Offer In Compromise

Just received confirmation that an Offer-In- Compromise I have been working on was accepted.  It is a great feeling because it is a very good program the IRS has but it is difficult to get accepted.  If you feel you are a candidate for this program please call and we can discuss further, still very happy!

Per Diem Rates

IRS issues 2019 to 2020 per-diem rates for traveling away from home

Business travelers who incur expenses while traveling away from home have new per-diem rates to use in substantiating certain of those expenses (Notice 2019-55). The new rates are in effect from Oct. 1, 2019, to Sept. 30, 2020. The IRS on Wednesday provided the 2019–2020 special per-diem rates, including the transportation industry meal and incidental expenses rates, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method.

The updated rates are effective for per-diem allowances paid to any employee on or after Oct. 1, 2019, for travel away from home on or after that date, and supersede the rates in Notice 2018-77, which provided the rates for Oct. 1, 2018, through Sept. 30, 2019.

Rev. Proc. 2011-47 provides the general rules for using a federal per-diem rate to substantiate the amount of ordinary and necessary expenses for lodging, meals, and incidental costs paid or incurred for business-related travel away from home. Taxpayers using the rates and the list of localities in Notice 2019-55 must comply with the rules in Rev. Proc. 2011-47.

High-low substantiation method

For purposes of the high-low substantiation method, the per-diem rates are $297 for travel to any high-cost locality and $200 for travel to any other locality within the continental United States (CONUS), slightly higher than last year.

The amount of these rates that is treated as paid for meals for purposes of Sec. 274(n) is $71 for travel to a high-cost locality and $60 for travel to any other locality within CONUS, both unchanged from last year.

The notice contains a list of the localities that are high-cost localities (localities that have a federal per-diem rate of $248 or more, $7 higher than last year) for all or part of the calendar year.

Incidental expenses

Since 2012, incidental expenses have included only fees and tips given to porters, baggage carriers, hotel staff, and staff on ships. The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel.

Transportation industry

The special meals and incidental expenses rates for taxpayers in the transportation industry are $66 for any locality of travel within CONUS and $71 for any locality of travel outside CONUS, both unchanged after increasing $3 last year.

Thanks to By Sally P. Schreiber, J.D. for this information

Hardship Distribution on 401(k) Distributions relaxed!

Final regs. relax 401(k) hardship distribution requirements September 20, 2019

The IRS has amended the requirements for hardship distributions from Sec. 401(k) plans (T.D. 9875). The final regulations, issued on Friday, (1) eliminate the requirements that plan participants take loans from the plan to the extent they are available before they are permitted to take a hardship distribution from the plan and that participants may not make new contributions to the plan within six months of the hardship distribution. (2)They also change the casualty loss hardship distribution rules for disaster relief and the rules for determining the amount of plan funds available for distribution, while clarifying the requirement that funds not be available from other sources. Many of these changes were necessitated by amendments to the Code, including changes made by the Bipartisan Budget Act of 2018, P.L. 115-123 (BBA).

The final regulations eliminate the rules in existing Regs. Sec. 1.401(k)-1(d)(3)(iv)(B) (under which the determination of whether a distribution is necessary to satisfy a financial need is based on all the relevant facts and circumstances) and provide one general standard for determining whether a distribution is necessary. A distribution is not treated as necessary to satisfy an employee’s immediate and heavy financial need if the need may be relieved from other resources that are “reasonably available” to the employee (including assets of the employee’s spouse and minor children that are reasonably available to the employee).

Under the new regulations, a distribution is treated as necessary to satisfy an immediate and heavy financial need of an employee only to the extent that:

• The amount of the distribution is not in excess of the amount required to satisfy the financial need (including any amounts necessary to pay any federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution);
• The employee has obtained all other currently available distributions (including distributions of ESOP dividends under Sec. 404(k), but not hardship distributions) under the plan and all other deferred compensation plans, whether qualified or nonqualified, maintained by the employer;
• The employee has provided the plan administrator with a written representation that he or she has insufficient cash or other liquid assets reasonably available to satisfy the need; and
• The plan administrator does not have actual knowledge that is contrary to the representation.

The employer may rely on the employee’s representation (unless the employer has actual knowledge to the contrary) that the need cannot reasonably be relieved from other specified resources.

