| About Roger A. Kahan CPA | Back Issues |
 
+ + + + + + + + + + + + + + + ++ + TOPICS COVERED IN THIS ISSUE: Meals and entertainment expenses + + + + + + + + + + + + + + + ++ + MEALS AND ENTERTAINMENT EXPENSES Generally, only 50% of business related meals and entertainment expenses are tax deductible by the payer. If the related expenditure
covers mostly employees or staff of the company, the amount paid
may be considered as a Staff Meeting expense and should be fully
deductible. Meals solely for yourself (no business related person is accompanying you), other than when you are away traveling overnight, are not deductible. Meals and entertainment expenses must be substantiated with the dates, places and names of the participants along with an explanation of the business purpose. An invoice must also support meals and entertainment of $75 or more. You should share this information with your acquaintances and family. It may provide some “small talk” for your conversation. Just remember that the information came from your trusted advisor, me. + + + + + + + + + + + + + + + ++ + THERE IS A NEW RISK TO DATA: PHOTOCOPIES Consumers have been bombarded with warnings about identity theft. Threats range from mailbox thieves and lost laptops through to email scams and corporate data invasions. I have also heard of “raising” ballpoint pen signatures from checks (you should sign your checks or official documents with an acceptable gel pen). A raised signature can be reprinted on a blank check or “official” document. Now experts are warning people that photocopiers and fax machines could be additional culprits. That is because many copiers and fax machines manufactured in the past five years have fixed drives, the same kind of data-storage mechanisms found in computers, to reproduce and transmit documents. As a result, the seemingly innocuous machines can retain the data being scanned. If the data on the copier’s or fax machine’s disk is not encrypted or if the machines do not have an overwrite mechanism, and if someone with malicious motives gets access to the machine, industry experts say sensitive information from original documents might get into the wrong hands. One major company has suggested that you should contact your tax consultant or your local copy shop to confirm that their machines have data security installed. Don’t worry; we have checked our equipment. + + + + + + + + + + + + + + + ++ + TAX AUDIT RISKS Your chances of being audited are pretty good if you are wealthy. Audits appear less likely if you are not. About one in sixteen taxpayers with income of $1 million and higher were audited last year, a 33% increase from the previous year. Overall, there were more audits of individual taxpayers in 2007 - for a risk of about 1 in 100. Congress set three years as the deadline, or statute of limitations, during which the IRS can go back and make additional tax assessments. But that time can be extended for certain reasons. There is NO statute of limitations for failure to file a return or when fraud is suspected. Yes, filing an incorrect return may be better than NOT filing at all. (What a country we live in, huh?) + + + + + + + + + + + + + + + ++ + IRS PLANS NEW TAXPAYER WARNING LETTERS The Internal Revenue Service is planning to increase its enforcement efforts by sending out warning letters to a larger group of taxpayers who may be underreporting their income. The new warning letter,
the CP2057, will differ from the CP2000 letter that the IRS has
been sending out for years, according to The Wall Street Journal.
The earlier type of letter included suggestions for proposed changes
to areas such as income, credits and deductions, while the CP2057
will mainly ask taxpayers to double-check parts of the return and
file an amended return if they have made a mistake. Unlike the
CP2000, it will not include the exact amount owed. "The Automated Soft Notice (CP2057) is a test involving approximately 31,000 notices mailed this fall," said IRS spokesman Bruce Friedland in an e-mail. "If the test results indicate limited underreporting in the subsequent year and self-correction of unreported income, we hope to expand the use of this notice. A very small portion of our staff is assisting in this test - again, it is designed as an automated notice. The CP2057 asks the taxpayer to file an amended return, or work with the document issuer to correct erroneous documents." The warning letters are part of the IRS's ongoing effort to close the estimated $300 billion tax gap by looking for ways to identify people who may be dodging taxes or miscalculating. The automatically generated letters will leverage computer technology for matching information on the returns that taxpayers submit with other forms the IRS receives, such as 1099 and K1 documents, in an effort to find more discrepancies and abuses. "We believe this approach will allow taxpayers to correct underreporting issues without having to correspond extensively with the IRS, thus benefiting both the taxpayer and the service," said Friedland. "We continue to issue CP2000 notices (an important component of our enforcement efforts) and expect to continue issuing these notices as appropriate, even if we expand the use of CP2057." + + + + + + + + + + + + + + + ++ + MATCHING SOCIAL SECURITY NUMBERS As many taxpayers have found out, the Internal Revenue Service compares your Social Security Number (SSN) reported on your