Friday, December 16, 2016

21st Century Cures Act Establishes Small Employer HRAs

Under the 21st Century Cures Act enacted 12/13/16, certain small employers are allowed to offer Health Reimbursement Arrangements (HRAs) to employees without also offering other health insurance coverage in 2017. The HRA must meet certain requirements and the amount the employer can contribute to the HRA is limited. Additionally, reimbursements to the employee for medical expenses are tax-free only if the employee is enrolled in other health coverage (e.g., individual coverage) that is minimum essential coverage. The HRAs also can affect an employee's eligibility for a premium tax credit, or the amount of premium tax credit that is available. The new law also provides that small employers that have reimbursed individual health insurance premiums from a standalone HRA before 1/1/17 will not be subject to the Section 4980D penalty.

Tuesday, December 13, 2016

2017 Standard Mileage Rates for Business, Medical and Moving Announced

The Internal Revenue Service today issued the 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 53.5 cents per mile for business miles driven, down from 54 cents for 2016
  • 17 cents per mile driven for medical or moving purposes, down from 19 cents for 2016
  • 14 cents per mile driven in service of charitable organizations

The business mileage rate decreased half a cent per mile and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged.   The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements are described in Rev. Proc. 2010-51. Notice 2016-79, posted today on, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Thursday, November 17, 2016

New Version of Form I-9 Released

The U.S. Citizenship and Immigration Services (USCIS) has released a new version of Form I-9 (Employment Eligibility Verification). Dated 11/14/16, the form includes several changes, including prompts to ensure information is entered correctly, the ability to enter multiple preparers and translators, a dedicated area for additional information, and a supplemental page for the preparer/translator. According to the USCIS, the revised form is easier to complete on a computer and streamlines the certification process for certain foreign nationals. Employers are required to use the new form by 1/22/17. Until then, employers can either continue to use the version dated 3/8/13 or use the updated form. More information is available at

Tuesday, August 23, 2016

IRS advises taxpayers in the sharing economy on how to meet their tax responsibilities

In a newly launched web page, the “Sharing Economy Resource Center,” IRS has provided guidance to taxpayers involved in the sharing economy (also called the on-demand, gig or access economy) to help them quickly locate the resources they need to satisfy their tax obligations.

Background. IRS notes that an emerging area of activity in the past few years has changed how people commute, travel, rent vacation places and perform many other activities. The sharing economy allows individuals and groups to utilize technology advancements to arrange transactions to generate revenue from assets they possess. Typically, the Internet is used to connect suppliers willing to provide services or the use of assets—apartments for rent, cars for transportation services, etc.—to consumers. These platforms are also used to connect workers and businesses for short-term work, such as household chores or technology services. Although this is a developing area of the economy, there are tax implications for the companies that provide the services and the individuals who perform the services.

New guidance. IRS notes that if a taxpayer receive income from a sharing economy activity, it's generally taxable. This is true even if the taxpayer even didn't receive a Form 1099-MISC (Miscellaneous Income), Form 1099-K (Payment Card and Third Party Network Transactions), Form W-2 (Wage and Tax Statement), or some other income statement. There is likely a tax obligation even if the taxpayer pursued this activity as a side job or as a part time business and even if the taxpayer was paid in cash. On the brighter side, depending upon the circumstances, some or all of the taxpayer's business expenses may be deductible, subject to the normal tax limitations and rules.
IRS has provided guidance to taxpayers with the release of its new “Sharing Economy Resource Center” webpage (at IRS offers tips and resources on a variety of topics ranging from filing requirements and making quarterly estimated tax payments to self-employment taxes and special rules for reporting vacation home rentals. Some topics include:
  • . . . Taxes. Income received is generally taxable, even if the recipient doesn't receive a Form 1099, W-2 or some other income statement and even if the activity is only part-time or a sideline business.
  • . . . Deductions. There are some simplified options available for deducting many business expenses for those who qualify. For example, a person who uses his car for business often qualifies to claim the standard mileage rate, currently 54¢ a mile for 2016.
  • . . . Rentals. Special rules generally apply to the rental of a home, apartment or other dwelling unit that is used by the taxpayer as a residence during the tax year. Usually, rental income must be reported in full, any expenses need to be divided between personal and business purposes and special deduction limits apply. But if the dwelling unit is rented out fewer than 15 days during the year, none of the rental income is reportable and none of the rental expenses are deductible.
  • . . . Estimated payments. Those involved in the sharing economy often need to make estimated tax payments during the year to cover their tax obligation. These payments are due on Apr. 15, June 15, Sept. 15 and Jan. 15. Form 1040-ES is used to figure these payments.
  • . . . Payment options. The fastest and easiest way to make estimated tax payments is to do so electronically using IRS Direct Pay or the Treasury Department's Electronic Federal Tax Payment System (EFTPS).
  • . . . Withholding. Alternatively, those involved in the sharing economy who are employees at another job can often avoid needing to make estimated tax payments by having more tax withheld from their paychecks. Form W-4 can be filed with an employer to request additional withholding.

