IRS issues standard mileage rates for 2020

The Internal Revenue Service today issued the 2020 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 57.5 cents per mile driven for business use, down one half of a cent from the rate for 2019,
  • 17 cents per mile driven for medical or moving purposes, down three cents from the rate for 2019, and
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate decreased one half of a cent for business travel driven and three cents for medical and certain moving expense from the rates for 2019. The charitable rate is set by statute and remains unchanged.

It is important to note that under the Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. Taxpayers also cannot claim a deduction for moving expenses, except members of the Armed Forces on active duty moving under orders to a permanent change of station. For more details, see Rev. Proc. 2019-46.

The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than five vehicles used simultaneously. These and other limitations are described in section 4.05 of Rev. Proc. 2019-46.

Notice 2020-05, posted today on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.  In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

Important End-of-Year Reminder for Arkansas Businesses

This is a reminder for Arkansas businesses from Secretary of State John Thurston that the end of the year is approaching and there are a couple of important deadlines coming up.


Have You Paid Your Franchise Taxes?

If you have not paid your franchise taxes for 2019, and do not do so by December 31st, your business will enter revoked status.

Adults can pass on these tips to teach teens online safety

Adults teach their kids how to drive, balance a checkbook and cook. It’s also a good idea to teach younger users how to explore the internet with caution.

All internet users should be mindful of risks people can take when they share devices, shop online and interact on social media. Teens and younger users – like others who are less experienced with technology – often put themselves at risk by leaving a trail of personal information for fraudsters and con artists to follow.

Taxpayers might find the phrase “online security” overwhelming but, it doesn’t have to be. Even those who aren’t super tech savvy – no matter their age – can stay safe online. Here are some tips adults can pass on to the kids in their lives:

  • Remember security is important.
    No one should reveal too much information about themselves. People can keep data secure by only providing what is necessary. This reduces online exposure to scammers and criminals. For example, birthdays, addresses, age and especially Social Security numbers are some things that should not be shared freely. In fact, people should not routinely carry a Social Security card in their wallet or purse.
  • Use software with firewall and anti-virus protections.
    People should make sure security software is always turned on and can automatically update. They should encrypt sensitive files stored on computers. Sensitive files include things like tax records, school transcripts, and college applications. They should use strong, unique passwords for each account. They should also be sure all family members have comprehensive protection for their devices…particularly on shared devices.
  • Learn to recognize and avoid scams.
    Everyone should be on the lookout for scams. Thieves use phishing emails, threatening phone calls and texts to pose as IRS employees or other legitimate government or law enforcement agencies. People should remember to never click on links or download attachments from unknown or suspicious emails. If someone calls asking for personal information, folks should remember not to give out such details.
  • Protect personal data.
    Adults should advise children and teens and other youngers users to shop at reputable online retailers. Treat personal information like cash; don’t leave it lying around.
  • Know the risk of public Wi-Fi.
    Connection to Wi-Fi in a mall or coffee shop is convenient and often free, but it may not be safe. Hackers and cybercriminals can easily steal personal information from these networks. Always use a virtual private network when connecting to public Wi-Fi.

Jan. 31 filing deadline remains for employer wage statements, independent contractor forms

As the year comes to an end, the Internal Revenue Service reminds employers and other businesses that wage statements and independent contractor forms still have a Jan. 31 filing deadline.

Before the Protecting Americans from Tax Hikes (PATH) Act, employers generally had a longer period of time to file these forms. But the 2015 law made a permanent requirement for employers to file their copies of Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31.

Certain Forms 1099-MISC, Miscellaneous Income, filed with the IRS to report non-employee compensation to independent contractors are also due at this time. Such payments are reported in box 7 of this form.

The early filing date means that the IRS can more easily detect refund fraud by verifying income that individuals report on their tax returns. Employers can avoid penalties by filing the forms on time and without errors. The IRS recommends e-file as the quickest, most accurate and convenient way to file these forms.

Get a jump on the due date

Employers should verify employees’ information. This includes names, addresses, and Social Security or individual taxpayer identification numbers. They should also ensure their company’s account information is current and active with the Social Security Administration before January.  If paper Forms W-2 are needed, they should be ordered early.

