Taxpayers Have False Sense of Security about Identity Theft

Tax identity theft is a serious topic at any time, but especially at this early point in the 2016 filing season. The following article from Accounting Today provides some timely information.

Taxpayers Have False Sense of Security about Identity Theft

SCOTTSDALE, ARIZ. (FEBRUARY 23, 2016)

 

BY MICHAEL COHN

Taxpayers are not doing enough to protect themselves from identity theft-related tax fraud and a majority of them don’t expect it to happen to them, according to a new survey.

The survey, from security company IDT911, found that 63 percent of Americans are taking an “it could never happen to me” approach and say they aren’t worried about their identities being stolen this tax season despite high-profile data breaches involving the Internal Revenue Service and some service providers.

Nineteen percent admitted they have not ensured their Wi-Fi network is password protected if they are filing their taxes online, and 49 percent said they don’t even lock their mailbox when receiving their tax refund through the mail, potentially exposing sensitive personal and financial information to thieves.

Despite the uptick in tax-related identity theft incidents, 48 percent of those surveyed believe the holiday shopping season is the most risky time of year. Tax-filing season came in second at 30 percent.More than a third (38 percent) of the 1,500 adult U.S. consumers surveyed said they’re unsure how to vet a tax preparer, including an overwhelming 92 percent of Millennials aged 18 to 34. Over half of the respondents (52 percent) said they do not trust, or are not sure if they trust, online tax services, likely due to the recent data breaches of multiple providers.

Only 12 percent planned to file their taxes in January despite experts advising consumers to file as early as possible in order to beat out identity thieves who might potentially claim their tax refunds.

“Tax season has become fraud season,” said IDT911 chairman Adam Levin. “As breaches have become the third certainty in life, cybercriminals are able to glean information from literally hundreds of millions of compromised records in order to target consumers in tax related identity theft and phishing schemes. In today's dangerous digital world, each of us must be vigilant and remain on high alert.”

IDT911 said its fraud center saw a 154 percent increase in tax-related cases from 2014 to 2015, with 2016 showing no signs of slowing down. Tax refund fraud losses are estimated to reach $21 billion by 2016, according to the Treasury Inspector General for Tax Administration, and the Federal Trade Commission recently announced that it received a 47 percent increase in identity theft complaints in 2015, with tax refund fraud being by far the biggest contributor. These numbers are expected to rise if the proper precautions are not put in place.

Despite the increased likelihood of identity theft during tax season, many Americans may not know where to go when they are eventually impacted. More than a third of the survey respondents (38 percent) are unsure if their financial services or insurance providers offer identity theft or fraud protection services. The majority of respondents (57 percent) said their financial institution would be the first entity they’d contact once they learned they were the victim of a data breach.

Please contact our office at (630) 986-0540 or taxes@brummetandolsen.com with any questions.

IRS Looking For Taxpayers Who Pad Their Tax Deductions

The following article demonstrates the increasing role advancing technology is playing in the automated analysis of tax returns. It is important to know your tax preparer and know your responsibilities and rights as a taxpayer.

IRS Looking For Taxpayers Who Pad Their Tax Deductions
Isaac M. O'Bannon, Managing Editor, CPA Tax and Advisor Compliance
On Feb 12, 2016

 

It's tax time. For those who might think, "I'll add a little here, maybe add a little more there ... nobody will notice, right?" Well, the IRS is looking harder at deductions and is warning taxpayers to avoid the temptation of falsely inflating deductions or expenses on their returns to under pay what they owe and possibly receive larger refunds.

The vast majority of taxpayers file honest and accurate tax returns on time every year. However, each year some taxpayers fail to resist the temptation of fudging their information. That’s why falsely claiming deductions, expenses or credits on tax returns is on the “Dirty Dozen” tax scams list for the 2016 filing season.

"Taxpayers should file accurate returns to receive the refunds they are entitled to receive and shouldn't gamble with their taxes by padding their deductions," said IRS Commissioner John Koskinen.

Taxpayers should think twice before overstating deductions such as charitable contributions, padding their claimed business expenses or including credits that they are not entitled to receive – like the Earned Income Tax Credit or Child Tax Credit.

Increasingly efficient automated systems generate most IRS audits. The IRS can normally audit returns filed within the last three years. Additional years can be added if substantial errors are identified or fraud is suspected.
Significant civil penalties may apply for taxpayers who file incorrect tax returns including:

• 20 percent of the disallowed amount for filing an erroneous claim for a refund or credit.
• $5,000 if the IRS determines a taxpayer has filed a “frivolous tax return.” A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax reported is substantially incorrect.
• In addition to the full amount of tax owed, a taxpayer could be assessed a penalty of 75 percent of the amount owed if the underpayment on the return resulted from tax fraud.