Thursday, August 18, 2016

GSA Releases Domestic Per Diem Rates for Fiscal Year 2017

The General Services Administration (GSA) has released the federal domestic per diem rates for fiscal year 2017. The IRS permits taxpayers to use these rates to substantiate business expenses under IRC Sec. 274(d) for lodging, meals, and incidental expenses incurred while traveling away from home. The maximum standard per diem rate has increased from $140 to $142 ($91 for lodging and $51 for meals and incidental expenses). Per diem rates for localities without standard rates range from $142 to $436. The updated rates are effective from 10/1/16 through 9/30/17 and may be downloaded in Excel format via . GSA Per Diem Bulletin FTR 17-01, 8/12/16.

Friday, April 8, 2016

Spring Update

The following is a summary of important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.
2016 inflation adjustments announced for two tax breaks. The “Protecting Americans from Tax Hikes Act of 2015” (the PATH Act) made permanent the annual election to expense under Sec. 179 up to $500,000 of assets placed in service during the year; this dollar limitation begins to phase down when the amount of expensing-eligible assets placed in service during the year exceeds $2 million (the investment ceiling). The PATH Act also provided for post-2015 inflation adjustments to these dollar amounts. The IRS has announced that for tax years beginning in 2016, the $500,000 dollar limitation remains unchanged but that the investment ceiling increases to $2,010,000.

The IRS also announced that for 2016, the inflation-adjusted excludible amount for transit passes and commuter transportation in a commuter highway vehicle is $255 (up from $250).
IRS explained how employers should handle retroactive increase in 2015 excludible transit benefits. Late last year, the PATH Act retroactively increased the 2015 monthly exclusion for employer-provided transit and vanpooling benefits from $130 to $250. The IRS issued follow-up guidance clarifying that any “transit benefits” (i.e., total of vanpooling and transit pass benefits) provided by an employer to an employee in excess of $130 (the former maximum monthly excludable amount) up to $250 (the amended maximum monthly excludable amount) are excluded from the employee's gross income and wages. The exclusion applies to these excess transit benefits whether the employer provided the transit benefits out of its own funds or whether the transit benefits were provided through compensation reduction arrangements. The IRS guidance also explained how to handle the increased exclusion on employees' W-2s, and provided a special administrative procedure for employers to use in filing Form 941 (Employer's Quarterly Federal Tax Return).

Relief for employers that want to claim retroactively revived WOTC. The work opportunity tax credit (WOTC) allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of first-year wages. The PATH Act retroactively revived the WOTC for 2015 and extended it through Dec. 31, 2019. Also, effective as of Jan. 1, 2016, the list of WOTC-eligible “targeted groups” includes qualified long-term unemployment recipients. IRS announced transitional relief for (1) employers hiring a member of a targeted group, other than qualified long-term unemployment recipients, and who began or begins work for the employer on or after Jan. 1, 2015, and on or before May 31, 2016; and (2) employers hiring an individual who is a long-term unemployment recipient and who began or begins work for that employer on or after Jan. 1, 2016, and on or before May 31, 2016. These employers have until June 29, 2016, to file Form 8850, a key certification form needed to claim the credit.

Cuba off the list of sanctioned countries. Taxpayers can't claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period during which the country is on the sanctioned list—i.e., the U.S. has designated the country as one that supports international terrorism, or has severed or does not conduct diplomatic relations with the country. Additionally, income derived from any controlled foreign corporation (CFC) from any foreign country while that country is on the sanctioned list is “subpart F income” (meaning that the CFC's U.S. shareholders are taxed on such income even if it's not actually distributed to them). Cuba used to be on the list of sanctioned countries, but effective after Dec. 21, 2015, it has been removed from this list.

Cents-per-mile valuation of personal use updated. An employee's personal use of an employer-provided auto must be treated as fringe benefit income and valued using one of several methods. One of the acceptable methods allows employers to value personal use at the mileage allowance rate (54¢ per mile for 2016). However, the cents-per-mile method may be used only if the auto's fair market value does not exceed $12,800, as adjusted for inflation. The IRS has announced that the inflation-adjusted figures for vehicles first made available to employees for personal use in 2016 are $15,900 for autos (down from $16,000 for 2015) and $17,700 (up from $17,500 for 2015) for trucks and vans—i.e., passenger autos built on a truck chassis, including minivans and SUVs built on a truck chassis.

