been filed. Don’t risk losing your money.

 It’s not uncommon to feel overwhelmed when you haven’t filed for a while, but don’t despair. Lost paperwork can be reconstructed. If you owe, it’s better to file and negotiate an installment agreement because this will stop the late filing penalties although interest will continue until the tax bill is paid. Sometimes, penalties can be abated if the circumstances are serious, such as family crisis, illness oor other catastrophic situations.

 Contact a tax professional to help you get the monkey off your back. An enrolled agent (EA) is licensed by the Treasury Department to represent clients who have problems with tax filing and with the IRS. EAs must pass a rigorous three-part exam to act on a client’s behalf and can help to get taxes filed, negotiate an installment agreement for those who can’t pay in full or, possibly, negotiate an offer in compromise to reduce taxes, penalties and interest. Don’t wait for the IRS to come looking for you; it’s far better to voluntarily come forward.

 Every U.S. citizen and resident is required to pay his or her fair share of taxes. No more, no less. The IRS has a matching program whereby all 1099s, W-2s, etc., are entered in their computers. They match this information with the tax returns that have been filed to ensure that all income has been reported and that everyone who is legally required to do so has filed a return. So, if you haven’t filed for whatever reason, get moving before the IRS comes looking for you!

DIVORCE AND TAXES PART 2

WHO CLAIMS DEPENDENCY EXEMPTIONS

The dependency exemption for qualifying children of divorced or separated parents will usually go to the parent who has primary custody of the children for the calendar year. The custodial parent is determined by the number of nights that the children lived with the parent. When the children spend an equal amount of time with each parent, the parent with the higher adjusted gross income is allowed to claim the dependency.

A custodial parent may give up his or her claim to the dependency exemption to the noncustodial parent, provided four requirements are met.

First, the qualifying child must have received over one half of his support during the calendar year from his parents, who are either divorced, legally separated, or have lived apart during the last six months of the calendar year whether or not they were actually married.

Second, the qualifying child must have been in custody of one or both parents for more than one-half of the calendar year.

The third requirement is that the custodial parent must sign an unconditional written declaration on IRS form 8332 that he or she will not claim the dependent for any taxable year. A court order or decree, or a separation agreement will not be treated as a release. The release must state the name of the noncustodial parent to whom the exemption is released, and the years in which the release is effective.

The fourth, and perhaps most important, requirement is that the noncustodial parent must attach that written declaration to his or her tax return for each year in which the children are claimed as a dependent.

If all of the above conditions are met, the non custodial parent may claim the dependency exemption, the child tax credit, and any education credits attributable to educational expenses paid for the children by the non custodial parent. The custodial parent, however, may still file as head of household and claim the dependent care credit and earned income credit.

www.haroldjblotchertaxes.com

HAROLDJBLOTCHERTAXES.COM

Harold J Blotcher, EA

DIVORCE AND TAXES Support Payments Distinguishing Alimony from Child Support Divorce is never easy. No matter the reason there are almost always emotional and financial implications. Included in those are several tax considerations that must be addressed. My next couple of articles will outline some of the tax situations that arise as the result of divorce. This article will provide an overview of alimony and support payments. In the context of a divorce or separation, one spouse may be required to make support payments to the other. The tax consequences of these payments depend on whether the support is intended for the recipient spouse or for the children who are in the custody of the recipient spouse. State law requires that parents provide support for their children, and money expended on such support is generally not tax deductible. Consequently, it does not matter whether the support is being paid to various suppliers of goods and services when a child resides with the taxpayer, or if the payment is made to the custodial parent for this purpose. In either case, payments for the support of a child do not generate a tax deduction. Likewise, such amounts received by the custodial parent do not constitute taxable income to the recipient. Payments for the support of an ex-spouse, however, are a different matter. These payments are considered alimony and are deductible by the payer spouse and includible in the income of the recipient spouse. It is crucial, therefore, that alimony payments be properly identified. There five requirements for a payment to be considered alimony. First, the payment must be in cash, not in services, or property, or a debt instrument. Second, the payment must be made to, or on behalf of a spouse, pursuant a divorce or separation instrument. A "divorce or separation instrument" is either: (1) a decree of divorce, a decree of separate maintenance or a written instrument incident to a decree of divorce or separate maintenance; (2) a written separation agreement; or (3) a decree of spousal maintenance. A "decree" is basically a court judgment. A written instrument is "incident to a decree" if it is related to it. Note also that the payments must be made to the spouse or a designated third party if the payment is made on behalf of the spouse. Such designation must be provided in the divorce or separation instrument. For example, the divorce or separation instrument may provide that the payer spouse make payments directly to the creditors of the recipient spouse. The third requirement of alimony is that the divorce or separation instrument cannot specify that the payments are not alimony.  If the instrument specifies that the payments are not alimony, the recipient must attach a copy of the instrument to his or her tax return for each year in which the designation applies,  otherwise the recipient will be taxed on the income. The fourth requirement is that the spouses must not share a household when the payments are made. Payments made while the couple lives together in the same household will not qualify as alimony. However, payments made while the one spouse is preparing to depart and in fact departs less than one month after the date of payment may still be considered alimony. The fifth and final requirement of alimony is that the divorce or separation instrument must provide for the termination of alimony payments upon the death of the recipient spouse. For example, if the divorce instrument requires A to pay B $10,000 in cash annually for ten years, but does not specify that the payments will terminate upon B's death, none of the payments will be treated as alimony for federal tax purposes.  Furthermore, just because payments actually do cease before the recipient's death does not mean this criteria is met. As always feel free to contact me with any comments or question.

WORTH REPEATING

I have posed on this subject before, but it is an important topic that bears repeating. The following is a reprint of a bulletin from the Internal Revenue Service.

