Tax Tip: IRS Requires Accurate Records for Deductions

Are you looking for ways to lower your tax bill? Itemizing your deductions can potentially reduce what you owe. Common deductions include medical expenses, charitable donations or unreimbursed job-related expenses. If you decide to claim deductions, it’s very important that you keep accurate records and receipts to meet IRS requirements.

What Are Accurate Records?

According to IRS Publication 463, any evidence you use to support a deduction must be “documentary” and “adequate”, meaning it must be written and show the date, place, amount and nature of the expense. Examples of the types of documentary evidence you can use to support your deduction include mileage logs, itemized credit card receipts, bank statements, taxi and toll receipts, receipts for gifts, and receipts from gas stations, hotels and restaurants. NOTE: Credit card statements without itemized, supporting receipts are NOT adequate.

If you’re self-employed, keep the receipts for any business-related expense you incur, no matter how small. If you plan to claim the home office deduction, you’ll also need to keep detailed records regarding your home, including any costs you pay for property tax, rent, mortgages, utilities and repairs. You should also maintain detailed records if you’re paying out-of-pocket costs for your health insurance or other medical expenses.

Additional Guidelines

As a general rule, the IRS advises taxpayers to maintain records for at least three years following their tax filing. If you file early, the three-year limitations period begins on the annual filing deadline. No records are necessary if you claim the standard deduction but you could end up owing more in taxes. Even if you don’t plan on itemizing, it’s still a good idea to keep a paper trail so you can compare your deductions before you file.

If you would like to discuss your specific situation, please contact us.

Mileage Deduction: Are you deducting all of the mileage you’re entitled to?

You probably know that miles driven for business purposes can be deductible. But did you know that you might also be able to deduct miles driven for other purposes? The rates vary depending on the purpose and the year:

• Business: 56 cents (2014), 57.5 cents (2015)
• Medical: 23.5 cents (2014), 23 cents (2015)
• Moving: 23.5 cents (2014), 23 cents (2015)
• Charitable: 14 cents (2014 and 2015)

The rules surrounding the various mileage deductions are complex, however. Some are subject to floors and some require you to meet specific tests in order to qualify. There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.

So contact us to help ensure you deduct all the mileage you’re entitled to on your 2014 tax return — but not more. (You don’t want to risk back taxes and penalties later.) And if you drove potentially eligible miles in 2014 but can’t deduct them because you didn’t track them, then start tracking your miles now so you can potentially take advantage of the deduction when you file your 2015 return next year.

© 2015

Why you shouldn’t procrastinate on filing your 2014 income tax return

If you’re like many Americans, you may not start thinking about filing your tax return until the April 15 deadline is just a few weeks — or perhaps even just a few days — away. But there’s another date you should keep in mind: Jan. 20. That’s the date the IRS began accepting 2014 returns, and filing as close to that date as possible could protect you from tax return fraud.

In this increasingly common scam, thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. When the real taxpayers file, they’re notified that they’re attempting to file duplicate returns.

Tax return fraud can cause major headaches to straighten out and significantly delay legitimate refunds. But if you file first, it will be the thief who’s filing the duplicate return, not you.

Of course you need to have your W-2s and 1099s to file. So another key date to be aware of is Feb. 2 — the deadline for employers to issue 2014 W-2s to employees and, generally, for businesses to issue 1099s to recipients of any 2014 interest, dividend or reportable miscellaneous income payments.

Contact us if you have questions about tax return fraud or would like help filing your 2014 return early.

© 2015

2015 IRS Mileage Rates Announced

On December 10, 2014, the IRS announced the standard mileage rates for 2015. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2015 the standard mileage rates are:


• For business use of an automobile, the rate increases to 57.5 cents per mile, up from 56 cents in 2014.
• For medical or moving expenses, it is 23 cents per mile, down half a cent from 2014.
• For services to charitable organizations, the rate stays the same at 14 cents per mile.

Remember, 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.

Instead of using the standard mileage rates, taxpayers may deduct the actual costs of using their vehicle.

Regardless of which method is used, taxpayers must always substantiate and document actual expenses and mileage if they plan to utilize this deduction.

Please contact us with your questions.

Energy-Related Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

The following energy provisions are retroactively extended through 2014 in the new law.

