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News Archive 2008

News Archive 2007

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CURRENT NEWS ITEMS:

 

Optional Mileage Rates

IRS Tips on Identity Theft Protection

Social Security wage base

Cost of Living Adjustments

Nanny tax threshold

Retirement plan dollar limits


Optional Milage Rates

RS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will increas to 56¢ per mile for business travel for 2014 to better reflect the real cost of operating an auto. This rate can also be used by employers to reimburse tax-free under an accountable plan employees who supply their own autos for business use, and to value personal use of certain low-cost employer-provided vehicles. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense will be 23.5¢ per mile. Download IRS Standard Milage Rates

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IRS Tips on Protecting
Your Identity

Protecting yourself. The IRS lists a number of simple, practical steps that a taxpayer can take to avoid becoming a victim. It advised a taxpayer:

  • Don't carry your Social Security card or any documents that include your SSN or Individual Taxpayer Identification Number (ITIN);

  • Don't give a business your SSN or ITIN just because they ask. Give it only when required;

  • Protect your financial information;

  • Check your credit report every 12 months;

  • Review your Social Security Administration earnings statement annually;

  • Secure personal information in your home;

  • Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts; and

  • Don't give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

Warning Signs. IRS provided possible indications that there has been a tax-related identity theft. It advised that a taxpayers should be on guard if he or she receive a notice from IRS or learn from their tax professional that:

  • More than one tax return was filed for you;

  • You owe additional tax, have a refund offset or have had collection actions taken against you for a year you did not file a tax return;

  • IRS records indicate you received more wages than you actually earned; or

  • Your state or federal benefits were reduced or cancelled because the agency received information reporting an income change.

Steps to take. IRS advised that all victims of tax-related identity theft should:

  • File a report with the local police;

  • File a complaint with the Federal Trade Commission (FTC) or the FTC Identity Theft hotline:

  • Contact one of the three major credit bureaus to place a "fraud alert' on your account (Equifax, Experian, or TransUnion); and

  • Close any accounts that have been tampered with or opened fraudulently.

In addition, if a taxpayer's SSN has been compromised and the taxpayer knows or suspects he or she may be a victim of tax-related identity theft, a taxpayer should:

  • Respond immediately to any IRS notice and call the number provided;

  • Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS's website, print, then mail or fax according to instructions;

  • Continue to pay your taxes and file your tax return, even if you must do so by paper; and

  • If you previously contacted IRS and did not have a resolution, contact the Identity Protection Specialized Unit.

Steps IRS has taken. IRS notes that identity theft cases are among the most complex handled by IRS. It is continually reviewing processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized. Among the steps underway to help victims:

  • The IRS Identity Protection PIN (IP PIN) is a unique six digit number that is assigned annually to victims of identity theft for use when filing their federal tax return that shows that a particular taxpayer is the rightful filer of the return.

  • IRS is offering certain taxpayers the opportunity to opt into the IP PIN program. These are taxpayers who may be unaware that they are identity theft victims but IRS identified them because their accounts have indications of identity theft.

  • IRS will continue its IP PIN pilot program that allows taxpayers who filed tax returns last year from Florida, Georgia or the District of Columbia to opt into the IP PIN program.

  • This year, IRS uses an online process through its website that will allow taxpayers who have an IP PIN requirement and lose their IP PIN to create an account and receive an IP PIN online.

Victim case resolution are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. A typical case can take 120 days to resolve, and IRS is working to streamline its internal process and reduce that time period

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Social Security wage base

The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2014 increases to $117,000 from $113,700, which was the wage base for 2013. The $3,300 increase, which is about 2.9%, is due to an increase in average total with ages. Read more.

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers—one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).

For 2014, the FICA tax rate for employers is 7.65% each—6.2% for OASDI and 1.45% for HI. For 2014, an employee pays:

a. 6.2% Social Security tax on the first $117,000 of wages (maximum tax is $7,254.00 [6.2% of $117,000]), plus

b. 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus

c. 2.35% Medicare tax (regular 1.45% Medicare tax + 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return). (Code Sec. 3101(b)(2))

For 2014, the self-employment tax imposed on self-employed people is:

  • 12.4% OASDI on the first $117,000 of self-employment income, for a maximum tax of $14,508.00 (12.40% of $117,000); plus

  • 2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a separate return), (Code Sec. 1401(a), Code Sec. 1401(b)), plus

  • 3.8% (2.90% regular Medicare tax + 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return). (Code Sec. 1401(b)(2))

There is a maximum amount of compensation subject to the OASDI tax, but no maximum for HI.

