Archive for January, 2014


January 28th, 2014 No comments

One of the most significant issues facing business owners is whether they need to register to do business (or qualify to do business) in a foreign state (a foreign state merely refers to a state other than that of the state in which the business is incorporated). This issue is often raised by the CPA when doing tax preparation or considering tax planning strategies.

If the business has sufficient nexus (contact with a state), it is subject to that state’s income, franchise, gross receipts, sales, or other tax. The explanation of nexus is beyond the scope of this post, but has been addressed in earlier posts.

Some business owners are reluctant to register to do business in a foreign state for a host of reasons. The reasons may include Read more…


Tax Planning Strategies for Your Business . . . Repairs & Capitalization of Assets

January 21st, 2014 No comments


Hopefully your tax professional made you aware before the end of the 2013 tax year that it was an opportune time to discuss tax preparation and tax planning strategies as to when taxpayers must capitalize costs and when they can deduct expenses for acquiring, maintaining, repairing, and replacing tangible property.

Final Repair/Capitalization Regulations

The new rules apply to tax years beginning on or after January 1, 2014, but provide taxpayers with the option to apply either the final or temporary regulations to tax years beginning after 2011 and before 2014.

De minimis expensing alternative. The final regulations also include a new de minimis expensing rule that allows taxpayers to deduct certain amounts paid or incurred to acquire or produce a unit of tangible property. To take advantage of this $5,000 de minimis rule, however, taxpayers must have Read more…



January 14th, 2014 No comments

One of the more common tax preparation questions is “How much can I write off for my automobile used for business purposes so that I may maximize my tax planning?”

The IRS announced (IRS Notice 2013-80) on Dec. 6 the optional standard mileage rates for use of a vehicle. Taxpayers can use the optional standard mileage rate (rather than actual vehicle expenses) to calculate the deductible costs of operating a vehicle.

For business use of a car, van, pickup truck, or panel truck, the 2014 rate will be 56 cents per mile. The portion of the business standard mileage rate that is treated as depreciation will be 22 cents per mile for 2014, down one cent from the 23 cent rate in effect in 2012 and 2013.

Driving for medical or moving purposes may be deducted at 23.5 cents per mile.

The rate for service to a charitable organization is unchanged, set by statute (Sec. 170(i)) at 14 cents a mile.

Regardless of whether taxpayers use the optional standard mileage rate or actual expensed, a contemporaneous mileage log book is required to be maintained by the taxpayer to claim vehicle expenses. If a contemporaneous log book is not maintained, the IRS has the right to disallow the tax deduction for vehicle use.

To substantiate the vehicle deduction, the log book needs to show Read more…



January 7th, 2014 No comments

During the past few years, many a taxpayer has complained about how long the wait was to receive a refund from Pennsylvania when filing Form PA-40. The taxpayers who are due refunds are usually those who make quarterly estimated tax payments and paid too much during the year. The vast majority of PA taxpayers who only have PA personal taxes withheld from their paychecks likely will not be an overpayment position unless they have unreimbursed employee expenses.

PA’s response to the delay in issuing refunds has been to implement refund fraud prevention efforts. What impact will this new procedure have on refunds? Likely, taxpayers will have to wait even longer for their refund unless they work closely with their tax professional during the tax preparation phase and follow the tax planning strategy discussed below.

Beginning with the 2014 income tax filing season, the PA Department of Revenue (DOR) will institute new security measures to identify and intercept fraudulent refund filings.  As part of this initiative to ensure refunds are issued only to their rightful owners, taxpayers may be asked to confirm their identities before refunds are issued.

In such cases, the taxpayer will be contacted by the department by way of a letter sent to the address on the taxpayer’s personal income tax return. The letter from the department will instruct the taxpayer to call a designated number (Good luck in having this call promptly answered), where the taxpayer will speak to a representative of a company the department has partnered with for its expertise in identity verification.  The taxpayer will be asked to provide answers to questions to verify identity.

Taxpayers who receive this identity validation notice will authorize release of their refunds sooner if they follow the instructions for verifying identity provided in the notice.

Legislation passed in 2012 authorizes the PA DOR to enter into benefits-based procurements. The DOR is leveraging this authority by partnering in this identity validation effort with Revenue Solutions, Inc. (RSI), a company with experience in fraud identification and access to advanced analytical, technological and data tools beyond the department’s resources. Sounds like your tax information will be shared with a third-party. RSI’s compensation is directly tied to its performance in preventing fraudulent refund payments that otherwise would have gone undetected.  This initiative is anticipated to save taxpayer dollars in the form of denied refunds and reduce identity misrepresentation on income tax returns in the future.

As we read this new procedure, it is almost inevitable that PA refunds will be delayed as it is in RSI’s financial interest to challenge the issuance of a refund. What can you do to expedite having your refund issued to you? Read more…

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