The cents-per-mile rate for business driving goes down slightly. The IRS has issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, medical and charitable purposes. IRS Notice 2020-5 provides that the 2020 standard mileage rate for transportation or travel expenses is 57.5 cents (down from 58 cents per mile for 2019) for all miles of business use.
For medical driving, the 2020 standard mileage rate is 17 cents per mile The standard mileage rate is 14 cents per mile for use of an auto in rendering services to a charitable organization.
Court: A taxpayer's offer in compromise (OIC) was properly rejected. An OIC is an agreement between a taxpayer and the IRS to settle a tax debt for less than the amount owed. The IRS can accept an OIC for reasons including that there's: 1) doubt as to liability of the debt 2) doubt as to collectability of the debt.
One taxpayer who owed taxes of $25,000 made an OIC to settle the debt for $12,000. The IRS rejected his OIC because, while his income wasn't disclosed, he had net of $110,000 in assets. He appealed, claiming the IRS should've reviewed his ability to pay from his income, not his assets. The U.S. Tax Court rejected his appeal because he had enough assets to pay the debt. (Banks, TC Memo 2019-166)
Ready, set, file. The IRS has announced that it will begin accepting 2019 e-filed business returns on January 7 and will begin accepting individual returns on January 27. The tax agency noted that while individual taxpayers may get their returns prepared using a tax professional before the start date (or use software programs), the processing of those returns will begin after IRS systems open on January 27. The deadline to file 2019 individual tax returns and pay any tax owed is Wednesday, April 15, 2020. "More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline," the IRS stated.
Direct deposit remains the fastest way to receive federal tax refunds. With tax season starting soon, the IRS reminds taxpayers that opting to have their tax refund directly deposited into their checking or savings accounts is the fastest way to get their money. According to the IRS, eight out of 10 taxpayers get their refunds via direct deposit. Direct deposit also avoids the possibility that a refund check could be lost or stolen or returned to the IRS as undeliverable. Taxpayers can split their refund into up to three financial accounts, including at a bank or in an IRA. Questions about refunds? We can answer them when we prepare your tax return.
If you're age 70 1/2 or older, be aware that a new law has changed the rules for IRAs. Before 2020, traditional IRA contributions weren't allowed once you attained age 70 1/2. Starting in 2020, new rules allow individuals of any age to make contributions to traditional IRAs, as long as you have compensation (generally, earned income from wages or self-employment).
The required minimum distribution (RMD) age has also been raised from 70 1/2 to 72. Before 2020, IRA owners were generally required to begin taking RMDs from their plans by April 1 of the year following the year they reached age 70 1/2. Contact us with questions.
Having a baby or adopting a child? You may be able to tap your retirement plan penalty free. Generally, amounts withdrawn from an individual retirement account before age 59-1/2 are subject to an additional 10% tax, unless an exception applies (such as a distribution in a case of financial hardship). With the recent passage of the Setting Every Community Up for Retirement Enhancement Act (SECURE) a new exception has been added. Starting in 2020, a plan distribution up to $5,000 may be penalty-free, if it's used to pay costs related to a birth or adoption.
The limit applies on an individual basis, so for a married couple, each spouse may qualify for a penalty-free $5,000 distribution. Contact us with questions to learn more about this and other changes brought by the SECURE Act.
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