by Website Administrator | Mar 1, 2023 | tax info
IRS issues standard mileage rates for 2023; business use increases 3 cents per mile
IR-2022-234, December 29, 2022
WASHINGTON — The Internal Revenue Service today issued the 2023 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2023, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
- 65.5 cents per mile driven for business use, up 3 cents from the midyear increase setting the rate for the second half of 2022.
- 22 cents per mile driven for medical or moving purposes for qualified active-duty members of the Armed Forces, consistent with the increased midyear rate set for the second half of 2022.
- 14 cents per mile driven in service of charitable organizations; the rate is set by statute and remains unchanged from 2022.
These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.
The standard mileage rate for business use 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.
It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, unless they are members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details see Moving Expenses for Members of the Armed Forces.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Taxpayers can use the standard mileage rate but generally must opt to use it in the first year the car is available for business use. Then, in later years, they can choose either the standard mileage rate or actual expenses. Leased vehicles must use the standard mileage rate method for the entire lease period (including renewals) if the standard mileage rate is chosen.
Notice 2023-03PDF contains the optional 2023 standard mileage rates, as well as the maximum automobile cost used to calculate the allowance under a fixed and variable rate (FAVR) plan. In addition, the notice provides the maximum fair market value of employer-provided automobiles first made available to employees for personal use in calendar year 2023 for which employers may use the fleet-average valuation rule in or the vehicle cents-per-mile valuation rule.
https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2023-business-use-increases-3-cents-per-mile
by Website Administrator | Feb 20, 2023 | tax info
Click here for a pdf of the IRS Publication regarding Tax Deadlines.
by Website Administrator | Feb 19, 2023 | tax info
Federal Tax Calendar
Federal Tax Calendar for tax deposits and filings can be accessed via the following website: http://www.tax.gov/calendar/
by Website Administrator | Feb 19, 2023 | bookkeeping, tax info
“The value of an accountant who specializes in year round bookkeeping”
Recently, a prospective client of mine pointed out to me that one of my ‘competitors’ was going to do his books and provide monthly statements for substantially less than I quoted him. So I was forced to ‘defend’ my price.
It turns out that the ‘competitor’ he is referring to is a local bookkeeping service that does not do tax returns. My fees normally include tax returns. But the real issue is of continuity. This service subcontracts the tax returns to someone else.
Several weeks ago, I had run into another prospective client, who coincidentally was using the same bookkeeping service, yet they were talking with me about being their accountant and doing their bookkeeping. It turns out that the bookkeeping service was fine, and had all sort of good ideas and suggestions.
The trouble is that there was no follow through. Many of the suggestions related to the preparation of the tax return, and therefore these suggestions weren’t getting to the ‘accountant’.
In our firm, the accountant reviews the financial statements every single month, and communicates with the client on an ongoing basis with an eye towards preparing the tax return at the end of year. We’re thinking about this all year round, so we don’t have any surprises at the end of the year.
As an Epilogue, the first prospective client saw the light , and became a client. The second one is still trying to figure out where the money would come from.
So, if you insist on having a separate bookkeeper from your accountant, be sure to include your accountant in some of those meetings held throughout the year. This will assure continuity in your business from keeping the books to preparing the final tax returns.
by Website Administrator | Feb 19, 2023 | tax info
“If the IRS [ . . . ] contacts you”
There are numerous reasons why the Internal Revenue Service may contact you throughout the year, so if you receive an IRS missive in the mail, don’t panic. Instead, open the letter and deal with it straightaway. Whatever you do, don’t put it off.
Chances are you are receiving a computer-generated letter because the IRS thinks you owe it money. This is likely due to a mistake on your tax return, such as failing to include all your income. But the IRS is often NOT correct, so before you automatically pay the bill, do some investigation. It’s very possible that the income from one or more W-2s or 1099s is being credited to your account in error. Or they identified stock that you may have sold, and they assume that you had paid nothing for that stock, asking you for tax on what you sold it for.
Even if the income is yours, the amount is correct, and you really did leave it off your tax return, double-check the IRS’s work by adding the missing numbers to your return and recalculating your taxes. IRS and state computers often make mistakes and you might save some money.
The best piece of advice is seek out your preparer, enrolled agent, or CPA, particularly if it is an audit. What may appear to you as a daunting task can often be dealt with just a single letter, or an hour or two’s time with an IRS agent. And if the IRS should give you call on the phone, consult with your accountant before you talk with them. Often a seemingly innocent question and answer session can create a web of questions.
by Website Administrator | Feb 19, 2023 | tax info
“Employee vs subcontractor – Why the Federal rules are more important to know”
Previously, we explored New Hampshire’s rules for differentiating between an employee and a subcontractor.
As important as it is to know the state rules, oftentimes the bigger stick comes from the Federal government, since if the IRS were to challenge your decision to treat someone as a subcontractor, and successfully argue that he or she should be an employee, you could be looking at payroll taxes and penalties that could easily run up to as much one half of what you were paying that person to begin with!
In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. These fall into 3 categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. [ . . . . ]
