February 1, 1995 IRS Raises Standard Mileage Rate The Internal Revenue Service has announced that the standard mileage rate for automobile tranportation expenses paid or incurred on or after January 1, 1995 is 30¢ per business mile, up from 29¢ in 1994. The standard mileage rate for charitable use of a car remains unchanged at 12¢ per mile. Instead of deducting the business use portion of actual 1995 auto costs, self-employeds who own their cars as well as employees who provide their own cars and pay their own cost generally can use the optional cents per mile base. The standard mileage rate replaces separate deductions for operating and fixed costs such as depreciation, maintenance and repairs, tires, gas, oil, insurance and registration. Businesas connected parking fees and tolls may be claimed separately and the business portion of interest paid on a car loan is deductible by self-employeds even if they use the optional mileage rate. Form 1099s Due February is known for birthdays of Presidents, Valentine`s Day and for issuing Form 1099s to independent contractors. A Form 1099 is issued to all non incorporated taxpayers who rendered business services to other businesses and are paid $600 or more in one calendar year. Form 1099 was described in the January newsletter and is the form issued to the provider of the services by the payor. The Form 1099 includes on it the payee`s name, address, taxpayer identification number, and amount paid. Failure for the payor to provide a correct taxpayer identification number (TIN) results in a $50 penalty per each Form 1099 with a $50,000 maximum penalty. In order to obtain the information for the Form 1099s (whether or not you or we are preparing the 1099s) the Form W-9, Request for Taxpayer Identification Number, is the official vehicle to give to the payee to have filled out. One advantage of having a signed W-9 is that if the TIN is incorrect, the $50 penalty will be transferred to the payee from the payor. We advise the Form W-9 be sent out as soon as possible and recommend before a payment is made which reaches the $600 mark, a signed W-9 is obtained. Remember, the deadline to send out Form 1099s is February 28. If you need Form W-9 please call us. GATT Mid Und During World War I German soldiers had imprinted on their belt buckles the phrase Got mid und which meant god is with us. I have taken some liberty with the phrase as I discuss the relevant tax changes contained in GATT (Tax changes in a foreign trade agreement! What next?) The new law contains little known technical changes that will affect millions of individuals who participate in pension plans. They relate to interest rate and cost of living assumptions. The result is to save the government tax dollars which in turn paid for the GATT tariff reductions. The new law removed the guaranteed 4% minimum interest rate on Series EE savings bonds. Social Security numbers are required for children in the year of their birth and is effective in 1997. Tax Audits to Reflect Economic Reality When an IRS agent suspects that a taxpayer under examination has under-reported income, the agent can use one or more Òindirect methodsÓ to establish the existence and amount of unreported income. The Òsource and application of fundsÓ is one method. This is used to determine what a taxpayer bought during the year. If more is purchased than total income then the difference is deemed to be additional income unless shown otherwise i.e., inheritance. What is Your Time Worth? The IRS 1994 Form 1040 instructions indicate that taxpayers save substantial amounts of time when they have their returns prepared by a tax professional. For example, a 1040 return with Schedules A, B, C, D, and SE would by the IRS`s estimate take 21 hours, 36 minutes. Your Name & Number, Please Social Security accuracy will be very important this year not only for primary and secondary social security numbers but also for dependents. Refunds could be held up for about 12 weeks if a return contains an inaccurate social security number. No interest will be paid on these delayed refunds. The name and social security number must exactly match Social Security`s records! You should contact your local Social Security office if there is a question regarding your name or number. Use Fee for Installment Agreement Beginning March 1, 1995 the IRS will charge a fee of $43 for entering into an installment agreement. The fee for restructuring or reinstating an agreement will be $24.