Don't be Fooled, Phone Scams Continue to be Serious Threat Nationwide.

WASHINGTON — As April 1st approaches, the IRS warns taxpayers not to be fooled by the tricks scammers use to take advantage of those they target. Scammers use fake names, provide bogus IRS badge numbers and alter caller ID numbers to make it look like the IRS is calling.

With the final two weeks of the filing season about to begin and millions preparing their returns, taxpayers should be alert.

"This is no April Fool's joke. Everyone should be on the lookout for threatening calls from people faking IRS phone numbers and demands for immediate payment," IRS Commissioner John Koskinen said. "These are scams. I urge taxpayers to stay vigilant and remain aware of the constantly changing tactics used by these criminals.”

As the filing season nears its end, there has been a surge of phone scams where scam artists threaten police arrest, deportation, license revocation and other threats.

They often leave “urgent” callback requests and sometimes prey on the most vulnerable people, such as the elderly, newly arrived immigrants and those whose first language is not English. Scammers have been known to impersonate agents from IRS Criminal Investigation as well.

Here are five things the scammers often do but the IRS will not do.

The IRS will not:

Call to demand immediate payment, nor will the agency call about taxes owed without first having mailed you a bill.
Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
Require you to use a specific payment method for your taxes, such as a prepaid debit card.
Ask for credit or debit card numbers over the phone.
Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

If you know you owe taxes or think you might owe, call the IRS at 1-800-829-1040. The IRS workers can help you with a payment issue.
If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 or report it online at the IRS Impersonation Scam Reporting Page.
If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their FTC Complaint Assistant at FTC.gov. If the complaint involves someone impersonating the IRS, include the words “IRS Telephone Scam” in the notes.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue involving bills or refunds. For more information on reporting tax scams, go to IRS.gov and type “scam” in the search box.

HOME OFFICE DEDUCTION

The Home Office deduction is one of the more complicated and misunderstood tax deductions for the small business person who works from home or for employees who must maintain a home office for the convenience of their employers. The following are the rules for claiming the home office deduction.

First of all, the business must be for profit or an expectation of profit. Next, you must set aside an area that is used exclusively for this business. Perhaps you have set up a room with a desk, computer, file cabinets, and storage for your product. Use the room entirely and exclusively for business purposes and it will be deductible. Beware, however, that as soon as you add a sofa bed in the corner for your in-laws to use when they come to visit, the space is no longer exclusive and you lose the deduction.

What is eligible for a deduction? This is where the math comes in. You must determine the total square footage of your home and the total square footage of the office. Example: Total house is 2000 square feet and the office area is 200 square feet. This will give you a 10% office usage equation. You will then be allowed to deduct 10% of your costs for the upkeep and maintenance of your home which includes insurance, taxes, mortgage interest (or rent if you do not own), electricity, gas, and repairs for the entire house. Additionally, you can take specific fix-up and maintenance costs in full if they are solely for the business space.

Also available is a deduction for depreciation on the home. To determine this figure, use the cost of the house, less the value of the land, and depreciate this value over 39 years.  As long as you determine actual expenses and qualify to claim depreciation, the allowable depreciation reduces the basis of your home accordingly, whether or not you actually claim it on your tax return.  

When you sell the home, you must make an adjustment for the amount of the depreciation taken. This depreciation adjustment is recaptured on your tax return at the 25% tax rate.

However, in 2013 and later tax years, there is a simpler option. Qualifying taxpayers may use a prescribed rate ($5 per square foot limited to 300 square feet) to compute their business use of home deduction. This option used instead of determining actual expenses has the advantage of reducing taxpayers' recordkeeping burden. Under this option, depreciation is treated as zero and will not reduce the basis of your home. In addition, under this optional method, taxpayers can still deduct business expenses unrelated to qualified business use of the home for that taxable year, such as advertising, wages and supplies.

Be sure you fully understand the home office deduction and subsequent depreciation recapture before using it. Rules for the home office deduction can be tricky; therefore it is wise to get professional tax help.

As always you are free to call me with questions on this or any other tax matter. (781) 363-5519

IRS NOTICE

IRS NOTICE


You’ve just picked up your mail and … uh oh,
among the ads, bills and too numerous offerings for credit cards is that official looking letter from the Internal Revenue Service. A feeling of dread comes over you…but don’t panic or toss it, and please DO open it. It might even be good news.

Usually, mail from the IRS is a notification that they need verification of documents or substantiation of an amount you have claimed on your tax return. Read the letter thoroughly. Determine what they are looking for, and then provide the information. Some of the most commonly missed items on a return are simple things: you forgot to sign the 1040; you didn’t attach W-2’s and required statements; if you’re paying quarterly, maybe you claimed the wrong amount as estimated tax; or, perhaps the income you listed doesn’t match the figure that was reported to the IRS on a Form 1099 by someone who paid you during the tax year.

If you have the correct information, it’s a simple matter to fix. Make copies of your documents verifying the information on your return and send the copies back to the IRS along with a copy of the letter they sent to you. If, in fact, you didn’t include an amount on your return that should have been there, sign the form agreeing to the change and send them a check for the amount of tax due by the deadline date given for compliance. Usually, penalties and interest will be added—so, the sooner you comply, the less it will cost.

If your IRS letter advises you that your return has been selected for audit, you would be wise to seek professional advice. If you used a tax professional to prepare your return you should contact that person for help with the audit. If you prepared your own return, you may wish to contact an enrolled agent immediately. Enrolled agents are authorized by the U.S. Treasury Department to represent taxpayers before all administrative levels of the IRS for audits, collections, and appeals. .

Now you’re thinking, what about that possible good news mentioned earlier? It could be that the notice is for an unexpected refund, of course. Now, open that letter!




http://www.haroldjblotchertaxes,com