by NFS | Nov 23, 2012 | Archives
WASHINGTON — The Internal Revenue Service today 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 on 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.
-IRS Notice 2012-95
by NFS | Nov 22, 2012 | Archives
Today, we all move pretty fast and sometimes we rush right by the simple things in life, like thanking our colleagues, customers and friends for all that they do.
We’d like to “slow down” for a minute, during a very challenging year, as we approach one of America’s great traditions of “taking stock and giving thanks.” For almost 400 years, our country has celebrated Thanksgiving Day to give thanks for what we have and express gratitude to each other.
Your friends at Northeast Financial Strategies want you to know how much your loyalty and friendship are appreciated this year and in all years past.
To you and your family, from all of us here at NFS, a very Happy Thanksgiving!
by NFS | Nov 21, 2012 | Archives
FUTA Tax Surcharges – Form 940 Schedule A for 2012
Some states have borrowed from the Federal government to pay unemployment benefits and have not yet repaid the money. As a result employers with payroll in those states have a “credit reduction” that applies to effectively reduce the maximum .054 credit. The reduction in the credit means a net increase in the FUTA taxes due for the year.
When a state borrows from the Federal government and does not repay the funds by the end of the year AFTER the year of the borrowing, the credit drops by .003 (.3%). If the funds are not paid by the end of the following year, the credit decreases by an additional .003. Each year that the funds are not repaid results in an additional .003 (.3%) credit decrease.
As of November 10, 2012, the following states have not repaid their borrowed monies and therefore the credit reduction indicated applies. If any of these states repays its entire borrowed monies by December 31, 2012, the reduction does not apply, but such a repayment is not expected to happen.
Indiana – 0.9% reduction in the credit due to four years of non-repayment, effectively resulting in a FUTA rate of 1.5%.
Arkansas, California, Connecticut, Florida, Georgia, Kentucky, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Rhode Island, and Wisconsin – 0.6% reduction in the credit due to three years of non-repayment effectively resulting in a FUTA rate of 1.5%.
Arizona, Delaware, and Vermont – 0.3% reduction in the credit due to two years of non-repayment effectively resulting in a FUTA rate of 0.9%.
Michigan – not on the list this year which means it must have repaid its borrowed funds.
The credit reduction is shown on Schedule A (Form 940) and then carried to the Form 940. Affected employers (those required to make deposits of FUTA taxes) should take this reduction in the credit into account when calculating the fourth quarter deposit.
This adjustment is above and beyond any invoices the employers have received from their states for the interest on the borrowed funds.
by NFS | Nov 20, 2012 | Archives
Per Diem Amounts – Effective October 1, 2012
The M&IE rates have stayed at the same $46, $51, $56, $61, $66, and $71 although some cities may have different rates that they had for the prior fiscal year (October 1, 2011-September 30, 2012). The full per diem tables by state and key city can be found at http://www.gsa.gov/. IRS Publication 1542 has been discontinued and is no longer available for new years.
The definition of “incidental expenses” has changed. Effective October 1, 2012, this includes only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. Transportation between places of lodging or business and places where meals are taken, and the mailing cost of filing travel vouchers and paying employer-sponsored charge
card billings, are no longer included in incidental expenses. Accordingly, taxpayers using per diem rates may separately deduct or be reimbursed for transportation and mailing expenses.
The High/Low cost amounts are now $242 and $163 with the M&IE portion deemed to be $65 and $52, respectively.
The special M&IE per diem rate for taxpayers in the transportation industry is $59 for travel in the continental United States.
– IRS Notice 2012-63
by NFS | Nov 19, 2012 | Archives
If an individual, partnership, estate, trust, or an S corporation engages in an activity that is not conducted as a for-profit business, deductions are limited to the amount of income from the activity. This rule does not apply to corporations, other than S corporations. If an activity is considered a for-profit business, deductions can exceed income, allowing the resulting loss to offset other income.
Determination
In determining whether an activity is a hobby or a business, all facts and circumstances are taken into account. No one factor can make the determination. The following list is not intended to be all inclusive.
1) Manner in which the taxpayer carries on the activity. Factors that may indicate a business
include maintaining complete and accurate books and records, carrying on the activity substantially similar to other profitable activities of the same nature, and changing operating methods and techniques to improve
profitability.
2) The expertise of the taxpayer or his or her advisors. Factors that may indicate a business
include knowledge of the taxpayer, or consultation with those who are knowledgeable about a particular industry, then using that knowledge to try and make a profit.
3) The time and effort expended by the taxpayer in carrying on the activity. Factors that may indicate
a business include spending a lot of time and effort in the activity, particularly if the activity does not have substantial personal or recreational aspects. Taking time away from another occupation may also indicate a profit motive. Spending little time will not be counted against the taxpayer if qualified employees are hired to carry on the activity.
4) Expectation that assets used in activity may appreciate in value. Even if no profit is made
from operations, if the value of land or other assets in the activity appreciate so that an overall profit is made from a sale, the activity may be considered a business.
5) The success of the taxpayer in carrying on other similar or dissimilar activities. If the taxpayer
was successful in the past turning an unprofitable venture into a profitable venture, the current activity may be a business even if it has not yet made a profit.
6) The taxpayer’s history of income or losses with respect to the activity. Early losses during startup
will not count against the taxpayer, but continued losses after the customary startup stage that are not explainable may indicate a hobby. Losses sustained due to unforeseen circumstances, such as casualty or thefts beyond the taxpayer’s control, will not count against the taxpayer. Any series of profitable years are strong evidence the activity is a business.
7) The amount of occasional profits, if any, which are earned. The amount of profits in relation to the amount of losses, and in relation to the taxpayer’s investment in the activity, may indicate intent. An occasional small profit one year, mixed with large losses in other years or large taxpayer investments, may indicate the activity is a hobby. Substantial occasional profits mixed with frequent small losses or investment may indicate a business. An opportunity to earn substantial ultimate profits in a highly speculative venture also
indicates a profit motive.
8) The financial status of the taxpayer. If the taxpayer does not have substantial income or capital from other sources, the taxpayer may have a profit motive. If the taxpayer has substantial income from other sources, and losses from the activity in question generate substantial tax benefits, the taxpayer may not have a profit motive.
9) Elements of personal pleasure or recreation. Where there are recreational or personal elements involved with the activity, a lack of profits may indicate a hobby. On the other hand, a lack of any appeal in the activity other than possible profits indicates a profit motive. It is not necessary that the sole purpose for engaging in an activity is to make a profit. The availability of other investments that might produce a higher
rate of return will not count against the taxpayer. The fact that a taxpayer derives personal pleasure in the activity is not sufficient in itself to classify the activity as a hobby if other factors indicate the activity is a business.
Click the following link to download the NFS Hobby vs. Business Brochure for more information.
