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The IRS Issue Resolution Program is looking for more tax issue submissions that relate to business taxpayers. The IIR program by the IRS helps to resolve business tax issues that are common problems. Through the submission of tax issues, the IRS IIR program has offered tax assistance to help alleviate those problems.

Once an issue is received, the IRS will gather a team of experts to meet about how to approach a solution for the issue. The team will gather as many different resources available to come to an educated consensus on the type of guidance that may be used to resolve the issue.

The IRS says that recommendations can be submitted to IIR@irs.gov and that they are reviewed semi-annually. The next decisions will be made on Sept. 30 2010 and the IRS details more about this in its latest newsletter:

WASHINGTON — The Internal Revenue Service is encouraging business taxpayers, associations and other interested parties to submit to the Industry Issue Resolution (IIR) program tax issues for resolution involving a controversy, a dispute or an unnecessary burden on business taxpayers.

The objective of the IIR program is to resolve business tax issues common to significant numbers of taxpayers through new and improved guidance. In past years, issues have been submitted by associations and others representing both small and large business taxpayers, resulting in tax guidance that helps thousands of taxpayers.

Recent submissions accepted into the IIR program include:

* Network assets in the telecommunications industry (unit of property)
* Asset class determination under Revenue Procedure 87-56 for wireless telecommunication assets
* Vendor mark down allowances in calculation of inventory under the retail inventory method
* Network assets in the utilities industry (unit of property)

Guidance issued as a result of the IIR program includes:

* Technical terminations of publicly traded partnerships – procedures for requesting relief, delegation of authority for granting relief, and a sample closing agreement documenting the conditions under which relief is granted. (Industry Director Communication LMSB-04-0210-006)
* Auto Last In First Out – for automobile wholesalers, manufacturers and dealers regarding the proper treatment of the dollar-value, LIFO inventory method for pooling purposes of crossover vehicles, which have characteristics of trucks and cars. (Revenue Procedure 2008-33)

For each issue selected, an IIR team of IRS and Treasury personnel gather relevant facts from taxpayers or other interested parties affected by the issue. The goal is to recommend guidance to resolve the issue. This benefits both taxpayers and the IRS by saving time and expense that would otherwise be expended on resolving the issue through audits.

IIR project selections are based on the criteria set forth in Revenue Procedure 2003-36. For each issue selected, a multi-functional team of IRS, Chief Counsel, and Treasury personnel will be assembled. The teams will gather and analyze the relevant facts from industry groups and taxpayers for each issue and recommend guidance.

Requests for guidance on tax issues under the IIR program can be submitted at any time to IIR@irs.gov. Submissions received are reviewed semi-annually with selections next being made from issues submitted by September 30, 2010.

The IRS has recently released more information on the new health care tax credit that has been made available under the Affordable Care Act. Section 45R of the Internal Revenue Code covers the small business health care tax credit. Notice 2010-44 recently released by the IRS details numerous examples of how small businesses may qualify for the health care tax credit.

Here is the full press release by the IRS:

May 17, 2010

WASHINGTON — The Internal Revenue Service today issued new guidance to make it easier for small businesses to determine whether they are eligible for the new health care tax credit under the Affordable Care Act and how large a credit they will receive. The guidance makes clear that small businesses receiving state health care tax credits may still qualify for the full federal tax credit. Additionally, the guidance allows small businesses to receive the credit not only for regular health insurance but also for add-on dental and vision coverage.

Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small employers determine whether they qualify for the credit and estimate the amount of the credit. The notice also requests public comment on issues that should be addressed in future guidance.

Included in the Affordable Care Act approved by Congress in March and signed into law by the President, the small business health care tax credit, which is in effect this year, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.

Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt organizations, the IRS will provide further information on how to claim the credit.

More information about the credit, including a step-by-step guide and answers to frequently asked questions, is available on the Affordable Care Act page.

Taxpayers who take energy saving steps this year may get bigger tax savings next year. The Nonbusiness Energy Property Credit, a tax credit for making energy efficient improvements to homes has been increased as part of the American Recovery and Reinvestment Act of 2009.
Here are seven things the IRS wants you to know about the Nonbusiness Energy Property Credit:

The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

To qualify as “energy efficient” for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers’ Website.

Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.

The improvements must be made to the taxpayer’s principal residence located in the United States.

To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.

Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.
For more information on this and other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/recovery.

Links:
Energy Incentives for Individuals in the American Recovery and Reinvestment Act
IR-2009-98, Expanded Recovery Act Tax Credits Help Homeowners Winterize their Homes, Save Energy; Check Tax Credit Certification Before You Buy, IRS Advises

First time homebuyers were rushing to find their first dream home in 2009, for those who thought they were running out of time – it has been extended into 2010.