Taxpayers even may be subject to criminal prosecution (brought to trial) for actions such as:

• Tax evasion
• Willful failure to file a return, supply information, or pay any tax due
• Fraud and false statements
• Preparing and filing a fraudulent return, or
• Identity theft.

Criminal prosecution could lead to additional penalties and even prison time.

Using tax software is one of the best ways for taxpayers to ensure they file an accurate return and claim only the tax benefits they’re eligible to receive. IRS Free File is an option for taxpayers to use online software programs to prepare and e-file their tax returns for free.

Community-based volunteers at locations around the country also provide free face-to-face tax assistance to qualifying taxpayers helping make sure they file their taxes correctly, claiming only the credits and deductions for which they’re entitled by law.

Taxpayers should remember that they are legally responsible for what is on their tax return even if it is prepared by someone else, so they should be wise when selecting a tax professional. The IRS offers important tips for choosing a tax preparer at IRS.gov.

More information about IRS audits, the balance due collection process and possible civil and criminal penalties for noncompliance is available at the IRS.gov website. Taxpayers can also learn more about the Taxpayer Bill of Rights at IRS.gov. This is a set of fundamental rights each and every taxpayer should be aware of when dealing with the IRS, including when the IRS audits a tax return.
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Please contact our office at (630) 986-0540 if you have any questions about this 2016 filing season.
 

6 Tips on Gambling and Income Taxes: Don't Play the IRS for a Sucker

Each year we have clients that have received a tax document from a casino documenting their gambling winnings. They always state that they have lost far more than they have won, but the following article highlights the scrutiny this area is under from the IRS.

6 Tips on Gambling and Income Taxes: Don't Play the IRS for a Sucker

By Ken Berry, JD - CPA Practice Advisor Tax Correspondent On Jan 23, 2015

Do you have clients who enjoy wagering? It can be anything from buying daily lottery tickets to playing blackjack at a casino to betting at the racetrack. Naturally, if a client is lucky enough to pocket some loot, the IRS will make sure it receives its fair share in taxes. Silver lining: At least the client can use losers sustained in the same tax year to offset the winners.

In other words, gambling losses aren’t completely tax-deductible on their own, but you can write off losses up to the amount of your winnings. Those winnings are taxed at ordinary income rates reaching as high as 39.6% on the federal level.

But you can’t just deduct the amounts that you say you lost on your return. The IRS is a stickler for requiring adequate records to substantiate losses and this is a frequent audit item. Practically speaking, you should advise clients – especially those who are heavy gamblers – to keep a log of their activities stating the date of the activity, the location, names of any people who were there with you, the amounts wagered, the type of gambling and your winnings and losses. Supplement this log with receipts, tickets, statements and forms and the like.

The specific proof required by the IRS may vary according to the type of gambling activity. For instance:

• Bingo and similar games: Keep records of the number of games played, the cost of cards purchased, and amounts collected on winning cards.
• Slot machines: Maintain a record of the machine number and all winnings by date and time the machine was played.
• Casino table games (e.g., blackjack, craps, poker and roulette): Write down the number of the table where you played and any casino credit information.
• Racing (horses, harness, dog, etc.): Keep track of the number of races, the amounts of your wagers and the amounts you won and lost.

Reminder: Don’t try to play the IRS for a sucker. For example, if you finally hit the jackpot at the racetrack and offset the income with hundreds of tickets for small wagers the same day, an examiner will suspect that you simply scooped up losing ticket stubs off the ground. Losses should be realistic under the circumstances.

In addition, the IRS offers these tips:

1. As noted above, gambling income can include a variety of types, as well as the fair market value of prizes a person may win, such as cars or trips.
2. The taxpayer may, or may not, receive a Form W2-G.
3. With or without that form, winnings should be reported as income for tax purposes.
4. Winnings should be entered on the "Other Income" line of a federal tax return or tax software.
5. Gambling losses can be deducted against the total amount of winnings, but not over.
6. And, of course, keep accurate records.

Finally, be aware of this one “tax edge” for bettors: Gambling losses must be deducted as miscellaneous expenses on Schedule A, but they’re not subject to the usual floor of 2 percent of adjusted gross income (AGI). Thus, the losses are deductible, up to the amount of winnings, regardless of your client’s AGI or the amount of other miscellaneous expenses. You can take that to the bank.

