TAX FACTS: Mileage Tax Write-off To Rise In 2007 November 1, 2006Posted by notapundit in Economic News.
WASHINGTON (Dow Jones)–Contractors, sales people and other highway warriors will get a more generous tax write-off for business use of their cars next year.
The standard mileage deduction will rise to 48.5 cents per mile for business miles driven in 2007, up from 44.5 cents per mile in 2006, the Internal Revenue Service said Wednesday.
The standard deduction for a car used for medical or moving purposes will be 20 cents per mile, up from 18 cents in 2006. The IRS adjusts the mileage rates each year based on fuel and vehicle price trends.
The mileage rate for cars used for assisting a charitable organization will be unchanged in 2007 at 14 cents per mile. That charitable reimbursement is set by statute.
Taxpayers using the standard mileage rate must consider several important exceptions. Taxpayers can’t claim that rate if they also are claiming depreciation for the same vehicle, or if they claimed a “Section 179” deduction for that vehicle, typically used by small businesses. The fine print can be found in the IRS “Revenue Procedure 2006-49,” available on the IRS Web site, http://www.irs.gov.
New Tax Shelter Rules
The Treasury Department and IRS have updated requirements for when taxpayers and their lawyers or accountants should disclose use of tax shelters.
One weapon Congress provided the IRS to fight tax shelters involved improved disclosure requirements in the American Jobs Creation Act of 2004. It required lawyers, accountants and other “material advisors” to disclose involvement in tax transactions the IRS deemed suspicious and maintain lists of investors in these arrangements.
“We are continuing to use all the tools at our disposal to prevent abusive tax-avoidance transactions,” IRS Commissioner Mark Everson said in a statement. The proposed new rules seek to provide timely information “on potentially abusive transactions while not imposing an undue burden on taxpayers and their advisors,” he added.
The proposed new regulations update interim guidance previously issued by Treasury and the IRS. The new rules remove a reporting category for transactions with significant differences in book and tax accounting. And they add a new category for “transactions of interest.”
Treasury and the IRS are seeking comment on the proposed regulations. Specifically, they want to determine how the rules can be tailored to capture useful details about tax shelters and abusive transactions while minimizing the burden on taxpayers and their advisers.
Tax Directors Mired In Red Tape
A survey of U.S. tax directors shows they are spending more time dealing with regulatory issues, work they say is less valued by their companies.
The accounting firm KPMG LLP surveyed 203 senior tax executives. It found some 89% of tax directors said increased tax accounting and requirements under the Sarbanes-Oxley corporate reform law are forcing them to spend less time on tax planning than they would like.
“Tax directors are finding that their roles have changed as a result of increased compliance-related activities,” said Brad Brown, a KPMG partner.
By Rob Wells, Dow Jones Newswires