Controversial charitable contribution substantiation regulations withdrawn. The IRS has withdrawn proposed regulations issued last September that would have put in place an optional donee reporting procedure for substantiating charitable contributions of $250 or more. The regulations caused controversy because, even though the procedures contained in them were optional, donee organizations that elected to use those procedures would have had to obtain, store, and send to the IRS donor social security numbers, causing a potential identity theft problem.

Widened exclusion for identity protection services. Businesses, government agencies, and other organizations make significant efforts to secure the personal information of their customers and employees, but data breaches nonetheless occur. In response to such data breaches, organizations often provide identity protection services—credit reporting and monitoring services, identity theft insurance policies, identity restoration services, or other similar services—to the customers, employees, or other individuals whose personal information may have been compromised as a result of the data breach. In 2015, the IRS announced that it would treat as nontaxable the cost of identity protection services provided at no cost to customers, employees, or other individuals whose personal information may have been compromised in a data breach. Now, the IRS has announced that it also won't tax identity protection services provided free to employees or other individuals before a data breach occurs.

Please contact us should you have any questions or require additional information.

Tuesday, March 8, 2016

Beware of New Phishing Scheme Involving W-2s

The IRS is warning payroll and human resource professionals of phishing emails that purport to be from company executives and request personal information about employees. This phishing variation typically is an email directed to a payroll employee designed to look as though it's coming from the company CEO with a request for a list of employees and information, including social security numbers, birthdates, home addresses, salaries, information related to refunds, filing status, and PIN verification. IR-2016-34 .

Friday, January 15, 2016

Who Can Represent You Before the IRS?

Many people use a tax professional to prepare their taxes. Tax professionals with an IRS Preparer Tax Identification Number (PTIN) can prepare a return for a fee. If you choose a tax pro, you should know who can represent you before the IRS. There are new rules this year, so the IRS wants you to know who can represent you and when they can represent you. Choose a tax return preparer wisely.

Representation rights, also known as practice rights, fall into two categories:

  • Unlimited Representation
  • Limited Representation

Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionals who have unlimited representation rights include:

Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return. They can do this only before IRS revenue agents, customer service representatives and similar IRS employees. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question. For returns filed after Dec. 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants.

The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.

Other tax return preparers have limited representation rights, but only for returns filed before Jan. 1, 2016. Keep these changes in mind and choose wisely when you select a tax return preparer.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on

Thursday, January 7, 2016

2016 Standard Mileage Rates

Beginning on 1/1/2016, the standard mileage rates for cars, vans, pickups, and panel trucks will be 54 cents per mile for business miles, 19 cents per mile for medical or moving purposes, and 14 cents per mile for charitable purposes. The business expense rate is down 3.5 cents per mile from 2015, and the medical and moving expense rates are down four cents per mile from the 2015 rates. The charitable rate is set by law and remains unchanged from last year's rate. The portion of the business standard mileage rate treated as depreciation is 23 cents per mile for 2012 and 2013, 22 cents per mile for 2014, and 24 cents per mile for 2015 and 2016. When computing the allowance under a Fixed and Variable Rate (FAVR) plan, the standard vehicle cost cannot exceed $28,000 for autos or $31,000 for trucks and vans. Notice 2016-1, 2016-2 IRB .

ACA Information Reporting Deadlines Extended

Applicable large employers have until 3/31/16, to provide Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to each full-time employee. Form 1095-C is used to report information on health insurance coverage offered (or not offered) to employees. Additionally, the forms do not have to be filed with the IRS until 5/31/16, if filing on paper, or 6/30/16, if filing electronically. Similar extensions are provided for entities that must report information on Form 1095-B (Health Coverage). Individuals who file their personal income tax returns before receiving the applicable reporting forms and rely on other available information will not need to amend their returns once they receive Form 1095-B or Form 1095-C if the information is different. Notice 2016-4, 2016-3 IRB .

IRS Sent IP PIN Letters Erroneously Listing the Incorrect Year

The IRS announced that, due to an error, it sent out CP01A notices, dated 1/4/16, that incorrectly indicate the Identity Protection Personal Identification Number (IP PIN) issued is to be used for filing the 2014 tax return when the IP PIN is actually to be used for the 2015 tax return. [ Note:  The IRS issues IP PINs to victims of tax-related identity theft to help them verify the taxpayer's identity. A return filed without the required IP PIN will be rejected.] The IRS emphasizes the IP PIN listed on the CP01A notice, dated 1/4/16, is valid for the 2015 returns. Taxpayers and their tax professionals should use this IP PIN number for 2015 tax returns. The announcement is available at .