Tax Deductions 2011-2012: IRS Raises Mileage Rates by 4.5 Cents

  • Beginning July 1, drivers can deduct 55.5 cents per mile for using their private vehicle for business-related travel.
  • The new mileage rate for deducting medical and moving expenses is 23.5 cents per mile, up 4.5 cents from 19 cents.
  • These mileage rates are also used by the government and many companies as a benchmark to determine how much to reimburse their employees for fuel costs, the IRS said. The costs that are reimbursed by an employer don’t have to be reported as income for tax purposes, unless they exceed the IRS’s payment limit.

Mortgage Interest – New Construction not Completed

Mortgage Interest

Interest paid on mortgage for house that was never built is deductible, Tax Court says. Interest deductible on the loan for 24 months after construction begins. IRS regulations on deducting interest on a loan for a home under construction don’t condition deductibility on the house’s completion.

Important Individual and Business Tax Dates for November

Businesses:

Monthly payroll deposits for October due on November 15

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Individuals:

Retirement Plan Contributions

  • Simple IRA – made per pay period
  • 403(b)(7)/ Roth 403(b)(7) – made per pay period
  • 401(k)/ Roth 401(k) – made per pay period
  • Safe Harbor 401(k)/ Roth Safe Harbor 401(k) – made per pay period
  • Individual K/ Roth Individual K – made per pay period

Important Tax Reminder Dates for October

October – Important Tax Dates for Businesses and Individuals

 Businesses:

  •  Monthly payroll deposits for September due on October 15
  • 3rd Quarter Payroll Reports due by October 31
  • 3rd Quarter Sales Tax report and payment due on October 20

 Retirement Plans

  • Simple IRA Establishment Date is October 1
  • Safe Harbor 401(k)/ Roth Safe Harbor 401(k) Establishment Date is October 1

 Retirement Plans for Sole Proprietors and Partnerships

  • SEP  – Establishment Date is October 15 ( if extension taken)
  • SEP – Contribution Date is October 15 (if extension taken)
  • Simple IRA – Contribution Date is October 15 (if extension taken)
  • Profit Sharing/ Money Purchase – Contribution date is October 15 (if extension taken)
  • 403(b)(7)/ Roth 403(b)(7) – Contribution Date is October 15 (if extension taken)
  • 401(k)/ Roth 401(k) – Contribution Date is October 15 (if extension taken)
  • Safe Harbor 401(k)/ Roth Safe Harbor 401(k) – Contribution Date is October 15 (if extension taken)
  • Individual K/ Roth Individual K Contribution Date is October 15 (if extension taken)

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Individuals:

 Extension Due Date for Income Taxes is October 15

 Retirement Plans Contributions

  • Simple IRA made per pay period
  • 403(b)(7)/ Roth 403(b)(7) made per pay period
  • 401(k)/ Roth 401(k) made per pay period
  • Safe Harbor 401(k)/ Roth Safe Harbor 401(k) made per pay period
  • Individual K/ Roth Individual K made per pay period

 

IRS Guidance on Cell Phones – Record Keeping Relief

Cell Phones

IRS Issues Guidance on Tax Treatment of Cell Phones; Provides Small Business Recordkeeping Relief

 

IR-2011-93, Sept. 14, 2011

WASHINGTON — The Internal Revenue Service today issued guidance designed to clarify the tax treatment of employer-provided cell phones.

The guidance relates to a provision in the Small Business Jobs Act of 2010, enacted last fall, that removed cell phones from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.

The Notice issued today provides guidance on the treatment of employer- provided cell phones as an excludible fringe benefit. The Notice provides that when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require recordkeeping of business use in order to receive this tax-free treatment.

Simultaneously with the Notice, the IRS announced in a memo to its examiners a similar administrative approach that applies with respect to arrangements common to small businesses that provide cash allowances and reimbursements for work-related use of personally-owned cell phones. Under this approach, employers that require employees, primarily for noncompensatory business reasons, to use their personal cell phones for business purposes may treat reimbursements of the employees’ expenses for reasonable cell phone coverage as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee’s regular wages.

Under the guidance issued today, where employers provide cell phones to their employees or where employers reimburse employees for business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements. The guidance does not apply to the provision of cell phones or reimbursement for cell-phone use that is not primarily business related, as such arrangements are generally taxable.