IRS Mileage Rate for 2009 Will Be 55¢

The IRS announced that the standard mileage rate usable for business mileage reimbursements will move to 55¢ effective January 1. This rate falls in between the early 2008 rate of 50.5¢ and the late 2008 rate of 58.5¢. What's nice is that the stupid half cent is finally gone!

Medical and moving mileage will go to 24¢ per mile, with charitable miles at the good old standard rate of 14¢.

Employers who reimburse their employees should be sure to update their reimbursement systems immediately after year end. If the old rate of 58.5¢ is used instead, the difference of 3.5¢ is technically taxable income to the employee, and payroll taxes would be due on the difference. No big deal if you're a sole proprietor, but for larger companies, a miss on that could be a problem.

McCain & Obama's Plans For Your Tax Bill

As we head toward the climax of the 2008 presidential election, we'd like to bring you the highlights of some tax-related proposals of each of the candidates. We're not here to promote either candidate. While there are many other considerations in selecting your candidate, few will hit you as directly in the pocketbook as the income tax.

The Washington Post shows a nice summary of the effect the candidates changes would have on your family's income. You can see quickly that Obama favors reducing the overall tax burden slightly, but leans toward increasing the taxes for high-incomers to fund further reductions for those in the lower income levels. McCain's plan would reduce overall taxes further, and would provide some relief for all income levels, with more reductions to the high-incomers who pay more of the taxes.

If you'd like some detail on the proposals, visit the Tax Policy Center. Some of the highlights:

Issue	McCain	Obama
Capital gains/dividend tax rate (currently 15% max)	15%	20%
Max Corporate tax rate (currently 35%)	25%	35%
Estate tax exemption	$5 Million	$3.5 Million
Estate tax rate	15%	45%
Other	Require 60% approval for tax hikes	Impose additional 2-4% Social Security tax on those making over $200k-250k
	Increase dependent exemption by 70%	Increase education, earned income and child care credits for low incomers

IRS Increases Mileage Rate for 2nd Half of 2008

In case you haven't noticed, fuel prices are up. Oh...you already knew that?

Well, fortunately, the IRS has gotten wind of this trend as well. As of July 1, 2008, they have increased the standard mileage rate by 8¢, to 58.5¢ per mile. This mileage rate is used by employees or the self-employed to calculate deductions for the usage of their personal vehicles.

Also increasing is the medical and moving expense mileage rate, up 8 cents to 27 cents per mile. As always, the charitable mileage rate remains at 14 cents. Isn't that special...

New Rules Tighten Proof of Contributions

Guidelines issued by the IRS increased the level of documentation required for many contributions to charitable organizations. All monetary contributions must now be supported with either bank records or a written receipt from the organization that gives information about the date and amount of the donation.

Until this change, documentation from the charity was only required for individual contributions over $250. Now that bank records or receipts are required, some smaller cash contributions that we previously deducted are likely not going to qualify. For instance, dropping cash in the collection plate at church, contributing to the Salvation Army's kettle, and pitching in a buck or two at your Rotary meeting will be nondeductible without a receipt from the organization.

Sometimes it seems like the IRS has it in for charities. I'm not sure what that motivation would be, so I'll presume I'm wrong. I just don't see the damage in allowing some minimal threshold for deductible cash contributions with no receipts, if the circumstances seem reasonable.

IRS to Delay Refund Processing for Some Filers

Because Congress failed to fix the alternative minimum tax (AMT) until the last moment, the IRS announced that it will have to delay processing for some returns potentially affected by the AMT changes. Instead of delaying all returns, as was originally thought to be the case, the IRS will only delay processing of returns that use the affected forms.

The forms that will trigger an e-file rejection until the IRS systems have been updated are the following:

• Form 8863, Education Credits.
• Form 5695, Residential Energy Credits.
• Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
• Form 8396, Mortgage Interest Credit.
• Form 8859, District of Columbia First-Time Homebuyer Credit.

This seems to be pretty good news, as these forms are not incredibly common among returns filed by our office. The Education Credit form is probably the one that would affect the most filers, but the IRS still expects to be ready to accept these returns by February 11. The number of returns filed by our office before February 11 last year? Three.