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Leave It to the Pros

There’s another way around the gambling loss restrictions for a select few taxpayers. If gambling legitimately is your livelihood, you may report winnings and losses from such activities on Schedule C, but you can’t claim an overall loss. In addition, the value of complimentary rooms, vacations, and other gifts from casinos is treated as taxable income, but can be offset by losses from your gambling activities.

Of course, it’s not easy to establish yourself as a professional gambler. Be prepared for an argument from the IRS. And the agency usually prevails in court, so be wary of the odds against you.

3 Costly and Common Tax Scams to Avoid

The following article reposted from Yahoo Finance is a timely reminder of the most common scams currently facing taxpayers.

 

By Marine Cole

Tax season officially opened Tuesday, meaning that the Internal Revenue Service is now accepting 2014 returns — and that taxpayers should officially go on alert for scams that could cost them dearly.

From identity thieves to imposters posing as the IRS on the phone, con artists have become masters at obtaining sensitive personal information from taxpayers to make a quick buck. Many of these scams happen all year long, but are especially common during tax season.

Below are three common tax scams to watch out for this year. You can find other tax scams that were popular during last year’s tax season on the IRS website.

Tax Identity Theft
Scammers have bilked the IRS out of billions by stealing Social Security numbers and using them to obtain fraudulent tax refunds. Most victims don’t find out until after they’ve filed their real tax return.

You can prevent yourself from becoming a victim of tax ID theft by protecting your Social Security number — don’t carry around your Social Security card, for example, and be careful when giving out the number. Also, check your credit report annually to make sure your Social Security number isn’t attached to unfamiliar credit accounts.

If you’ve already become the victim of an ID theft scam, you should file a police report and a complaint with the Federal Trade Commission. You should also contact one of the three major credit bureaus to place a fraud alert on your credit record.

IRS Imposters
Someone from the IRS calls you and tells you that you owe Uncle Sam money and need to pay immediately through a wire transfer or a prepaid debit card. They may ask for your credit card information. Only they’re not with the IRS. 

Some con artists may also call you and say you’re owed a refund to try to trick you into sharing private information. If you refuse to share information, they may threaten to report you to the police or to revoke your driver’s license.

“They might know all or part of your Social Security number, and can fake caller ID information to make it look like it really is the IRS calling,” the FTC warned in a release last week.

Email Phishing Scams

Every year con artists come up with new email phishing scams during tax season.  Often, the bogus emails appear to be coming from the IRS Taxpayer Advocate Service and to include a fake case number. Recipients are typically asked to click on a link to resolve some kind of mistake, such as a document processing error.

The links may take taxpayers to a web page asking for personal information. If you receive such an email, it’s best to refrain from replying to it and from clicking on any link in the email. Taxpayers can forward the email to phishing@irs.gov.

Even if you aren't the victim of a tax scam, you may still be impacted. Some states including Ohio and Illinois have already warned taxpayers that their tax refunds may be delayed due to their revenue department implementing new security measures to catch fraudulent returns.

The Good NewsIt’s actually not that difficult to spot a tax scam, as long as you keep in mind that:

• The IRS never calls taxpayers about money owed without first mailing a bill.
• The IRS always gives taxpayers the opportunity to question or appeal the amount supposedly owed.
• The IRS never requires that taxpayers use a specific payment method for taxes.
• The IRS never asks for credit or debt card numbers over the phone.
• The IRS never threatens to bring in local police or other law enforcement group for not paying.

As part of Tax Identity Theft Awareness Week, the FTC, along with the AARP and the Treasury Inspector General for Tax Administration are also hosting a webinar on Jan. 27 at 2 p.m. EST to explain common tax scams and teach taxpayers how to protect themselves.

IRS ENTERS FILING SEASON WITH REDUCED ENFORCEMENT AND SERVICE DUE TO BUDGET CUTS

The IRS will open the 2015 filing season on January 20th and both the agency and taxpayers are preparing for some turbulence. The IRS is going into the filing season with a reduced budget, which could translate into fewer audits. Legislation passed by Congress in late 2014 could delay the start of the filing season, although to date, the IRS has not announced a delay. Taxpayers and the IRS are on alert for identity theft, a pervasive problem during filing season. Additionally, new requirements under the Patient Protection and Affordable Care Act kick-in. 

