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Tuesday, June 24, 2008

The IRS has increased mileage rates

WASHINGTON — The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile," said IRS Commissioner Doug Shulman. "We want the reimbursement rate to be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose

Rates 1/1 through 6/30/08

Rates 7/1 through 12/31/08

Business

50.5

58.5

Medical/Moving

19

27

Charitable

14

14

Friday, June 20, 2008

Low-Income Housing Limits to Be Waived in Indiana and Iowa

Low-Income Housing Limits to Be Waived in Indiana and Iowa

WASHINGTON — The Internal Revenue Service today announced that it will waive certain limitations for the low-income housing tax credit in Indiana and Iowa so that owners of facilities in these states can provide housing to victims of recent storms and flooding.

The IRS will continue to monitor closely the housing situation in other states affected by the recent flooding and is prepared to act quickly as circumstances warrant.

“Our thoughts are with the thousands of families left homeless by these terrible tragedies,” IRS Commissioner Doug Shulman said. “We are pleased to help these states to quickly house the needy whose homes were destroyed.”

Because of the widespread devastation to housing caused by storms and flooding, the IRS will temporarily suspend certain limitations for qualified low-income housing projects located anywhere in the states of Indiana and Iowa. Today’s action will expand the availability of housing for disaster victims and their families.

Formal notices detailing this relief will be issued shortly.

For related information, see:

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Tuesday, June 17, 2008

Report Certain Foreign Bank and Financial Accounts by June 30

IRS Reminds Taxpayers to Report Certain Bank and Financial Accounts

WASHINGTON –– The Internal Revenue Service today reminded U.S. persons who have bank and other financial accounts in a foreign country that they may be required to report those accounts to the U.S. Department of Treasury by the June 30 deadline.

With globalization, more people in the U.S. have foreign financial accounts. There is nothing improper about setting up or maintaining such accounts. Still, IRS officials are concerned that U.S. persons may overlook that their accounts are large enough to trigger reporting obligations.

“There are responsibilities that go along with owning such foreign bank and financial accounts,” said IRS Commissioner Doug Shulman. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”

Since 2000, the number of Report of Foreign Bank and Financial Accounts (FBAR) forms received by the Treasury has increased by nearly 85 percent, from 174,528 in 2000 to 322,414 in 2007. Despite this significant increase in filings, concern remains about the degree of reporting compliance for those who are required to file.

U.S. persons are required to file a Report of Foreign Bank and Financial Accounts (FBAR), Form TD F 90-22.1, each year if they have a financial interest in or signature authority or other authority over any financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.

The 2007 FBAR form is due June 30, 2008.

The FBAR is not an income tax return and should not be mailed with any income tax returns. The FBAR must be filed on or before June 30 of the following year to: U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI 48232-0621.

Unlike with federal income tax returns, requests for an extension of time to file an FBAR are not granted.

Civil and criminal penalties for non-compliance with the FBAR filing requirements are severe. Civil penalties for a non-willful violation can range up to $10,000 per violation. Civil penalties for a willful violation can range up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together.

If a holder of a foreign account was required to file FBARs for earlier years, however, he or she should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be assessed if IRS determines that the late filings were due to reasonable cause. The account holder should keep copies of their statement for his or her own record.

FBAR information returns for the 2007 calendar year must be filed with the U.S. Department of Treasury, P.O. Box 32621, Detroit, Mich., 48232-0621. The address for commercial delivery is: U.S. Department of Treasury, Currency Transaction Reporting, 985 Michigan Avenue, Detroit, Mich., 48226.

The FBAR form is not available for electronic filing, but many income tax software packages can prepare a printed copy. FBAR forms and instructions are also available on IRS.gov or the FinCEN Web site and by calling 1-800-829-3676.

Taxpayers who need assistance completing Form TD F 90-22.1 can contact the IRS by telephone at 1-800-800-2877, option 2, or via email at FBARquestions@irs.gov.
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Monday, June 16, 2008

IRS Gives Storm Victims More Time to File and Pay

IRS Gives Storm Victims More Time to File and Pay; Taxpayers in Parts of 10 States Qualify

WASHINGTON — Victims of storms and flooding in 10 states will have more time to make quarterly estimated tax payments normally due today, according to the Internal Revenue Service.

"Our hearts go out to the flood victims in the stricken states," IRS Commissioner Doug Shulman said. "At a time like this, taxes should be the last thing on the minds of these unfortunate victims."

Over the weekend the IRS provided tax relief, including the postponement of various tax-filing and tax-payment deadlines, to disaster-area counties in Iowa, Indiana and Wisconsin. Earlier this spring, the agency extended similar relief to storm victims in parts of Arkansas, Colorado, Georgia, Maine, Mississippi, Missouri and Oklahoma.

As a result, self-employed individuals, retirees and others in these areas who make quarterly estimated tax payments will have more time to make the payment normally due today. Businesses will also have extra time to file various returns and pay any taxes due. Due dates vary, depending upon location, and details are available on the Tax Relief in Disaster Situations page on this Web site.

In addition, affected taxpayers in these areas who suffered uninsured or unreimbursed property damage can choose to claim these losses on their 2007 tax returns.

The IRS is monitoring and regularly updating all available relief.
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