• The credit for nonbusiness energy property;
• The second generation biofuel producer credit (formerly cellulosic biofuels producer tax credit);
• The incentives for biodiesel and renewable diesel;
• The Indian country coal production tax credit;
• The renewable electricity production credit, and the election to claim the energy credit in lieu of the renewable electricity production credit;
• The credit for construction of energy efficient new homes;
• Second generation biofuels bonus depreciation;
• The energy efficient commercial buildings deduction;
• The special rule for sale or disposition to implement federal energy regulatory commission (FERC) or State electric restructuring policy for qualified electric utilities;
• The incentives for alternative fuel and alternative fuel mixtures; and
• The alternative fuel vehicle refueling property credit.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Business Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

The following business credits and special rules are generally extended through 2014 in the new law.

• The research credit;
• The temporary minimum low-income housing tax credit rate for non-federally subsidized new buildings;
• The military housing allowance exclusion for determining whether a tenant in certain counties is low-income;
• The Indian employment tax credit;
• The new markets tax credit;
• The railroad track maintenance credit;
• The mine rescue team training credit;
• The employer wage credit for activated military reservists;
• The work opportunity tax credit;
• Qualified zone academy bond program;
• Three-year depreciation for racehorses;
• 15-year straight line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements;
• 7-year recovery period for motorsports entertainment complexes;
• Accelerated depreciation for business property on an Indian reservation;
• 50% bonus depreciation (extended before Jan. 1, 2016 for certain longer-lived and transportation assets);
• The election to accelerate alternative minimum tax (AMT) credits in lieu of additional first-year depreciation;
• The enhanced charitable deduction for contributions of food inventory;
• The increase in expensing (up to $500,000 write-off of capital expenditures subject to a gradual reduction once capital expenditures exceed $2,000,000) and an expanded definition of property eligible for expensing;
• The election to expense mine safety equipment;
• Special expensing rules for certain film and television productions;
• The deduction allowable with respect to income attributable to domestic production activities in Puerto Rico;
• The exclusion from a tax-exempt organization’s unrelated business taxable income (UBTI) of interest, rent, royalties, and annuities paid to it from a controlled entity;
• The special treatment of certain dividends of regulated investment companies (RICs);
• The definition of RICs as qualified investment entities under the Foreign Investment in Real Property Tax Act;
• Exceptions under subpart F for active financing income;
• Look-through treatment for payments between related controlled foreign corporations (CFCs) under the foreign personal holding company rules;
• The exclusion of 100% of gain on certain small business stock;
• The basis adjustment to stock of S corporations making charitable contributions of property;
• The reduction in S corporation recognition period for built-in gains tax;
• The empowerment zone tax incentives;
• The American Samoa economic development credit; and
• Two provisions dealing with multiemployer defined benefit pension plans (dealing with an automatic extension of amortization periods and shortfall funding method and endangered and critical rules), are extended through 2015.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Individual Tax Extenders from the Tax Increase Prevention Act of 2014

In the recently enacted “Tax Increase Prevention Act of 2014,” Congress has once again extended a package of expired or expiring individual, business, and energy provisions known as “extenders.” The extenders are a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax-saving laws which have been on the books for years but which technically are temporary because they have a specific end date. Congress has repeatedly temporarily extended the tax breaks for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.” The new legislation generally extends the tax breaks retroactively, most of which expired at the end of 2013, for one year through 2014.

Here is an overview of the key provisions which affect individual taxpayers in the new law.

• The $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom;
• The exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income;
• Parity for the exclusions for employer-provided mass transit and parking benefits;
• The deduction for mortgage insurance premiums deductible as qualified residence interest;
• The option to take an itemized deduction for State and local general sales taxes instead of the itemized deduction permitted for State and local income taxes;
• The increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes;
• The above-the-line deduction for qualified tuition and related expenses; and
• The provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 and ½ or older.

We hope this information is helpful. If you would like more details about these changes or any other aspect of the new law, please contact us.

Will the lame-duck Congress revive expired tax breaks for 2014?

With the midterm elections now behind us and control of the U.S. Senate set to shift parties in January, it’s time to revisit the valuable tax breaks that expired at the end of 2013. Will the lame-duck 113th Congress revive any of them for 2014? Or will nothing happen until the 114th Congress goes into session after the new year begins?

Here are some of the breaks in question:
• The deduction for state and local sales taxes in lieu of state and local income taxes,
• Tax-free IRA distributions to charities,
• 100% bonus depreciation,
• Enhanced Section 179 expensing,
• Accelerated depreciation for qualified leasehold improvement, restaurant and retail improvement property,
• The research tax credit,
• The Work Opportunity tax credit, and
• Various energy-related tax incentives.

For you to benefit on your 2014 tax return from any breaks that are revived, you might need to take additional action by Dec. 31. So it’s a good idea to consider what you’d need to do so you can act quickly if applicable breaks are indeed revived. If you have questions about what you can do to prepare, please contact us.

© 2014