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IRS Increases Mileage Rate to 55.5 Cents per Mile
Jun 23rd
IR-2011-69, June 23, 2011
WASHINGTON — 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.
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
“This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”
While gasoline is a significant factor in the mileage figure, other items 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 increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.
The new rates are contained in Announcement 2011-40 on the optional standard mileage rates.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Mileage Rate Changes
| Purpose | Rates 1/1 through 6/30/11 | Rates 7/1 through 12/31/11 |
| Business | 51 | 55.5 |
| Medical/Moving | 19 | 23.5 |
| Charitable | 14 | 14 |
IRS Can Help When Natural Disasters Strike
Jun 7th
Try as we may, the one thing no one can control is the weather. When natural disasters such as floods, tornadoes and hurricanes occur, families and businesses can often feel overwhelmed when faced with rebuilding their lives. IRS wants to help.
Did you know that special tax law provisions may help you recover financially from the impact of a federally declared disaster?
If you have damaged or lost property in a location declared by the federal government as a major disaster area, you may be able to get some money back from the IRS right now.
Additionally, depending on your circumstances, the IRS may grant you more time to file your return and pay your taxes. You could get a faster refund by claiming losses related to a disaster on your tax return for the previous year, usually by filing an amended return.
Check out the Tax Relief in Disaster Situations webpage to learn more about the latest disaster relief information. This page has helpful tax relief information for those affected by a disaster such as the Mississippi River flooding this spring, along with the April and May tornadoes.
Remember, when natural disasters strike, the IRS is here to help you.
_________________________________________________________________________
IRS.gov
- Help for Individuals
- Help for Small Business Owners – Audio Presentations
- Continuity Planning and Other Tips to Stay in Business After a Major Disaster Audio
- Insurance Coverage and Other Emergency Planning Tips to Help Your Business Survive a Major Disaster Audio
- Recordkeeping and Reconstructing Business Records to Help Your Business Survive a Major Disaster Audio
- Disaster and Emergency Relief – Webinar Archive Video
IRS.gov in Spanish
IRS Forms and Publications
- Publication 3067, IRS Disaster Assistance
- Publication 1600, Disaster Losses — Help from the IRS
- Publication 547 – Casualties, Disasters and Thefts
- Publication 2194, Disaster Losses Kit for Individuals
Eight Tips from the IRS to Help You Determine if Your Gift is Taxable
May 20th
IRS Tax Tip 2011-62, March 29, 2011, http://1.usa.gov/ivAo9z
If you give someone money or property during your life, you may be subject to the federal gift tax. Most gifts are not subject to the gift tax, but the IRS has put together the following eight tips to help you determine if your gift is taxable.
- Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2010, the annual exclusion is $13,000.
- Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
- Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
- Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions).
- The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are not more than the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities. - Gift Splitting – you and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.
- Gift Tax Returns – you must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event. - You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
For more information see Publication 950, Introduction to Estate and Gift Taxes. Both Form 709 and Publication 950 can be downloaded at http://www.irs.gov or ordered by calling 800-TAX-FORM (800-829-3676).
Links:
- Publication 950, Introduction to Estate and Gift Taxes
- Form 709, United States Gift Tax Return
- Form 709 Instructions
- Gift Tax
- Frequently Asked Questions on Gift Taxes
Wedding Season Is in Full Swing!
May 3rd
From irs.gov:
Congratulations! You have tied the knot and cut the cake… Now what? Although next
year’s tax day seems far away, it will be here before you know it. Here are four simple
steps you can take soon after tying the knot to make your first joint income tax return
less stressful.
Step 1: Marriage can mean a change in name. Ensure the names you will enter on your
first tax return match the names and Social Security numbers on file with the Social
Security Administration. Make the change with SSA as soon as possible if there is a
spousal name change.
Step 2: Even if you get married on Dec. 31, 2011, you are considered to have been
married for the entire year. Check your withholding to be sure you are having enough
taxes taken out of your paychecks. If you both work, your combined income may place
you in a higher tax bracket.
The IRS Withholding Calculator will help you figure the correct amount of withholding for a married couple. Making a change to your withholding now can eliminate or reduce a tax bill next year. Use Form W-4, Employee’s Withholding Allowance Certificate, to make the needed adjustments and give the form to your employer.
Step 3: Make sure the IRS knows of your correct mailing address. Either you can notify the US Postal Service or you can complete and mail an IRS Form 8822, Change of Address form, to the address listed on page 2 of the form.
Step 4: Just in case you forgot to invite your employers to the wedding, let them know
about any name and address changes as soon as possible. This will ensure that you
receive your Form W-2, Wage and Tax Statement, at the right time to file. Also, ensure
other payers, such as banks and investment companies, have your updated name and
address as well.
You may be wondering how being married will affect your taxes. When you file your
return, you will be able to choose between filing jointly with your spouse (which may
lower your combined tax) or using the filing status called married and filing separately.
When it comes to wedding planning, details are important. So take these steps now to
ensure your first tax season as husband and wife goes as smoothly as your wedding.
Ten Things to Know about Farm Income and Deductions
Mar 23rd
IRS Tax Tip, March 21, 2011 http://1.usa.gov/dLjkrk
If you have a farming business, there are several tax issues to consider before filing your federal tax return. The IRS has compiled a list of 10 things that farmers may want to know.
