IRS Increases Mileage Rate Until Dec. 31, 2005 – As I predicted a few weeks ago, IRS has finally raised the standard rate for business mileage.  However, they have made the change effective a month earlier than I expected. 

For the last four months of 2005, the rate is 48.5 cents per mile.  This means you will need to show separate totals for miles driven from January 1, 2005 through August 31, 2005 (40.5 cents) and from September 1 through  December 31, 2005 (48.5 cents).

As always, this extra eight cents per mile for the final four months of 2005 may not be adequate for a lot of people; so it’s extra crucial to be keeping track of actual operating costs so that you can compare them with the standard rate deduction when you and your professional preparer are working on your 2005 1040.   If you set up sub-accounts for each vehicle in QuickBooks, getting these totals for the year isn’t a very time consuming task.

IRS has also increased the deduction for charitable and medical miles for the last four months of 2005 by seven cents, from 15 cents per mile to 22 cents.

The rate to be used for charitable purposes remains at 14 cents per mile because our imperial rulers in DC have carved that rate into stone, and not allowed IRS to increase it based on such trivial things as a doubling of gas prices.

The IRS Is Watching Old Business Accounts – If you decide to abandon a corporation and don’t wrap things up properly, you could be looking at some heavy taxes personally.  I have seen this quite often with California corporations, where until you officially dissolve it, the $800 per year minimum tax, plus lots of penalties and interest, grow into thousands of dollars very quickly.  Just leaving the PRC isn’t good enough protection.  The FTB will hunt down the owners wherever they may be and seize bank accounts.  I have seen it happen here in the Ozarks.  

Guidance Imminent on Hardship Distributions From Deferred Comp Plans for Katrina Victims – If there’s ever a time when tapping into retirement accounts makes sense – and shouldn’t be penalized – it’s this.

U.S. Treasury Urges Waiver of ATM Surcharges for Katrina Evacuees – It will be interesting to see how many banks honor this humanitarian request.

IRS, Treasury Announce Measures to Aid Hurricane Relief – Interesting way to donate pay for vacation days to charity.  Taking this off of W-2 pay is actually a much better tax savings than the normal Schedule A cash contributions.  Anything that reduces adjusted gross income (AGI) generates much more tax savings than itemized deductions do because there are so many tax penalties based on the level of AGI.  Official IRS announcement.

The Feds have busted some more phony trust tax scams.

Survival of the Stupidest
Cheating on your taxes is stupid enough.  Forgetting to declare over a million dollars that everyone in the country (especially the IRS) knows you won takes a level of stupidity very few people possess.  Richard Hatch must be hoping to follow Martha Stewart’s path and land his own reality show during or after his stay in the Federal gray bar hotel to be such an idiot.   I don’t have a much higher regard for the accountant who prepared that tax return for hatch, even if he did mark it as “informational.”  If he signed it in the paid preparer section, he is probably looking at some severe sanctions as well.