The Internal Revenue Service (IRS) has been busy this year with releases coming out practically every week. It’s hard for employers to keep up on the latest IRS deliberations, so this article consolidates a few of the most recent published directives.
Notice 2016 -1
Distributed December 18, 2015, this Notice provides the optional 2016 standard mileage rates for computing the deductible costs of operating an automobile for business, charitable, medical or moving expense purposes. It also provides the amount used in calculating reductions to basis for depreciation taken under the business standard mileage rate.
Revenue Procedure 2010-51 provided rules for computing the deductible costs of operating a car for determining business, charitable, medical or moving rates and Notice 2016-1 describes an alternative method for substantiation of actual allowable expense amounts for those that maintain adequate records.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Although employees generally deduct an amount equal to the business standard mileage rate times the number of business miles traveled, some prefer to use actual fixed and variable costs. Variable costs include gasoline and oil used by the automobile that are allocable to traveling those business miles (subject to some limitations). Standard mileage rates for 2016 business travel is 54 cents per mile, charitable travel is 14 cents, and medical and moving travel is 19 cents.
Costs for items such as depreciation or lease payments, insurance, and license and registration fees are not deductible for these purposes and are not included in the charitable or medical and moving standard mileage rates.
Revenue Procedure 2016-14
This Procedure provides some 2016 inflation adjustments and also provides additional items adjusted for inflation due to the enactment of the “Protecting Americans from Tax Hikes Act (PATH Act) of 2015. Although these rates were distributed earlier, this Revenue Procedure officially amends the original Rev. Proc. 2015-53 (October 21, 2015).
Expenses paid or incurred by eligible educators in connection with the purchase of books, supplies, computer equipment and other equipment, and supplementary materials used in the classroom (some special rules apply to this list) may be tax deductible. For taxable years beginning after December 31, 2015 the deduction cannot exceed $250.
Qualified transportation fringe benefits, excludable from income, for taxable years beginning in 2016 for commuter highway vehicles and transit passes, combined, is $255. Section 105 of the PATH Act creates parity between transit benefit exclusions and the exclusion for qualified parking.
Section 124 of the PATH Act provides the dollar limitation for the aggregate cost of Internal Revenue Code Section 179 property, that a taxpayer may elect to expense, at $500,000, with limitations. For taxable years beginning in 2016 these amounts are adjusted for inflation.
Fact Sheet 2016-8
Distributed February 2016, an IRS Fact Sheet (FS) is just that—a condensed listing of previous legislation of interest to individuals and employers.
• New, tax-favored, ABLE accounts can now be offered by states to people who became disabled before age 26. Contributions totaling up to $14,000, in both 2015 and 2016, can generally be made to an ABLE account each year to enable families raising children with disabilities to save and pay for disability-related expenses. Though contributions are not tax deductible, disbursements are tax-free to pay qualified disability expenses.
• New Starter retirement accounts are available free from the Treasury Department through the “myRA” program. For details, go to www.myRA.gov.
• Individuals may have already received new year-end health coverage information. While the information on these forms may assist in preparing a return, they are not required. The individual shared responsibility payment has increased from last year and will apply to taxpayers who did not have qualifying coverage or an exemption for each month during 2015. A special interactive tool is available on www.IRS.gov to determine whether an exemption is available.
• A bonus of a few more days to file tax returns is available to individuals this year. Taxpayers have until April 18, 2016 to file their 2015 individual tax returns. Emancipation Day falls on Friday, April 15 and is treated the same as a federal holiday—giving all of us an extra weekend to crunch numbers.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.