Budget cuts impact audits and service

The IRS must do more with less after Congress voted in December to cut the agency’s budget by some $345 million. In fact, the IRS has been doing more with less for the past several years as its budget has been reduced nearly every year. In December, IRS Commissioner John Koskinen told the agency’s employees that he was instituting a hiring freeze, with only a few mission-critical exceptions.

Koskinen also acknowledged that the number of taxpayer audits will likely decline because of staffing cutbacks and budgetary pressures. The audit coverage rate for individuals hovers around one percent and that rate could go down. Between 2012 and 2013, the audit rate experienced a decline, largely due to budgetary constraints at that time, according to the IRS.

Going into the filing season, the IRS has cautioned that its customer service functions will be challenged by the budget cuts. With limited budgetary resources, the agency will likely need to shift personnel from other functions to customer service during the filing season. This could slow the processing of refunds, Koskinen said. As a last resort, Koskinen indicated that the agency could consider furloughing employees for one or more days. Koskinen said the IRS spends $29 million every day to keep operating. 

Late legislation

When Congress make changes to the Tax Code late in the year, the IRS must scramble to incorporate these changes into its return processing systems. This year is no different. The Tax Increase Prevention Act of 2014, signed into law by President Obama in December, makes some 500 changes to the Tax Code through language extending the tax extenders, technical corrections and the removal of so-called “deadwood.”

The IRS has been upgrading its return processing systems for the new law. At this time, the agency has not delayed the start of the filing season. In past years, the IRS has opened the filing system generally but asked filers of certain returns and schedules, impacted by legislation, to hold off. Our office will keep you posted of developments.

Identity theft

Tax return identity theft is a growing problem. Identity thieves gather information financial information through phishing scams, discarded tax returns, and other records containing personal and financial information. Identity thieves typically file false returns early in the filing season with hopes to get a refund. Often, taxpayers discover for the first time that they are victims of identity theft when they file their returns.

The IRS has devoted significant resources to identifying false returns. The agency has developed special filters for its return processing systems. Special identity protection numbers have been assigned to victims of identity theft. The IRS receives some 150 million individual returns and issues around 110 million refunds, so the challenge is daunting.

Affordable Care Act

Unless exempt, taxpayers will need to report on their 2014 returns if they are covered by minimum essential health coverage. Individuals without minimum essential coverage – unless exempt – will make a shared responsibility payment. The IRS is bracing for a flood of questions about what is minimum essential coverage, how to calculate the shared responsibility payment and who is exempt. The IRS has revised Form 1040, U.S. Individual Income Tax Return, and created new forms, such as Form 8965, Health Coverage Exemptions.

Individuals who obtained health insurance through the ACA Marketplace in 2014 may be eligible for the Code Sec. 36B premium assistance tax credit. If they are, they will need to file a new form, Form 8962, Premium Tax Credit, with their 2014 return. If taxpayers received advance payments of the credit, they will need to reconcile the difference between the advance credit payments and the allowable amount of the credit. Taxpayers could discover that their advance payments exceeded their allowable amount. In that case, they will need to repay the excess, subject to certain limitations.

Please contact our office at (630) 986-0540 if you have any questions about the filing season.

IRS 2013 Audit Rates Vary Significantly Among Taxpayers

Recently-released statistics from the IRS show a drop in audits among all income groups for fiscal year (FY) 2013 with the overall individual audit coverage rate at its lowest level since FY 2006. At the same time, the number of IRS employees working audits has decreased. However, enforcement revenue increased.

Taxpayer groups

For statistical purposes, the IRS groups taxpayers into particular categories. The IRS generally defines higher income taxpayers as taxpayers with incomes over $200,000. The IRS also identifies taxpayers with incomes above $1 million for statistical purposes. Similarly, the IRS groups businesses into various categories; for example, corporations with assets under $10 million and corporations with assets above $10 million, $50 million, or $100 million. The IRS also identifies S corporations and partnerships for statistical purposes.

Audit types

As it does with taxpayers, the IRS groups different types of audits into various categories. Field audits are generally full audits. Correspondence audits are, as the name suggests, generally audits conducted by correspondence with the taxpayer. Keep in mind that these categories are very broad and a particular taxpayer’s audit experience may be different.

Individuals

In FY 2013 (October 1, 2012 to September 30, 2013), the overall individual audit rate; that is audits of all individuals in all income groups, was less than one percent: 0.96 percent. That compares to an overall individual audit rate of 1.03 percent for 2012 and 1.11 percent for 2011. The last time the overall individual audit rate was below one percent was in 2006.

