tax matters – S. Davis Tax Consultants, Inc.

July 18, 2018May 3, 2019

Do you have a Mileage Log?

Although the tax benefit for mileage used for work is no longer deductible as an unreimbursed employee expense, business mileage deduction is still an option for business owners.

Business mileage deduction has always been a hot area to audit for the IRS.

They know taxpayers do not keep or maintain appropriate contemporaneous logs necessary to substantiate their tax deductions.

**You should keep a record of your travel whether you take standard mileage or actual expenses on your return**

I see it time and time again. Taxpayers are so busy managing and growing their business they do not have time to kept a required log.

IRS Publication 463 defines Adequate evidence as “documentary evidence ordinarily… adequate if it shows the amount, date, place, and essential character of the expense.” (see page 25)

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November 15, 2017May 3, 2019

Passport may be Revoked if you have Tax Issues

There was a law passed, sometime ago now, that allows your tax issues to affect your international travel plans.

The Internal Revenue Service is set to enforce the directives beginning January of 2018.

Under this law, governed by Internal Revenue Code Section 7345, the IRS will notify the State Department to revoke your current passport and/or deny passport applications due to ‘certain’ tax delinquencies.

The law also gives the IRS discretionary enforcement options.

The State Department generally will not issue a passport to you after receiving certification from the IRS.

What does this mean for your current or future travel plans?

If you already have a U.S. passport, you can use your passport until you are notified by the State Department that it has been revoked.

What if I need my passport to keep my job?

You must fully pay the balance, or make an alternative payment arrangement to have your certification reversed.

How will I know if my passport is revoked?

The IRS will send written notice by regular mail to your last known address. This is usually the address provided on your last filed tax return.

However, Taxpayer Advocate Service has identified cases in which taxpayers affected are not receiving proper written notification of revocation status.

“The passport language in the broader [Collection Due Process] notice is delivered at a time when the taxpayer is focusing on resolution of the debt and claiming [Collection Due Process] rights – thus the language is buried among the other information and may not constitute effective notice.’ – National Taxpayer Advocate. (2017, July 7). The IRS’s New Passport Program: Why Notice to Taxpayers Matters (Part 1 of 2). Retrieved November 07, 2017, from https://taxpayeradvocate.irs.gov/news/the-irs-s-new-passport-program-why-notice-to-taxpayers-matters-part-1-of-2

What if I satisfied or ‘settled’ my tax debt?

The IRS will make this reversal within 30 days and provide notification to the State Department as soon as practical.

Because revocation will not be reversed automatically, there are cases in which an application of reversal may be required. You should receive a written notice of reversal in the mail.

Contact your tax professional to determine actions appropriate to ‘settle’ your seriously delinquent tax debt.

Once you ‘settle’ your tax debt or make appropriate arrangements, there are remedies to reverse the delinquent status with the State Department and remove restrictions for your passport.

You may contact the State Department at the National Passport Information Center to verify if your passport status: 1.877.487.2778.

If you have tax issues – obtaining representative may be crucial. Review our blog on benefits of tax representation.

August 29, 2017May 3, 2019

A look at Charitable Donations in the wake of Hurricane Harvey (and Irma)

The following are things to consider when making a deductible charitable contribution, depending on the type of charity, type of property contributed and the Adjusted Gross Income of the individual donor (depending on filing status).

As an individual, all charitable contributions, whether cash or noncash items, are subject to income limits. In most cases, donations are limited to 50% of your income. There are instances, however, in which your donations are limited to 20% or 30% of your income. Charitable contributions are beneficial only when individuals itemize their deductions (Reported on Schedule A).

As a corporation, charitable contributions are limited to 10% of the entity’s taxable income (before taking into consideration other deductions).

In either case, charitable donations that exceed the income limits are eligible to be carryforward for 5 years. ‘Carryover of a qualified conservation contribution can be carried forward for 15 years.’

In the wake of Hurricane Harvey (and Irma) and its devastating effects, taxpayers need to be aware of charitable contributions made to eligible organizations and if they can reap the benefit(s) on their tax return.

Not every organization is considered an eligible organization for tax purposes.

You can not take a deduction for ‘value of your time or services’ contributed. Donations to INDIVIDUALS are NEVER DEDUCTIBLE, no matter how good the cause. The money must be given to eligible organizations. Depending on the amount donated, there may be tax implications to the donor.

See celebrities who ran into a roadblock when donating to individuals for charitable purposes.

In the era of fundraising via social media and online networks – these contributions should be made with caution, especially if you are looking for a deduction at tax time.

Maintain Proper Records:

Be sure to obtain and keep proper records. In every case, I always recommend (though it is not required) my clients make donations via a check or debit/credit where contributions can be traced.

To claim a deduction for cash contribution(s) of $250 or more, you must receive an acknowledgement for each contribution from the qualified organization.

For deduction of noncash contributions, you must submit Form 8283, Noncash Contributions with your Form 1040, Schedule A to ensure certain information is reported.

To claim a deduction for noncash contributions, you must maintain records regardless of the amount.

In general, you should have written records that include: date purchased, amount paid when purchased (also known as your cost basis), detailed description of items (I’ve had cases where the IRS asked for pictures of items contributed), value of property on date contributed and method used to determine value.

There are special rules depending on the value of the property donated and if it has been enhanced, was inherited, received as a gift, traded securities, vehicles and certain other items.

You can review Publications issued for Individuals:

Publication 526: Charitable Contributions

You may review Publication issued for Corporations:

Publication 542 page 12