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The Internal Revenue Service issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
56.5 cents per mile for business miles driven
24 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.
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 for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 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.
The IRS informally indicated iPads and other tablets will be treated the same as cellphones for tax purposes when provided to employees by employers. As a result, employees will not be taxed for the value of personal use if the device is primarily used for business reasons rather than provided as a form of compensation. Reimbursements by employers to employees for personally owned iPads will generally follow the same guidelines if used primarily for business.
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Looking for ways to help the victims of Hurricane Sandy? The IRS announced special relief intended to support leave-based donation programs to aid victims who have suffered from extraordinary destruction caused by Hurricane Sandy. Under these programs, employees may donate their vacation, sick or personal leave in exchange for employer cash payments made to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy.
Employees can forgo leave in exchange for employer cash payments made before January 1, 2014. Under this special relief, the donated leave will not be included in the income or wages of the employees. Employers will be permitted to deduct the amount of the cash payment. Details on this relief program are in IRS Notice 2012-69.
Employees donating their vacation, sick or personal leave would not be eligible to take a charitable contribution tax deduction since this amount is not taxable to them. This does provide an opportunity for those who want to help but have limited cash resources.
Charity Navigator, the nonprofit watchdog for charity organizations, issued a list of 10 highly rated charitable organizations that have rushed in to help the storm’s victims both in the United States and abroad. It includes:
• American Red Cross
• World Vision
• Feeding America
• Operation USA (helping people impacted in Haiti, Cuba and the U.S.)
• International Medical Corps (helping people in Haiti)
Our thoughts and prayers are with the many people facing the devastation from the hurricane.
In the aftermath of Hurricane Sandy, the Internal Revenue Service announced additional tax relief to affected individuals and businesses.
Following recent disaster declarations for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in Connecticut, New Jersey and New York will receive tax relief. Other locations may be added in coming days based on additional damage assessments by FEMA.
The tax relief postpones various tax filing and payment deadlines that occurred starting in late October. As a result, affected individuals and businesses will have until Feb. 1, 2013 to file these returns and pay any taxes due. This includes the fourth quarter individual estimated tax payment, normally due Jan. 15, 2013. It also includes payroll and excise tax returns and accompanying payments for the third and fourth quarters, normally due on Oct. 31, 2012 and Jan. 31, 2013 respectively. It also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline falling during this period.
The IRS will abate any interest, late-payment or late-filing penalty that would otherwise apply. The IRS automatically provides this relief to any taxpayer located in the disaster area. Taxpayers need not contact the IRS to get this relief.
Beyond the relief provided by law to taxpayers in the FEMA-designated counties, the IRS will work with any taxpayer who resides outside the disaster area but whose books, records or tax professional are located in the areas affected by Hurricane Sandy. All workers assisting the relief activities in the covered disaster areas who are affiliated with a recognized government or philanthropic organization are eligible for relief. Taxpayers who live outside of the impacted area and think they may qualify for this relief need to contact the IRS at 866-562-5227.
In addition, the IRS is waiving failure-to-deposit penalties for federal payroll and excise tax deposits normally due on or after the disaster area start date and before Nov. 26, if the deposits are made by Nov. 26, 2012. Details on available relief can be found on the disaster relief page on IRS.gov.
The tax relief is part of a coordinated federal response to the damage caused by the hurricane and is based on local damage assessments by FEMA. For information on disaster recovery, individuals should visit disasterassistance.gov.
The IRS wants to assure taxpayers, businesses and tax preparers that it is working aggressively to monitor the situation and provide additional relief as needed.
So far, IRS filing and payment relief applies to the following localities:
In New Jersey (starting Oct. 26): Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union;
In New York (starting Oct. 27): Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester.
Holt Accounting & Tax Professionals offers prayers for those experiencing this devastation. Please contact us if we can assist anyone in the affected areas in any way.