Source: https://www.broylesco.com/blog/2015/11/
Timestamp: 2019-01-16 18:52:16
Document Index: 396799536

Matched Legal Cases: ['§ 1', '§601', '§ 1', '§ 1', '§ 1', '§ 1', '§ 1']

The IRS raising the safe harbor for purchases of de minimis tangible property.
IRS Notice 2015-82: The Treasury Department and the IRS received more than 150 comment letters suggesting an increase in the amount of the de minimis safe harbor limit for taxpayers without an AFS. The suggested increased amount ranged from $750 to $100,000.
Generally, commenters wrote that the $500 limitation was too low to effectively reduce the administrative burden of complying with the capitalization requirement for small business taxpayers that frequently purchase tangible property in their trades and businesses.
Commenters noted that the cost of many commonly expensed items (for example, tablet-style personal computers, smart phones, and machinery and equipment parts) typically surpass the current $500 per item or invoice threshold provided in § 1.263(a)-1(f)(1)(ii)(D). Commenters also stated that the $500 threshold does not correspond to the financial accounting policies of many small businesses, which frequently permit the deduction of amounts in excess of $500 as immaterial.
Commenters noted that without an increase in the de minimis safe harbor limit for taxpayers without an applicable financial statements (AFS), a capitalization threshold in excess of $500 can only be substantiated by establishing that a taxpayer’s policy results in the clear reflection of income for federal income tax purposes, resulting in additional burden and uncertainty for taxpayers. Finally, many commenters expressed concern regarding the disparate treatment of taxpayers with an AFS compared to those without an AFS under the safe harbor requirements, stating that obtaining an AFS is cost prohibitive for many small businesses and does not adequately justify the substantially lower de minimis ceiling for these taxpayers.
Section 1.263(a)-1(f)(1)(ii)(D) permits the IRS to change the safe harbor limit to an amount identified in published guidance in the Federal Register or in the Internal Revenue Bulletin (see §601.601(d)(2)(ii)(b)).
Having considered taxpayers’ comments, the goal of the final tangible property regulations to reduce administrative burden, and the concern that taxpayers’ methods of accounting clearly reflect income, the § 1.263(a)-1(f)(1)(ii)(D) de minimis safe harbor limitation for a taxpayer without an AFS is increased from $500 to $2,500 effective for costs incurred during taxable years beginning on or after January 1, 2016.
For taxable years beginning before January 1, 2016, the IRS will not raise upon examination the issue of whether a taxpayer without an AFS can utilize the de minimis safe harbor provided in § 1.263(a)-1(f)(1)(ii) for an amount not to exceed $2,500 per invoice (or per item as substantiated by invoice) if the taxpayer otherwise satisfies the requirements of § 1.263(a)-1(f)(1)(ii).
Moreover, if the taxpayer’s use of the de minimis safe harbor provided in § 1.263(a)-1(f)(1)(ii) is an issue under consideration in examination, appeals, or before the U.S. Tax Court in a taxable year that begins after December 31, 2011, and ends before January 1, 2016, the issue relates to the qualification under the safe harbor of an amount (or amounts) that does not exceed $2,500 per invoice (or per item as substantiated by invoice), and the taxpayer otherwise satisfies the requirements of § 1.263(a)-1(f)(1)(ii), then the IRS will not further pursue the issue.
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New verification code will appear on some 2015 W-2 forms
IRS website: IRS Tests W-2 Verification Code for Filing Season 2016 (11/10/2015).
IRS is putting a new verification code on Copies B & C of some payroll firms’ W-2 forms in order to test its capability to verify the authenticity of Form W-2 data. The test is one in a series of steps IRS is taking to combat tax-related identity theft and refund fraud.
Background. Form W-2, Copy B is “To be filed with employee’s federal tax return”, and Copy C is “For employee’s records”.
New verification code. IRS will be testing the new code during the upcoming filing season. Its objective is to verify Form W-2 data submitted by taxpayers on electronically-filed individual tax returns.
IRS has partnered with certain payroll service providers (PSPs) to include a 16-digit code and a new verification code field on a limited number of Form W-2 copies B & C provided to employees. The code will be displayed in four groups of four alphanumeric characters, separated by hyphens (for example: XXXX-XXXX-XXXX-XXXX).
The verification code will appear in a separately labeled box. The W-2 form will include the following instructions to taxpayer and tax preparers: “Verification Code. If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.”
Some employees will receive W-2 forms that have a “Verification Code” box which is blank. These taxpayers do not need to enter any code data into the tax software product that they use to file their personal income tax return.
For purposes of the test, omitted and incorrect W-2 verification codes will not delay the processing of a personal income tax return or the issuance of a refund. IRS will analyze this pilot data in a “test-and-learn” review to see if it is useful in evaluating the integrity of W-2 information.
The code will not be included in W-2 forms or W-2 data submitted by the PSPs to the Social Security Administration, or any state or local departments of revenue. Nor will this pilot program affect state and local income tax returns or paper federal returns.
On the October 1 payroll industry conference call, Scott Mezistrano, IRS Industry Stakeholder Engagement and Strategy, said that only a small number of PSPs are currently participating in the program. He also said that a new field could be added to W-2 forms, beginning with 2017 forms, if the pilot program is successful.
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Filed Under: Bookkeeping, Tax Services Tagged With: CPA Middleton Wisconsin, middleton tax preparation, tax planning
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Have you factored GST tax into your gifting strategy?
If your adult children face the prospect of high taxes on their estates, consider skipping a generation with some of your bequests and gifts. But beware of the generation-skipping transfer (GST) tax, which applies to transfers to a “skip person” — generally anyone more than one generation below you, such as a grandchild or an unrelated person more than 37½ years younger than you.
The GST tax rate is the same as the top estate tax rate. Fortunately, there’s a GST tax exemption. As with the gift and estate tax exemptions, the GST tax exemption is $5.43 million for 2015 ($5.45 million for 2016). Each spouse has this exemption, so a married couple can use double the exemption. Once you’ve used up your exemption, additional GSTs that aren’t otherwise exempt will be subject to the GST tax.
Gifts that qualify for the $14,000 per year per recipient annual gift tax exclusion generally are exempt from the GST tax. As the end of the year nears, consider making annual exclusion gifts before December 31, since unused exclusion amounts don’t carry forward from year to year.
A solid gifting strategy can benefit your loved ones and reduce your taxable estate. However, you need to be aware of potential GST tax liability. Please call us with questions regarding the GST tax or your gifting strategy in general.
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