The IRS webpage has posted some information outlining the details:

New Legislation

New legislation, the Worker, Homeownership and Business Assistance Act of 2009, which was signed into law on Nov. 6, 2009, extends and expands the first-time homebuyer credit allowed by previous Acts. The new law:

• Extends deadlines for purchasing and closing on a home.
• Authorizes the credit for long-time homeowners buying a replacement principal residence.
• Raises the income limitations for homeowners claiming the credit.

Under the new law, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived  in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased.

People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after Nov. 6, 2009. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers. The existing MAGI phase-outs of $75,000 to $95,000 or $150,000 to $170,000 for joint filers still apply to purchases on or before Nov. 6, 2009.

Several new restrictions apply to homes purchased after Nov. 6, 2009.

• Purchasers must attach a properly executed settlement statement to their return.
• No credit is available if the purchase price of the home exceeds $800,000.
• The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
• A dependent is not eligible for the credit.
• The new law gives the IRS broader authority to deny first-time homebuyer credit claims, without having to first audit a taxpayer’s return. Known as math error authority, this authority applies, retroactively, to credits claimed on original and amended 2008 returns, as well as to claims yet to be filed.

Additionally, there are new benefits for members of the military and certain other federal employees:

• Members of the uniformed services, members of the Foreign Service and employees of the intelligence community serving outside the U.S. have an extra year to buy a principal residence in the U.S. and qualify for the credit.
• In many cases, the credit repayment (recapture) requirement is waived for members of the uniformed services, members of the Foreign Service and employees of the intelligence community.

More information on these new benefits for the military, Foreign Service and intelligence community serving outside the U.S. is available.

General Information

Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:

• Applies only to homes used as a taxpayer’s principal residence.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.

The credit is claimed using Form 5405, which you file with your original or amended tax return.

For 2008 Home Purchases

The Housing and Economic Recovery Act of 2008 established a tax credit for first-time homebuyers that can be worth up to $7,500. For homes purchased in 2008, the credit is similar to a no-interest loan and must be repaid in 15 equal, annual installments beginning with the 2010 income tax year.

For 2009 Home Purchases

The American Recovery and Reinvestment Act of 2009 expanded the first-time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, 2010. [Added Nov. 12, 2009]

For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer’s main residence within a three-year period following the purchase.

First-time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. News release 2009-27 has more information on these options.

Don’t forget to talk to your tax preparer if you’ve made a home purchase in 2008 or 2009 and if you paid any contractors this year – Don’t forget to use our 1099 Software.

The IRS posted this article on the proposed regulations for merchant card and third party transactions reported to the IRS beginning in 2011. They are allowing the public to make comments on the new form 1099-K.

I thought this might be interesting for those of you who have small businesses and rely primarily on internet transactions.

R-2009-106, Nov. 23, 2009 WASHINGTON — The Internal Revenue Service today issued proposed regulations under a new statute requiring that, starting with transactions in calendar year 2011, the gross amount of payment card and third-party network transactions be reported annually to participating merchants and the IRS.

The provision was enacted as part of the Housing Assistance Tax Act of 2008 and is designed to improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete.

“Time and time again, we have seen that better information reporting helps the tax system work better by ensuring that everyone pays what they owe,” said IRS Commissioner Doug Shulman. “The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program.”

These proposed regulations, posted today on IRS.gov, propose rules to implement reporting of credit card, debit card and similar transactions, as well as transactions settled through third-party payment networks, such as third-party organizations that settle online transactions. The IRS also released for comment a draft version of new Form 1099K, Merchant Card and Third-Party Payments, which will be used to make these reports.

The new law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants. The IRS emphasized that individual cardholders are unaffected by this requirement, and none of the cardholder’s personal information will be shared with the IRS.

The IRS has created Form 1099-K, which is similar to the existing Forms 1099 used to report interest, dividends and other payments. The first information return covering calendar year 2011 must be filed with the IRS and furnished to participating merchants in early 2012. Among other things, the proposed regulations describe who is required to file a return and which payment card and third-party network transactions are subject to the reporting requirement. The proposed regulations also provide numerous examples.

The IRS welcomes comments on these proposed regulations and the draft Form 1099-K. Comments must be received by Jan. 25, 2010, and may be submitted electronically, by mail or hand delivered to the IRS. A public hearing is scheduled for Feb. 10, 2010, in Washington, D.C.

The proposed regulations provide details on submitting comments or participating in the public hearing.

The IRS continues to work closely with stakeholders to ensure the smooth implementation of this new information reporting program, including the mitigation of penalties in the early stages of implementation for all but particularly egregious cases.

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The IRS listed on its website 35 Tax Changes for Businesses that you may not be aware of:

5-Year Carryback of 2008 Net Operating Losses (NOLs) for Eligible Small Businesses (ESBs)
For 2008, you can choose a 3, 4, or 5-year carryback period for the part of your 2008 NOL that is an ESB loss.

