IR News Release 2011-69 announced that the IRS has increased the mileage rate for the second half of 2011.
Effective July 1, 2011 through December 31, 2011 the mileage rate for business travel is 55.5 cents per mile. Medical and moving mileage will increase to 23.5 cents per mile. The rate for charitable mileage remains unchanged at 14 cents per mile. Read more
The US has recently decided to criminally prosecute an HSBC customer who made a “quiet” disclosure of his foreign bank accounts for the 2003 through 2008 tax years. A “quiet” disclosure is when a taxpayer files amended returns and pay tax for previously unreported offshore income without otherwise notifying the IRS or participating in a voluntary disclosure program. Read more
The IRS recently issued Rev. Proc. 2011-32 increasing the limits on contributions to HSA accounts for 2012. The new limits are $3,100 and $6,250 for self only and family coverage, respectively. The prior limits (2010 and 2011) were $3,050 and $6,150. Contributions can be made up until the due date of the return (not including extensions) to be counted for the tax year. The new contribution limits are effective January 1, 2012.
Many people often assume that a bank statement or credit card statement is sufficient proof of substantiation when your tax return is examined. Unfortunately, this is not the case. At a minimum, proof of payment is typically required as is an invoice or receipt. In a recent Tax Court case (Mark Stroff, TC Memo 2011-80) the taxpayer was allowed a portion of claimed expenses for casual labor when he presented a list of 13 individuals’ first names that corresponded to names on his weekly planner, though there was no record of actual payment. However, the taxpayer was denied deductions for meals and entertainment, vehicles, telephone, and legal fees due to lack of documentation. While he lucked out on the casual labor, he lost on many of the other expenses.
The importance of good books and records cannot be understated, especially when it comes to expenses related to travel, meals and entertainment. Meals and Entertainment expenses fall under Section 274 of the Internal Revenue Code which requires at a minimum:
In other words, Who, What, Where, When, and Why is required for all meals and entertainment expenses. The best recommended strategy is to write on the back of the receipt as soon as possible after the event is over the names of the people that were in attendance and a brief description of the purpose of the meeting and what was discussed. This, in combination with the information on the receipt and a good calendar or planner that you can refer back to goes a long ways towards providing adequate substantiation during an examination.
As always, if you have questions feel free to give us a call.
The FTB has begun assessing penalties on certain taxpayers who fail to make tax payments electronically. Affected taxpayers are those who, since January 1, 2009, have incurred either a total California tax liability greater than $80,000 or any individual estimated tax or extension payment more than $20,000.
The law has been in effect since 2009 but for the past two years the FTB has not assessed any penalties, giving taxpayers time to understand and comply with the new rules. The penalty for failing to make a payment electronically is 1% of the payment amount, which can result in substantial penalties for taxpayers with large liabilities or payments. Read more