News from Zimmerman & Associates

Mileage Rate Changes

Beginning July 1, 2008, the IRS has increased the optional standard mileage rates for business and medical/moving miles.  The business rate has jumped from 50.5 cents per mile to 58.5 cents per mile.  The medical and moving mileage rate has increased to 27 cents per mile from 19 cents per mile.  The charitable mileage rate remains at 14 cents per mile.  The new rates apply to miles driven from July 1 through December 31, 2008.

The optional business standard mileage rate is commonly used to calculate the deductible costs of operating a business-use automobile, instead of tracking actual costs.

Bonus Depreciation and Increased Section 179 Expense

The dollar limitation for property that can be written off via Section 179 increases from $125,000.00 in 2007 to $250,000.00 in 2008.  On January 1, 2009, the limit will scale back down to $125,000.00, adjusted for inflation.  Section 179 does not apply to real estate is limited by the size of the business, and is applicable only to the extent of any profit incurred.  Any remaining unused Section 179 expense is carried over and applied against any profits in future years.

The legislation also allows for an additional 50% deduction for depreciation on fixed assets purchased in 2008.  In other words, 50% of the purchase price of a fixed asset can be immediately written off, while the remaining cost of the asset is depreciated over its normal statutory rate.  The advantage of this provision over Section 179 is that there are fewer limitations, and businesses can receive the deduction even if they are in a loss position.
Both provisions are presently only applicable to 2008.

Newsletters

2008 Newsletters

2008 Semi Annual Newsletter, 1st Half

Home builders are getting special audit attention from the IRS.  Agents are looking for inappropriate deferrals by contractors using the completed-contract method of accounting.  Among the targets are developers who sell lots, but don’t report income until common improvements are done, and those contractors using a subsidiary to build all houses in a project.

IRS has reinstated its random audit program.  The IRS will select 13,000 random returns a year.  Agents will look for unreported income and overstated deductions or tax credits.  Unincorporated small businesses will be a major focus.

IRS says that contracts saying workers aren’t employees have no effect.  IRS will still reclassify independent contractors as employees if the firm has substantial control over them... To Read More, Click Here.

2007 Newsletters

2007 Semi Annual Newsledger, 1st Half

2007 Semi Annual Newsletter, 2nd Half