App for Tracking Tax-Deductible Donations

Ever made a donation of goods to a charity and wondered how to track and value those donated items?  Now there is an App for that.  UDoGood, available on the Apple AppStore allows you to track your donations of clothing, household items, cash, etc.  UDoGood is a simple way to document, photograph and record your charitable donations.  UDoGood also gives suggestions for determining the fair market value of your donations. At the end of the year you can email your list of donated goods to your tax preparer or to yourself. Read more

IRS Increases Standard Mileage Rate

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

FBAR Quiet Disclosure Criminal Prosecution

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

2012 HSA Inflation Adjustment

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.

Business Expense Substantiation

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:

• The amount of the expense
• The time and place of the meal, entertainment, etc.
• The business purpose of the expenditure
• The business relationship of the various parties in attendance – who attended and what is their relationship to the event?

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.