New IRS Mileage Rates for 2016:
Remember folks, no mileage deduction is allowed if the vehicle has been depreciated using MACRS or Section 179.
IRS Notice 2016-01 contains the standard mileage rates for 2016, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate.
The IRS has officially announced the start date for tax season. This year, it's Jan 19th, 2016. Returns will be accepted after that date. The filing deadline for this year is April 18th, 2016 due to the federal holiday of Emancipation Day in Washington, D.C.
The IRS commissioner gave this prepared statement:
“We look forward to opening the 2016 tax season on time. Our employees have been working hard throughout this year to make this happen. We also appreciate the help from the nation’s tax professionals and the software community, who are critical to helping taxpayers during the filing season.”
We hope that this year goes smoothly, and that the IRS gets a little better at answering its call volume in 2016.
Gear up, everyone!
Here is a question recently posed to one of our instructors:
Q: I have a small business client who purchases products for review, mostly nutritional supplements. She will also try them out before recommending them to clients. However, the client does not sell any products, and does not carry inventory. Are these purchases deductible?
Answer: The short answer is... "it depends!" Tax pros and the IRS have been arguing over what qualifies as an "ordinary and necessary" business expense for decades. It seems contrary to common sense to say that a taxpayer that buys another company's products to promote (without actually selling anything themselves) is actually doing any type of business activity.
But let's not be so hasty!
It may seem difficult to believe, but there is a whole subsect of online businesses that do just that. They do not sell a product. All they do is promote someone else's product.
Every market has them. In publishing, they are basically "professional reviewers" who purchase products, and then write online reviews about them, or push the products in person or on Facebook. Once they get "famous" enough, they start to get stuff sent to them for free, and if they keep up with it, companies start to pay them for "consulting" (ie, paid reviews). It's basically shill advertising, which has existed from the dawn of time.
"I used this product, and it worked GREAT for me, now let me show you how you can change your life, your appearance, your relationship with XXX product!"
It's a lucrative business for some. They also make money off affiliate advertising (Google Adwords clicks). Many make their living entirely this way. And just in case you are still unconvinced that this might be a good way to make a living, the YouTuber that makes the most money does EXACTLY this. Her name is "Disney Collector" and she buys Disney toys and unboxes them and reviews them. That's it. That's all she does. And she doesn't get the toys for free, I think she buys them, because she's basically anonymous online (no one really knows what she looks like, she only shows her hands).
Last year, "Disney Collector" made $4 Million dollars USD on YouTube from affiliate clicks. Just promoting Disney products. She doesn't work for Disney, she's just some housewife in Florida that started making videos and now she's (presumably) rich. When 100 million people watch your videos, those $.05 clicks add up quick. No one would argue that she's not doing it for profit--obviously!
So, essentially, the answer is, YES, buying products to review could be an ordinary and necessary business expense, depending on the type of business activity.
The AICPA opposes the bill. After the fiasco of Loving v. Commissioner, the IRS was left unable to regulate tax preparers (beyond requiring them to have a PTIN). As of right now, the Internal Revenue Service lacks any statutory authority to regulate tax preparers, and Congress is trying to change that after the courts decided against the IRS commissioner.
Federal courts invalidated the RTRP program in 2013, and the IRS developed the optional AFSP certificate in response. The new AFSP program has been met with mixed reviews and only limited participation.
The proposed legislation gives the IRS the ability to exempt CPAs and EAs from the new requirements, so it's unclear why the AICPA is opposing the legislation.
Our advice: Become an EA!
The Federal Trade Commission now reports that Identity Theft is the #1 consumer complaint.
The IRS has almost 700,000 PENDING (unresolved) identity theft cases. This is a 69% increase over last year. The IRS also takes an average of 275 days simply to resolve an identity theft case (based on prior year filing season statistics). And wait times are increasing.
Sadly, the IRS does not have nearly enough manpower to deal with this enormous problem. Proof: only 37% of incoming calls were answered by the IRS during the 2015 tax season. Wait times to speak to an operator were almost half an hour, on average.
The IRS has tried to respond to the issue by creating a special Identity Protection Specialized Unit which taxpayers can call (the toll-free number is 1-800-908-4490). When we called this number, it gave us a number of prompts, but would not let us speak to a human being, so we aren't sure how useful it is to the general public.
There is some useful information on the IRS website, here, with steps to follow when you have tax related identity theft.
What can we do? Be patient and persevere, and hope that the IRS finds a better way to deal with this ever-increasing problem.
Congress passed a bill on on December 3, 2015 called the Fixing America's Surface Transportation (FAST) Act (H.R. 22). The bill contains two IRS provisions (that were kinda tacked on quietly) that allow the IRS to use private debt collectors, and would revoke passports for taxpayers with more than $50,000 in unpaid federal taxes.
The Taxpayer Advocate actually found that the IRS was better at collecting taxes than private debt collection agencies, and then there is the whole issue of taxpayer privacy. Collection agencies are notorious for disregarding privacy law, but that's not even the worst part of this news.
The worst part is that the LAST time Congress tried to outsource IRS collections, the collection agencies cost taxpayers more money than they collected, which means that private collection of IRS debt is a failed experiment that congress has decided, unfortunately, to repeat.
There's still time to sign up for a free IRS course on EITC due diligence and earn one credit of CPE. You'll need to have a valid PTIN account in order to receive course credit.
Topic: EITC Due Diligence
Date: Tuesday, December 8, 2015
Time: 11:00 a.m. Pacific Time , 9:00 a.m. Hawaii Time
Highlights of What's Covered:
CPE: Earn One CE Credit – Category: Federal Tax
PTIN Holders: In order to get your CE reported to the IRS, ensure that your first name, last name and PTIN match your account. Your PTIN must begin with the letter P followed by 8 numeric characters. If your name and PTIN are incorrectly entered, you may still receive a certificate but your credit will not be reported to the IRS.
Register & Attend: https://www.webcaster4.com/Webcast/Page/1148/11753
Presented by: IRS Stakeholder Liaison Western Area and EITC & Refundable Credits Outreach
Please share this with your staff, colleagues and anyone who may benefit from this information.
Remember that it's PTIN renewal time, don't forget to do it before you get overwhelmed with holiday plans. There's some good news; the IRS has lowered the cost of renewing your PTIN to $50. Not a bad trade-off, considering practitioners used to have to use their Social Security Numbers on the preparer's section of the return (remember doing that, old-timers?).
You can renew your PTIN at www.IRS.gov/ptin.