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Federal Tax

New Guidance from IRS is Great News for Small Businesses

The IRS Provides New Guidance on Tangible Property Regulations

The New Repair Rules have been a hot topic in the tax community since their release. While they provided much needed guidance regarding the capitalization and disposal of tangible property, they also required businesses to file numerous change of accounting method forms (3115) in order to adapt them. This put a significant burden on businesses.

Fortunately, the IRS released Rev. Proc. 2015-20 a few days ago. This revenue procedure eases the process of adopting the new regulations for small business. Essentially, the IRS will now allow small business taxpayers to change a method of accounting under the tangible regulations on a prospective basis for the first taxable year beginning on or after January 1, 2014. The IRS is also waiving the requirement to file Form 3115 for small businesses that choose to use this simplified procedure for 2014.

New Applicable Federal Rates Released for March by IRS

Each month, the IRS provides various prescribed rates for federal income tax purposes. These rates, known as Applicable Federal Rates (AFRs), are regularly published as revenue rulings.

The AFRs for March 2015 are as follows:

Annual Semi-Annual Quarterly Monthly
Short-Term: 1-3 years 0.40% 0.40% 0.40% 0.40%
Mid-Term: >3 & up to 9 years 1.47% 1.46% 1.46% 1.46%
Long-Term: >9 years 2.19% 2.18% 2.17% 2.17%

Qualified Charitable Distributions in 2015 Uncertain, but There is an Option!

Capitol Hill provided an excellent holiday gift in late-December 2014 with the Tax Extenders Package, otherwise known as The Tax Increase Prevention Act. One of the most talked about provisions of the Act was the extension of tax-free distributions from an Individual Retirement Account (IRA) for charitable purposes through December 31, 2014. This is called a Qualified Charitable Distribution (QCD) in tax terms.

A QCD is a very common tax savings strategy. Essentially, a taxpayer who is 70 ½ is subject to required minimum distribution rules and must take at least a specific and calculated distribution from their IRA each year. A QCD allows a taxpayer to satisfy the required distribution rules if they elect to donate their distribution, up to $100,000 per taxpayer, directly to a qualified charity. The benefit to the taxpayer is the amount donated to charity through the IRA distribution is not included in his or her gross income. Generally, amounts that can be excluded from gross income rather than as an itemized tax deduction on Schedule A result in a better tax benefit to the taxpayer, especially given the current environment of the Pease limitations on itemized deductions. For QCDs purposes qualified charities do not include community foundations, private foundations or other donor-advised funds.

Dirty Dozen Tax Schemes: Scam Phone Calls

Posting by John Merchant

The Internal Revenue Service (IRS) recently released its annual “dirty dozen” tax related scams that they find are being perpetrated on unsuspecting victims. This year phone scams were at the top of the list. According to the IRS, scam artists will call on the telephone pretending to be IRS collection agents and demanding payment on an outstanding tax bill that is totally phony. They may demand that the taxpayer give them a credit card number to be used for payment or suggest that the taxpayer mail a prepaid debit card to some address. If the taxpayer is hesitant, they will often resort to various threats such as arrest, deportation and license revocation.

In a twist on this scheme, the scammer may announce that the taxpayer is due a refund and ask for bank account information and a social security number to verify that they have the right person so that they can wire transfer the refund to the taxpayer. Or, they may send an e-mail requesting personal information in regard to a tax matter. The IRS emphasizes that its first contact about a tax matter is never by telephone or e-mail. Rather, it is by letter.

If you receive a call or an e-mail from a person claiming to be from the IRS and wanting to discuss a tax matter that you have never heard of, do not give them any information. Instead, call the IRS at 1-800-829-1040 and ask them for confirmation of any outstanding bill or refund.

For more information on this and other tax scams, check the IRS website at www.irs.gov.

IRS Releases New Applicable Federal Rates

Each month, the IRS provides various prescribed rates for federal income tax purposes. These rates, known as Applicable Federal Rates (AFRs), are regularly published as revenue rulings. 

The AFRs for February 2015 are as follows:

Annual Semi-Annual Quarterly Monthly
Short-Term: 1-3 years 0.48% 0.48% 0.48% 0.48%
Mid-Term: >3 & up to 9 years 1.70% 1.69% 1.69% 1.68%
Long-Term: >9 years 2.41% 2.40% 2.39% 2.39%

 

Please click here to see the complete revenue ruling.

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