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Federal Tax

Estate Basis Reporting Requirement Approaching

In recent years, congress has enacted various tax laws to increase the accurate reporting of tax basis. These laws have extended to individuals, financial institutions, and most recently executors (e.g. - personal representatives, and trustees). With the Surface Transportation Act of 2015, executors of estates required to file an estate tax return must now separately provide to the receiving beneficiaries as well as the IRS the estate’s claimed tax value of all property included in the decedent’s estate that was or will be distributed..

This new law became effective for estate tax returns filed after July 31, 2015. The due date for the separate reporting of the estate tax value of property is 30 days after the earlier of the date of which a return was filed or required to be filed (including extensions). However, shortly after the Act was passed, the IRS issued Notice 2015-57, which provided a delay for filing until February 29, 2016. The Notice is intended to allow the IRS sufficient time to provide guidance on ‘how’ executors can best report the estate tax value to the IRS and the inheriting beneficiaries.

While penalties can be assessed for non-compliance and the deadline is fast approaching, the IRS has not issued any guidance to date. Stay tuned for the IRS prescribed method on how to report the estate tax value of property to beneficiaries.

2016 Mileage Rates Announced

The IRS has announced the 2016 standard mileage rates effective for mileage driven on or after January 1st, 2016. The optional standard mileage rate multiplied by the number of miles driven is a simplified method commonly used to calculate the deductible cost of using a vehicle for business purposes. In addition, the rates can be used to calculate the deductible mileage allowed for attending medical appointments, moving, or when driving to serve with a charity.

The 2016 rates are as follows:

  • Business Mileage can be deducted at 54 cents per mile, reduced from 57.5 cents per mile in 2015. The rate is reviewed annually and is based on fixed and variable costs of operating a vehicle.
  • Medical and Moving Mileage can be deducted at 19 cents per mile, reduced from 23 cents per mile in 2015. The rate is reviewed annually and is based on variable costs.
  • Charitable Mileage can be deducted at 14 cents per mile, there is no change to the rate as it is based on statute.

Taxpayers have the option of using the mileage rates or using the actual cost of maintaining and operating their vehicle. Maintaining accurate records of mileage used and the cost of vehicle up keep can aid tax preparers in deciding which method will provide the greatest benefit to the taxpayer.

More information on the new published rates and limitations that may apply can be found in Notice 2016-1. Questions concerning whether using the optional standard mileage rates would be of benefit should be directed to your trusted tax advisor.

IRS Extends Deadline for Employer Health Insurance Notices & Forms

It looks like the IRS is providing help to some employers in keeping their New Years’ resolution to timely comply with the Affordable Care Acts’ information reporting requirements. On December 28, 2015, the IRS issued Notice 2016-4 extending the due dates for the 2015 information reporting requirements for applicable large employers and for insurers, self-insuring employers, and some other providers of minimum essential coverage.

  • Employers have until March 31, 2016 to provide their employees the 2015 Form 1095-B, “Health Coverage” and the 2015 Form 1095-C, “Employer-Provided Health Insurance Offer Coverage”.
  • Employers not filing electronically now have until May 31, 2016 to submit the 2015 Forms 1095-B, 1095-C, 1094-B “Transmittal of Health Coverage Information Returns,” and 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns” to the Service.
  • Employers filing electronically now have until June 30, 2016 to submit the 2015 Forms 1095-B, 1095-C, 1094-B “Transmittal of Health Coverage Information Returns,” and 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns” to the Service.

The automatic and permissive extension provisions will not apply to these extended due dates.

The extended deadlines will not impact employees enrolled in employer-sponsored coverage and employees will still be able to file their returns timely by April 15th. The forms with the extended deadlines assist in determining individual eligibility for a premium tax credit, which is subject to very specific rules for health insurance coverage purchased through the Marketplace.

For further questions on the extended deadlines and these forms, please contact us.

2015 & 2016 Qualified Transportation Benefits made Permanent

For those employers providing mass transit and qualified parking benefits to their employees, congress retroactively increased the excludible transit benefits for 2015 from $130 to $250 effective January 1, 2015, as part of the 2015 extender package, through the Consolidated Appropriations Act. The fringe benefit for these exclusions was made permanent and is adjusted for inflation.

Stay tuned for more information from our blog and the IRS on how to reclaim any pre-tax benefit in excess of the originally stated $130 per month amounts for 2015.

For 2016, the monthly fringe benefit exclusion for both the qualified parking and for commuter highway vehicle transportation and transit passes is $255.

Being Smart With Your Charitable Donations

Donations to charitable organizations can be a great way to both lower your tax liability and support causes you care about. When making your donation, keep in mind the IRS has specific requirements in order for your charitable contribution to be tax deductible. To deduct a donation you will need to itemize your deductions, donate to a qualified organization, and keep records.

First and foremost, for any charitable contribution you make to be deductible, you must itemize your tax deductions. If you claim the standard deduction, you will not be able to deduct any donations. For 2015 the standard deduction is $6,300 for singles and $12,600 for married filing joint.

Next, research the organizations to which you are considering making donations. Unfortunately, not all charities are equal. Some use donations more effectively and are more transparent than others. In 2015, the Federal Trade Commission took unprecedented legal action against several charities for over $187 million in charity fraud.

Not all nonprofits are qualified charitable organizations. The IRS only allows deductions for donations to qualified tax-exempt organizations. A site like Guidestar or CharityNavigator can help you find reputable charities that are also qualified tax-exempt organizations.

Once you have made a donation, you will need to be able substantiate it in case the IRS has questions. Generally, for donations over $250 of either cash or property the IRS requires a special receipt from the charity, known as a letter of acknowledgement. You must obtain a copy of this letter prior to filing the tax return on which you are claiming the donation deduction, or the tax return’s due date (including extensions). The letter of acknowledgement must have the following elements:

  • It must be written,
  • The amount of cash and/or description of property donated,
  • If you received any goods or services, as well as a good faith estimate of their value, received as a result of the donation,
  • Or if applicable, a statement that the only benefits received were intangible religious benefits.

For additional guidelines for substantiating charitable deductions, see the “Tips for Year-End Charitable Contributions” blog by Glenn Bailey.

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