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IRS has announced the 2014 cost-of-living adjustments (COLAs) for retirement plans

The following plan limits are increased effective Jan. 1, 2014:

  • Defined benefit plans. The limitation on the annual benefit under a defined benefit plan under Code Sec. 415(b)(1)(A) is increased from $205,000 to $210,000. For participants who separated from service before Jan. 1, 2014, the 100% of average high-three-years' compensation under Code Sec. 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2013, by 1.0155.

  • Defined contribution plans. The limit on the annual additions to a participant's defined contribution account under Code Sec. 415(c)(1)(A) is increased from $51,000 to $52,000.

  • Annual compensation limit. The maximum amount of annual compensation that can be taken into account for various qualified plan purposes, including Code Sec. 401(a)(17), Code Sec. 404(l), Code Sec. 408(k)(3)(C), and Code Sec. 408(k)(6)(D)(ii), is increased from $255,000 to $260,000.

  • Key employee in top-heavy plan. The dollar limit under Code Sec. 416(i)(1)(A)(i) relating to the definition of a key employee in a top-heavy plan is increased from $165,000 to $170,000.

  • ESOP five-year distribution period. The dollar amount under Code Sec. 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan (ESOP) subject to a five-year distribution period is increased from $1,035,000 to $1,050,000, while the dollar amount used to determine the lengthening of the five-year distribution period is increased from $205,000 to $210,000.

  • Government plans. The annual compensation limitation under Code Sec. 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, '93 allowed COLAs to the plan's compensation limit under Code Sec. 401(a)(17) to be taken into account, is increased from $380,000 to $385,000.

  • Control employee. The employee compensation amount used in the definition of "control employee" for purposes of the auto commuting rule of Reg. § 1.61-21(f)(5)(i) increases from $100,000 to $105,000. The compensation amount under Reg. § 1.61-21(f)(5)(iii) increases from $205,000 to $210,000.

The following plan limits are unchanged:

Elective deferrals. The Code Sec. 402(g)(1) limit on the exclusion for elective deferrals described in Code Sec. 402(g)(3) remains unchanged at $17,500. This limitation affects elective deferrals to Section 401(k) plans, Section 403(b) plans, and the Federal Government's Thrift Savings Plan.

Catch-up contributions. The dollar limit under Code Sec. 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Code Sec. 401(k)(11) (SIMPLE 401(k) plan) or Code Sec. 408(p) (SIMPLE IRA) for individuals aged 50 or over remains unchanged at $5,500. The dollar limit under Code Sec. 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Code Sec. 401(k)(11) or Code Sec. 408(p) for individuals aged 50 or over remains unchanged at $2,500.

Highly compensated employee. The dollar limit used in defining a highly compensated employee under Code Sec. 414(q)(1)(B) remains unchanged at $115,000.

Deferred compensation plans. The limit on deferrals under Code Sec. 457(e)(15), concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $17,500.

Simplified employee pensions (SEPs). The compensation limit under Code Sec. 408(k)(2)(C) (amount of compensation above which an employee who meets other requirements must be able to participate in the employer's SEP plan) remains unchanged at $550.

SIMPLE accounts. The maximum amount of compensation an employee may elect to defer under Code Sec. 408(p)(2)(E) for a SIMPLE plan remains unchanged at $12,000.

 

Nanny tax threshold

On Social Security Online, the Social Security Administration has announced that for 2009, cash remuneration paid by an employer for domestic service in the employer's private home isn't FICA wages if the amount paid during the year is less than $1,700 (increased from $1,600 for 2008).

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Retirement plan dollar limits

Elective deferrals. The limit on the exclusion for elective deferrals described in is increased from $15,500 to $16,500. Deferred compensation plans. The limit on deferrals under Sec 457, concerning deferred compensation plans of state and local governments and tax-exempt organizations, is increased from $15,500 to $16,500. SEPs. The compensation limit under (amount of compensation above which an employee who meets other requirements must be able to participate in the employer's SEP plan) is increased from $500 to $550. SIMPLE plans. The maximum amount of compensation an employee may elect to defer under for a SIMPLE plan is increased from $10,500 to $11,500. Catch-up contributions. The dollar limit under for catch-up contributions to an applicable employer plan (401K) for individuals aged 50 or over is increased from $5,000 to $5,500.

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