To put the overall percentage in perspective, the IRS received 145,819,388 individual returns in 2013. The agency selected 1,404,931 individual returns for examination. The vast majority of these audits - 1,060,779 - were correspondence audits. The number of field audits was 344,152.

Higher income individuals

As incomes climb, so does the audit coverage rate. The IRS selected 3.26 percent of returns for examination from taxpayers with incomes above $200,000 in 2013 compared to 0.88 percent for taxpayers with incomes under $200,000. Both percentages reflected a drop from 2012, when the IRS selected 3.70 percent of returns for examination from taxpayers with incomes above $200,000 and 0.94 percent of returns for examination from taxpayers with incomes under $200,000.

The audit rate for taxpayers with incomes over $1 million also fell in 2013. The IRS selected 10.85 percent of returns for examination from taxpayers with incomes above $1 million compared to 12.14 percent in 2012 and 12.48 percent in 2011. In each of these years, the number of returns reporting incomes above $1 million increased but the audit rate declined.

Within the higher income groups, the number of field examinations actually increased in 2013 compared to 2012. However, the number of correspondence examinations decreased. Some of the increase in field examinations could be attributed to the IRS’s emphasis on curbing tax evasion by hiding assets in unreported foreign accounts. The IRS has encouraged taxpayers with unreported foreign accounts to come forward in its offshore voluntary compliance program.

Businesses

Audits of all types of businesses also declined in 2013. The IRS reported that it selected 0.61 percent of all business returns for examination compared to 0.71 percent in 2012. For the first time in three years, the audit rate of both small and large corporations declined. The IRS selected 0.95 percent of returns for examination from corporations with assets under $10 million and 15.84 percent of returns from corporations with assets over $10 million.

S corporations and partnerships are among the most popular business entities for small and mid-size businesses. The IRS received 4,476,307 S corporation returns in 2013 and 3,550,071 partnership returns in 2013. The audit percentage rate for S corporations and partnerships was the same in 2013 at 0.42 percent compared to 0.48 percent for S corporations in 2012 and 0.47 percent for partnerships in 2012.

Enforcement revenue

Overall, the IRS’ enforcement activities generated $53.35 billion in FY 2013, compared to $50.20 billion in FY 2012. In the previous year (2011), enforcement brought in $55.20 billion. The IRS reported that collections, appeals and document matching all showed increases in revenue. However, the amount collected through examination decreased to $9.83 billion for 2013 compared to $10.20 billion in 2012.

IRS staffing

The IRS reported that 19,531 employees - revenue agents, revenue officers and special agents - worked enforcement activities in FY 2013. That compares to 22,710 employees in FY 2010 - a decrease of 3,179 employees. Some of this decrease reflects normal separations from service, such as voluntary terminations of employment and retirements. Others reflect employee buyouts, which the IRS has offered several times in recent years in response to budgetary challenges.

If you have any questions about the IRS audit coverage rate, examinations or enforcement, please contact our office.

FY 2013 IRS Enforcement Statistics

2013 Federal Tax Year-In-Review

As 2014 begins, it is a valuable time to look back at some of the important federal tax developments in 2013 and their impact on the new year and beyond. Some of these developments were anticipated; others were surprises. In nearly all cases, the developments open tax planning opportunities.

Tax legislation. 2014 has commenced in a very different budgetary and fiscal climate in Washington compared to the same time last year. At the end of 2012, lawmakers were in tough negotiations over the fiscal cliff. The result was the American Taxpayer Relief Act of 2012 (ATRA), which finally passed Congress on January 1, 2013. The new law extended permanently the Bush-era tax cuts for lower and moderate income taxpayers, including reduced income tax brackets, marriage penalty relief, some education incentives, and much more. ATRA also increased taxes on higher income individuals by restoring the 39.6 percent tax bracket and revising other provisions. These and other changes made by ATRA are reflected on 2013 returns filed in 2014.

Extenders. Although ATRA resolved uncertainty about the Bush-era tax cuts, it did not make permanent many other temporary incentives. After 2013, a host of temporary incentives, known as tax extenders, expired. In some cases, for example transit benefits, taxpayers feel the effects immediately. In other cases, the impact of the expiration of these incentives will not be felt until taxpayers file 2014 returns in 2015. That effectively gives Congress time to extend the expired incentives, including the state and local sales tax deduction, research tax credit, higher education tuition deduction, and many more.

