For Small Businesses: IRS Raises Tangible Property Expensing Threshold to $2,500; Simplifies Filing and Recordkeeping

The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising from $500 to $2,500 the safe harbor threshold for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“

Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.

The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

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IRS Tax Tips for Deducting Gifts to Charity

The holiday season often prompts people to give money or property to charity. If you plan to give and want to claim a tax deduction, there are a few tips you should know before you give. For instance, you must itemize your deductions. Here are six more tips that you should keep in mind:

1. Give to qualified charities. You can only deduct gifts you give to a qualified charity. Use the IRS Select Check tool to see if the group you give to is qualified. You can deduct gifts to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.

2. Keep a record of all cash gifts.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods must be in good condition.  Household items include furniture, furnishings, electronics, appliances and linens. These items must be in at least good-used condition to claim on your taxes. A deduction claimed of over $500 does not have to meet this standard if you include a qualified appraisal of the item with your tax return.

4. Additional records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

5. Year-end gifts.  Deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2015. This is true even if you don’t pay the credit card bill until 2016. Also, a check will count for 2015 as long as you mail it in 2015.

6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. If you claim a deduction of more than $500 for a noncash contribution, you will need to file another form with your tax return. UseForm 8283, Noncash Charitable Contributions to report these gifts. For more on these rules, visit IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

What does it mean to be immoral or scandalous?

By Debby Winters

There is an absolute bar to the registration of “immoral or scandalous matter” according to Section 2(a) of the Trademark Act, 15 U.S.C. §1052(a).  To the U.S. Patent and Trademark Office (USPTO) immoral or scandalous might mean something different from what it means to you or me.   Additionally, although the two words “immoral” and “scandalous” may have somewhat different connotations, case-law has included immoral matter in the same category as scandalous matter.

“Scandalous” was defined as “shocking to the sense of propriety, offensive to the conscience or moral feelings, or calling out for condemnation” when  used to describe a mark that was trying to obtain trademark protection. This mark consisted of a photograph of a nude, reclining man and woman, kissing, and embracing. The mark was used for a “newsletter devoted to social and interpersonal relationship topics and social club services.”  The statutory language “scandalous” has also been considered to encompass matter that is “vulgar.” Vulgar matter has been defined as “lacking in taste, indelicate, morally crude.”

Dictionary definitions alone may be sufficient to establish that a proposed mark comprises scandalous matter, especially where multiple dictionaries, including at least one standard dictionary, all indicate that a word is vulgar, and the applicant’s use of the word is limited to the vulgar meaning of the word, for example in the proposed marks 1-800-JACK-OFF and JACK OFF. These were held as scandalous simply based on their dictionary meanings.  Folks have tried to get around that with creative spelling, but there is no use in trying, because marks such as FUK or SH*T have not passed the USPTO on the same vulgar/scandalous basis.  The Trademark Office won’t be fooled and it will it be lenient.

How about a “nutty’ variation for a name of a beer? Does that sound vulgar or scandalous to you? Certainly not at first glance it doesn’t.  After all, beer can sometimes be described as having a nutty flavor.  Well, recently Engine 15 Brewing Co filed to register the name of one of a beer, NUT SACK DOUBLE BROWN ALE.  Its trademark registration was initially refused based on the examiner’s determination that the mark was immoral or scandalous because “nut sack,” which the examiner equated the mark to is slang for a part of the male anatomy.  The examiner found the mark NUT SACK DOUBLE BROWN ALE would be perceived as “offensive to a substantial composite of the general public.”  Thus, the application was refused registration under Section 2(a) of the Trademark Act, the section that prohibits registration of immoral or scandalous marks.  Engine 15 appealed that ruling and they won.  The Trademark Trial and Appeal Board (TTAB) considered the prevalent use of the term “nut” and “nutty” in connection with beer flavor profiles and found that target consumers with “contemporary attitudes” would see the attempt at humor rather than being offended.  The TTAB also threw in a “Christian Grey/50 Shades” reference, noting that determinations of whether marks are too scandalous to be registered “involve various shades of grey.”  Witty of them, right?  As an aside, the mark FIFTY SHADES OF GREY has been registered for adult sexual aids as well as other related products.

Background: In case you haven’t kept up with recent immoral or scandalous trademark issues, several marks owned by the Washington Redskins football team were ordered to be cancelled based on determinations that REDSKINS is an offensive and disparaging term to Native Americans. The Washington Redskins are appealing the decision to the United States Court of Appeals for the Fourth Circuit in Virginia.  In a bold tactic, the appeal brief from the Redskins cites a slew of other registrations issued by the USPTO that contain terms that are racist or offensive but have been allowed to be registered. This tactic challenges the government’s ability to strip them of their registrations based on the free speech protections of the First Amendment to the Constitution.

Let me know in the comments if you think NUT SACK is immoral or scandalous.