income tax return with the Social Security Administration (SSA). If they do not agree, your income tax return will bounce (not be accepted) or your dependency exemptions may disappear. Your SSN is used by many other agencies and companies to identify you (including credit reporting agencies). It is important that you regularly check your records to make certain the name and number of your Social Security card matches up with the name and number you are using elsewhere. Remember to officially change your name with the SSA if you get married or divorced or legally change your name or upon the birth of a child or you adopt a child. + + + + + + + + + + + + + + + ++ + “Planning for the future is a lot like planting a tree. You’ve got to do it today if you want your family to enjoy it tomorrow.” + + + + + + + + + + + + + + + ++ + CHARITABLE CONTRIBUTIONS I know that I have mentioned this subject to all of my clients during their annual tax interview, but it is important to remember that you must have a receipt in order to claim a charitable deduction starting January 1, 2007. Bank checks, credit card slips, payroll deductions and signed letters and receipts for clothing, etc from the charity constitute a receipt. If your gift is over $125, you must obtain a signed receipt that also states that you received nothing in return for your gift (if you did receive something for making the gift, the value of what you received is NOT deductible as a charitable contribution. Remember: NO RECEIPT, NO DEDUCTION! + + + + + + + + + + + + + + + ++ + Did you know I do more than just prepare, compile and crunch numbers? I am not just a “bean-counter.” I can also advise you on estate and business planning and offer financial strategies to meet your goals. As your TRUSTED ADVISOR, I know your financial needs better than many other professional you may now be working with. You see, it all STARTS with your income tax returns. + + + + + + + + + + + + + + + ++ + YOUR FIRST BUSINESS TAX RETURN The first tax reporting of your business is critical. Many elections have to be made (depreciation basis and methods, method of accounting, write-off of goodwill and other intangibles, etc, etc, etc), and those elections can only be made on a timely filed income tax return. If you are not sure what elections are available or what elections you should request on your first income tax return, call us and be confident you have what we feel are the best tax benefits for your new business. + + + + + + + + + + + + + + + ++ + KEY PERSONS When a key person dies, problems develop. As the company searches for a replacement, it might experience a financial slump. Its competitors take advantage of its lost momentum, and its customers might lose their confidence in it. Creditors demand immediate payment, employees search for other jobs, and debtors delay their payments. The company's valuable assets - it's key person - is gone, and unless the firm has been wise enough to purchase key-person life insurance, it won't be compensated for the loss of this asset. All of these problems can be solved by cash - in other words, by life insurance. + + + + + + + + + + + + + + + ++ + DEDUCTIBLE LOSSES If you leave a deposit or pay for something in advance and the party holding your money goes defunct before you get anything in return, you may be able to deduct a non-business bad debt. This loss is treated as a short-term capital loss, deductible to the extent of capital gains plus the lesser of $3,000 or the excess of capital losses over capital gains. Any remaining loss can be carried over. + + + + + + + + + + + + + + + ++ + Roger A. Kahan is a Certified Public Accountant, a Tax, Business and Financial Advisor serving the tax and financial needs of individuals and small to medium sized businesses primarily in eastern Massachusetts (as well as almost anywhere in the United States). Roger is always seeking additional clients and other professional’s clients to advise and improve their personal or business life. Do you know of someone that could use our professional services? Please let us know if we can use your name in an introductory letter or phone call. We do offer a referral fee to those that join our ever-increasing list of tax clients. Call for more details. Thank you.+ + + + + + + + + + + + + + + ++ + IRS Increases Mileage Rates through Dec. 31, 2008 WASHINGTON – The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through December 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70. In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year. “Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” said Commissioner Doug Shulman. “We want the reimbursement rate to be fair to taxpayers.” While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs. The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. + + + + + + + + + + + + + + + ++ + A required disclosure: Pursuant to requirements related to practice before the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of (i) avoiding penalties imposed under the United States Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter. This information is restricted only to use by you.+ + + + + + + + + + + + + + + ++ +
+ + + + + + + + + + + + + + + ++ + REMEMBER:
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e-mail:
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About
Roger A. Kahan CPA | Back
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