- Crop Insurance Proceeds —You must include in income any crop insurance proceeds you receive as the result of crop damage. You generally include them in the year you receive them.
- Sales Caused by Weather — Related Condition If you sell more livestock, including poultry, than you normally would in a year because of weather-related conditions, you may be able to postpone reporting the gain from selling the additional animals due to the weather until the next year.
- Farm Income Averaging — You may be able to average all or some of your current year’s farm income by allocating it to the three prior years. This may lower your current year tax if your current year income from farming is high, and your taxable income from one or more of the three prior years was low. This method does not change your prior year tax, it only uses the prior year information to determine your current year tax.
- Deductible Farm Expenses — The ordinary and necessary costs of operating a farm for profit are deductible business expenses. An ordinary expense is an expense that is common and accepted in the farming business. A necessary expense is one that is appropriate for the business.
- Employees and Hired Help — You can deduct reasonable wages paid for labor hired to perform your farming operations. This includes full-time and part-time workers. You must withhold social security, medicare and income taxes on employees.
- Items Purchased for Resale — You may be able to deduct, in the year of the sale, the cost of items purchased for resale, including livestock and the freight charges for transporting livestock to the farm.
- Net Operating Losses — If your deductible expenses from operating your farm are more than your other income for the year, you may have a net operating loss. You can carry that loss over to other years and deduct it. You may get a refund of part or all of the income tax you paid for past years, or you may be able to reduce your tax in future years.
- Repayment of Loans — You cannot deduct the repayment of a loan if the loan proceeds are used for personal expenses. However, if you use the proceeds of the loan for your farming business, you can deduct the interest that you pay on the loan.
- Fuel and Road Use —You may be eligible to claim a credit or refund of federal excise taxes on fuel used on a farm for farming purposes.
- Farmer’s Tax Guide — More information about farm income and deductions is in IRS Publication 225, Farmer’s Tax Guide, which is available at http://www.irs.gov or by calling the IRS at 800-TAX-FORM (800-829-3676).
Links:
IRS Publication 225, Farmer’s Tax Guide
Health Insurance Tax Breaks for the Self-Employed
Mar 15th
IRS Tax Tip 2011-51, March 14, 2011, http://1.usa.gov/fiCYe7
Here is some information from the IRS about a special tax deduction for the self-employed. You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents if you are one of the following:
- A self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming.
- A partner with net earnings from self-employment reported on Schedule K-1 (Form 1065), Partner’s Share of Income, Deductions, Credits, etc., box 14, code A.
- A shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2, Wage and Tax Statement.
The insurance plan must be established under your business.
- For self-employed individuals filing a Schedule C, C-EZ, or F, the policy can be either in the name of the business or in the name of the individual.
- For partners, the policy can be either in the name of the partnership or in the name of the partner. You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
- For more-than-2% shareholders, the policy can be either in the name of the S corporation or in the name of the shareholder. You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Otherwise, the insurance plan will not be considered to be established under your business.
For more information see IRS Publication 535, Business Expenses, available at http://www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
IRS Publication 535, Business Expenses ( PDF)
Death and Finances: Eight Things to Do After a Loved One Passes Away
Feb 25th
by Lynnette Khalfani-Cox
Dealing with the death of a loved one is stressful enough. But not knowing what to do with someone’s finances after the person has passed away poses an additional burden on a grieving family.
To make the process a bit easier, here’s a checklist of the top eight money matters you must deal with — and mistakes to avoid — after someone you care about dies.
This checklist isn’t all-inclusive. But what follows is critical information that can save you precious time, money and energy, as well as help you avoid squabbles over assets or financial exploitation.
To read the rest of Ms. Khalfani-Cox’s article, please go http://aol.it/ePIeO2.
Are Your Social Security Benefits Taxable?
Feb 8th
IRS Tax Tip 2011-26, February 7, 2011 http://bit.ly/fX6pGe
The Social Security benefits you received in 2010 may be taxable. You should receive a Form SSA1099 which will show the total amount of your benefits. The information provided on this statement along with the following seven facts from the IRS will help you determine whether or not your benefits are taxable.
- How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.
- Generally, if Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return.
- If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.
- Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet.
- You can do the following quick computation to determine whether some of your benefits may be taxable:
• First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.
• Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable. - The 2010 base amounts are:
• $32,000 for married couples filing jointly.
• $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.
• $0 for married persons filing separately who lived together during the year. - For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Publication 915 is available on this website or by calling 800-TAX-FORM (800-829-3676).
Links:
-
Publication 915, Social Security and Equivalent Railroad Retirement Benefits
Medical and Dental Expenses
Feb 2nd
IRS Tax Tip 2011-21, January 31, 2011 http://bit.ly/dEOvP3
If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2010 for medical care – including dental – for yourself, your spouse, and your dependents. Here are six things the IRS wants you to know about medical and dental expenses and other benefits.
- You may deduct only the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.
- You can only include the medical expenses you paid during the year. Your total medical expenses for the year must be reduced by any reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
- You may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn’t meet the gross income or joint return test.
- A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.
- You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.
- Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.
For additional information on medical deductions and benefits, see Publication 502, Medical and Dental Expenses or Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, available at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
Links:
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