Agricultural Chemicals Security Credit
The Food, Conservation, and Energy Act of 2008 added the agricultural chemicals security credit as part of the general business credit.

Alcohol and Cellulosic Biofuel Fuels Credit
There are several changes to alcohol and cellulosic biofuel fuels credits.

Biodiesel and Renewable Diesel Fuels Credit
There are several changes to the biodiesel and renewable diesel fuels credit.

Build America Bonds
Find out what a build America bond is and how to claim a credit.

Business Start-up and Organizational Costs
A separate election statement is no longer required to elect to deduct up to $5,000 of business start-up and organizational costs paid or incurred after September 8, 2008.

Cancellation of Debt
Certain businesses can make an irrevocable election to delay recognition income from the cancellation of business debt arising from the reacquisition of certain types of business debt repurchased in 2009 or 2010.

Capital Gain Tax Rate Reduction for Corporations With Qualified Timber Gain
Corporations with both a net capital gain and a qualified timber gain may have a reduced tax rate.

Carbon Dioxide Sequestration Credit
Carbon dioxide captured after October 3, 2008, from an industrial source may be eligible for a credit.

Changes to Investment Credit
There are several changes to the investment credit.

COBRA Premium Assistance Credit
The American Recovery and Reinvestment Act of 2009 (ARRA) allows a credit against employment taxes for providing COBRA premium assistance to assistance eligible individuals.

Credit for Employer Differential Wage Payments
Eligible small business employers may be able to claim a credit for differential wage payments.

Depletion
Changes to the taxable income limitation on percentage depletion for tax years 2007-2010.

Depreciation and Section 179 Expense
Section 179 deduction limits have increased, depreciation limits on certain electric vehicles have changed and the special depreciation allowance has changed for certain New York Liberty Zone property.

Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information
For tax years beginning after 2007, corporations will use Form 8926, Disqualified Corporate Interest Expense Disallowed Under Section 163(j) and Related Information, to figure the amount of any corporate interest expense deduction disallowed by section 163(j).

Domestic Production Activities Deduction
For tax years beginning in 2007, 2008, or 2009, the percentage used to figure the domestic production activities deduction increases to 6%.

Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance
Corporations and a certain automotive partnership can elect to accelerate certain credits.

Employer-Owned Life Insurance Contracts
Policyholders owning one or more employer-owned life insurance contracts may have to file a report.

Health Savings Accounts (HSAs)
Information on changes for Health Savings Accounts (HSAs).

Low-Income Housing Credit
Rules for the credit attributable to buildings placed in service after 2007.

Maximum Automobile Value for Using the Cents-Per-Mile Valuation Rule
An employer providing a passenger automobile for the first time for personal use by an employeeay use special rules for determining the value of the personal use.

Meal Expenses When Subject to “Hours of Service” Limits
Special rules for deducting business-related meal expenses.

New Forms to Adjust Employment Tax Returns
There are several new forms for adjusting employment tax returns.

Nonqualified Deferred Compensation Plans
There are new regulations on reporting requirements for amounts deferred under a nonqualified deferred compensation plan.

Original Issue Discount (OID)Tables
Contains latest version of OID tables. Prior year tables are also available.

Partial Exclusion Increased for Gain From Certain Small Business Stock
Exclusion of gain from the sale of qualifying small business stock is increased.

Penalty for Late Filing of a Partnership Return
The late filing penalty has increased for certain late filed partnership returns.

Penalty for Late Filing of an S Corporation Return
The late filing penalty has increased for certain late filed S-corporation returns.

Qualified Transportation Fringe Benefits
Monthly exclusion amounts have increased.

S Corporation Built-in Gains Tax
There is no tax imposed on the net built-in gain for a certain period.

Self-Employment Tax
The maximum amount of net earnings subject to the social security part of the self-employment tax has increased.

Social Security and Medicare Taxes
The maximum amount of wages subject to the social security tax and Medicare tax has increased.

Standard Mileage Rate
The standard mileage rate for business use of your vehicle, medical and move- related use and charitable use has increased for 2008.

Vehicle Credits
Information on new alternative motor vehicle credits.

Work Opportunity Credit
The qualified veterans group and high-risk youth groups have been expanded.

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On December 3, 2009, the IRS announced the standard mileage reimbursement rates for the calendar year 2010.  The former standards were updated on November 24, 2008.  These rates should be used to calculate the tax-deductible costs for using a car for business, charitable, medical, and moving purposes.  The most common use of these mileage rates is to reimburse employees for expenses involving use of their own cars for business purposes.

WASHINGTON — The Internal Revenue Service today issued the 2010 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, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 50 cents per mile for business miles driven
• 16.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than last year’s. The mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business 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 as determined by the same study. Independent contractor Runzheimer International conducted the study.

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 any vehicle used for hire or for more than four vehicles used simultaneously.

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

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