Tax reform. Action on the extenders could be linked to tax reform. During 2013, the leaders of the House and Senate tax writing committees undertook a nationwide campaign to drum up support for tax reform. The lawmakers visited a number of cities and highlighted proposals to simplify the Tax Code. Late in 2013, the Senate Finance Committee released legislative language proposing changes in depreciation, the international tax rules and tax administration. However, it is unclear if the Senate, or the House, will give these proposals serious consideration in 2014. Their chief proponent, SFC Chair Max Baucus, D-Montana, is retiring from Congress.

Affordable Care Act. The Affordable Care Act continued to generate new rules, regulations and controversies in 2013. The Obama administration surprised many observers with a one-year delay in the so-called employer mandate. However, the individual mandate, which generally requires individuals to carry minimum essential health coverage or pay a penalty unless exempt, took effect as scheduled on January 1, 2014. Some individuals whose existing policies were cancelled because they did not meet new standards under the Affordable Care Act may be eligible for a hardship exemption to the penalty. The Affordable Care Act’s Marketplaces experienced a rocky opening but as of early 2014, the White House reported that enrollment numbers were climbing.

New Medicare taxes. The IRS released final regulations on two new Medicare taxes imposed by the Affordable Care Act: the Net Investment Income (NII) tax and the Additional Medicare Tax. These two taxes generally impact higher income taxpayers (individuals with incomes over $200,000 and married couples with incomes over $250,000) but they have some especially complex features that complicate tax planning. The NII final regulations are intended to shed light on the many types of income that could be subject to the tax.

Health FSAs. The IRS announced in late 2013 a decidedly pro-taxpayer change to a popular health care benefit. At the plan sponsor’s option, employees participating in health flexible spending arrangements (health FSAs) will be allowed to carry over, instead of forfeiting, up to $500 of unused amounts remaining at year-end. Plan sponsors now have the choice of either allowing employees a carryover of up to $500 or giving employees a grace period of up to 2 ½ months. However, plan sponsors cannot offer both.

Same sex marriage and domestic partners. On June 26, 2013, the U.S. Supreme Court struck down as unconstitutional Section 3 of the Defense of Marriage Act. The IRS announced that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. This impacts not only a taxpayer’s filing status. It also applies to all federal tax provisions where marriage is a factor, including claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit. The IRS also reminded domestic partners and individuals in civil unions that they are not married for federal tax purposes.

Repair regulations. In September, the IRS issued final regulations on the treatment of amounts paid to acquire, produce, or improve tangible property. The complex regulations reach nearly every type of taxpayer. Their complexity should not be a barrier to taking advantage of some of the taxpayer-friendly provisions. For example, the final regulations include a de minimis safe harbor, a safe harbor for small taxpayers to assist them in applying the general rules for improvements to buildings, and more.

Foreign compliance activities. In 2014, foreign financial institutions will have new reporting obligations under the Foreign Account Tax Compliance Act (FATCA). FATCA, its supporters argue, will significantly boost taxpayer compliance. Its detractors counter that the law is too complex and sweeps in its reach taxpayers who have no intention to purposefully evade U.S. taxation. Along with FATCA, the U.S. has been expanding its tax treaties and information agreements with foreign jurisdictions to encourage greater transparency. This trend is likely to continue in 2014.

Mileage rates. The optional business standard mileage rate drops slightly for 2014 to 56 cents-per-mile (compared to 56.5 cents-per-mile for 2013). The IRS attributed the reduction to generally lower vehicle maintenance costs, including the price of fuel. For 2014, the depreciation component of the business standard mileage rate is 22 cents-per mile. This represents a one-cent decrease from the depreciation component for the 2013 business standard mileage rate. Similarly, the optional standard mileage rate for qualified medical and moving expenses will also decrease from 24 cents-per-mile for 2013 to 23.5 cents-per-mile for 2014. However, the 14 cents-per-mile rate for charitable miles driven is set by statute and is unchanged for 2014.

IRS operations. The IRS experienced a turbulent year in 2013 with reports of improper oversight of some organizations, leadership changes and a 16-day shutdown in October. In December, the Senate approved the nomination of John Koskinen to be the new Commissioner of Internal Revenue. One of Koskinen’s first tasks will be to oversee the smooth processing of returns and refunds during the 2014 filing season. Koskinen will also have to prioritize IRS activities in a challenging budgetary environment.

If you have any questions about these or any developments in 2013 and their impact on 2014, please contact our office at (630) 986-0540.