Automatic extensions of time to file Forms W-2 are not available. The IRS will only grant extensions for very specific reasons. Details can be found on the instructions for Form 8809, Application for Time to File Information Returns.

For more information, read the instructions for Forms W-2 & W-3 and the Information Return Penalties page at IRS.gov.

IRS and Treasury finalize Opportunity Zone guidance

The Internal Revenue Service today issued  final regulations providing details about investment in qualified opportunity zones (QOZ).

The final regulations modified and finalized the proposed regulations that were issued on October 28, 2018 and May 1, 2019.

The final regulations provide additional guidance for taxpayers eligible to make an election to temporarily defer the inclusion in gross income of certain eligible gain. The final regulations also address, the ability of such taxpayers’ eligibility to increase the basis in their qualifying investment equal to the fair market value of the investment on the date that it is sold, after holding the equity interest for at least 10 years.

The statute permits the deferral of all or part of a gain that would otherwise be included in income, if corresponding amounts are invested into a qualified opportunity fund (QOF). The gain is deferred until an inclusion event or Dec. 31, 2026, whichever is earlier. The final regulations provide a list of inclusion events.  Further, the final regulations provide guidance to determine the amount of income that must be included at the time of the inclusion event or December 31, 2026.

The final regulations also address the various requirements that must be met to qualify as a QOF, as well as the requirements an entity must meet to qualify as a QOZ business.  In order to provide clarity, the final regulations have modified the proposed regulations for QOFs and QOZ businesses.  Specifically, the final regulations provide additional guidance on how an entity becomes a QOF or QOZ business, and the requirement that a QOF or QOZ business engage in a trade or business.  The final regulations retain the general approach of the proposed regulations but provide additional guidance and clarity to the rules regarding QOZ business property.

Here’s how people can volunteer to help other taxpayers in their communities

With taxpayers beginning to think about filing their taxes next year, they can also consider volunteering to help others do so. The agency and its partner organizations are looking for people to prepare tax returns at free tax preparation sites across the country.

People can sign up through the Volunteer Income Tax Assistance program by visiting the sign-up page on IRS.gov today. The IRS and its community partners continue to look for people around the country to become IRS-certified volunteers. Many IRS partners are now accepting new volunteers to join one of these programs for the 2020 filing season. Both these programs offer invaluable help to America’s taxpayers:

  • Volunteer Income Tax Assistance offers free tax return preparation to eligible taxpayers who generally earn $55,000 or less.
  • Tax Counseling for the Elderly is mainly for people age 60 or older. Although the program focuses on tax issues unique to seniors, all taxpayers can usually get assistance. AARP participates in the TCE program through AARP Tax-Aide.

Many volunteers return to the program year after year. Here are several reasons why:

  • Volunteers can work flexible hours. Volunteers can generally choose their own hours and days to volunteer. The programs are usually open from mid-to-late-January through the tax filing deadline in April. Some sites are even open all year.
  • VITA and TCE sites are often close to home. More than 11,000 sites were set up in neighborhoods all over the country for 2018. These free tax help sites are in places like community centers, libraries, schools and shopping malls.
  • No prior experience needed. Volunteers receive specialized training to become IRS-certified. They can also choose from a variety of roles to serve. VITA and TCE programs want volunteers of all backgrounds and ages, as well as individuals who are fluent in other languages.
  • The IRS provides free tax law training and materials. Volunteers receive training materials at no charge. The tax law training covers how to prepare basic federal tax returns electronically. The training also covers tax topics like deductions and credits.
  • Tax pros can earn continuing education credits. Enrolled agents and non-credentialed tax return preparers can earn continuing education credits when volunteering as a VITA/TCE instructor, quality reviewer or tax return preparer.

Have You Paid Your Franchise Taxes?

If you have not paid your franchise taxes for 2019,

and do not do so by December 31st,

your business will enter revoked status.

To find out if your business is currently in good standing, search the AR Sec of State database here:

https://www.sos.arkansas.gov/corps/search_all.php.

You can file and pay your franchise taxes online 24/7 at https://www.ark.org/sos/franchise/index.php.