The final regulations also modify the safe-harbor list of expenses in existing Regs. Sec. 1.401(k)-1(d)(3)(iii)(B) for which distributions are deemed to be made on account of an immediate and heavy financial need.

Casualty loss hardship

Because the casualty loss rules were amended by the law known as the Tax Cuts and Jobs Act, P.L.115-97, so that taxpayers only qualify for a casualty loss deduction if they are in a federally declared disaster area, the new regulations provide that only disaster-related expenses and losses of an employee who lived or worked in the disaster area will qualify for the new safe harbor, and the expenses and losses of the employee’s relatives and dependents will not, unlike under the IRS’s disaster relief provisions.

The BBA’s changes to the hardship distribution rules apply to plan years beginning after Dec. 31, 2018. The IRS provided flexible rules for the various effective dates in the regulations because of the necessity for plan amendments to implement the new rules.

— Thanks to Sally P. Schreiber, J.D. for much of this informaion

Travel is still deductible!

For decades, the IRS has closely scrutinized deductions for travel and entertainment (T&E), expenses, often challenging write-offs claimed by business owners. But the Tax Cuts and Jobs (TCJA) wipes out most entertainment deductions, beginning in 2018. Nevertheless, business clients still must worry about the “T” part of “T&E.”

In particular, the tax law imposes strict recordkeeping requirements that must be met to support deductions.

The tax rules in this area continue to be tricky and fraught with numerous twists and turns. This is just a brief overview of what your clients need to know.

Starting point: Generally, you can deduct the cost of travel expenses when you’re away from home for business reasons. For instance, you might drive in your car or hop on a plane to visit a customer or supplier. For these purposes, your “tax home” is the general area or vicinity—for example, a city and its surrounding suburbs—of your principal place of business, regardless of the location of your home.

Assuming you meet the requirements, there’s a long laundry list of expenses that may be deductible, including the following:

• Air, rail and bus fares;
• Meals (limited to 50 percent of the cost);
• Baggage charges;
• Lodging expenses;
• Car expenses, including the cost of gas, oil, repairs, parts, tires, supplies, parking fees and tolls;
• Taxi fares or other transportation between the airport or station and a hotel, from one customer to another, or from one place of business to another;
• Cleaning and laundry expenses;
• Transportation costs for sample and display materials and sample room costs; and
• Tips on eligible expenses.

Note that the TCJA generally eliminates deductions for meals claimed as entertainment expenses—such as a lunch or dinner with a customer following a substantial business discussion—but it doesn’t touch the deduction for 50 percent of the costs of meals incurred while traveling away from home on business.

However, travel expenses are deductible only to the extent they are reasonable. No deduction is allowed for expenses that are lavish and extravagant under the circumstances, but the IRS gives you plenty of leeway. For instance, a deduction won’t be denied simply because you flew first class or dined at an exclusive restaurant.

Furthermore, the primary purpose of the travel must be business-related. That doesn’t mean you can’t combine some pleasure with business, but the trip can’t be a disguised vacation. In this case, be sure to spend more days on business matters than you do sightseeing or relaxing. Of course, costs attributable to your personal activities are nondeductible.

If you’re traveling by car or another vehicle, an extra set of rules come into pay. Essentially, you must keep track of all your expenses attributable to business travel, including gas, oil, tires, insurance, repairs, licenses, registration fees, etc. In addition, you may claim a depreciation deduction for the vehicle, based on its percentage of business use. For example, if you use your car 80 percent for business, you’re entitled to deduct 80 percent of the regular depreciation allowance.

Alternatively, you may be able to use the IRS-approved standard mileage deduction for the year. With this method, you don’t have to account for all of your actual expenses, although you still must record the mileage for each business trip, the date, the destinations, the names and relationships of the business parties and the business purpose of the travel. The standard mileage rate for 2019 is (plus any business-related tolls and parking fees).

Finally, as we alluded to above, the recordkeeping requirements for travel expenses are tough. Have clients keep the proof needed in a log, diary, trip sheets or similar records along with documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. To simplify matters, encourage clients to use an accountable plan. The plan should meet the following requirements:

• Expenses must have a business connection.
• Employees must account to the employer for these expenses within a reasonable time.
• The employer must require employees to return excess reimbursements within a reasonable and specific period of time.

Finish line: This in area of the law where your expert guidance can make a big difference. Help your clients protect their business travel deductions.

Thanks for Accounting.web for pulling this information together