The Internal Revenue Service today simplified the paperwork and recordkeeping requirements for small businesses by raising the safe harbor threshold from $500 to $2,500 for deducting certain capital items.

The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community”, said IRS Commissioner John Koskinen. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.”

Responding to a February comment request, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smart phones, and machinery and equipment parts typically surpass the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.

The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000. Further details on this change can be found in Notice 2015-82, posted today on IRS.gov.

For any questions about your specific tax situation, call one of our tax planning experts at 919-787-7711 or contact us online to schedule a consultation.

The IRS continues to warn consumers to guard against scam phone calls from thieves intent on stealing their money or their identity. Criminals pose as the IRS to trick victims out of their money or personal information. Here are several tips to help you avoid being a victim of these scams:

• Scammers make unsolicited calls.  Thieves call taxpayers claiming to be IRS officials. They demand that the victim pay a bogus tax bill. They con the victim into sending cash, usually through a prepaid debit card or wire transfer. They may also leave “urgent” callback requests through phone “robo-calls,” or via phishing email.
• Callers try to scare their victims.  Many phone scams use threats to intimidate and bully a victim into paying. They may even threaten to arrest, deport or revoke the license of their victim if they don’t get the money.
• Scams use caller ID spoofing.  Scammers often alter caller ID to make it look like the IRS or another agency is calling. The callers use IRS titles and fake badge numbers to appear legitimate. They may use the victim’s name, address and other personal information to make the call sound official.
• Cons try new tricks all the time.  Some schemes provide an actual IRS address where they tell the victim to mail a receipt for the payment they make. Others use emails that contain a fake IRS document with a phone number or an email address for a reply. These scams often use official IRS letterhead in emails or regular mail that they send to their victims. They try these ploys to make the ruse look official.
• Scams cost victims over $23 million.  The Treasury Inspector General for Tax Administration, or TIGTA, has received reports of about 736,000 scam contacts since October 2013. Nearly 4,550 victims have collectively paid over $23 million as a result of the scam.

The IRS will not:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand that you pay taxes and not allow you to question or appeal the amount you owe.
• Require that you pay your taxes a certain way. For instance, require that you pay with a prepaid debit card.
• Ask for your credit or debit card numbers over the phone.
• Threaten to bring in police or other agencies to arrest you for not paying.

If you don’t owe taxes, or have no reason to think that you do:

• Do not give out any information. Hang up immediately.
• Contact TIGTA to report the call. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
• Report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.

If you know you owe, or think you may owe tax:

• Call the IRS at 800-829-1040. IRS workers can help you.

Phone scams first tried to sting older people, new immigrants to the U.S. and those who speak English as a second language. Now the crooks try to swindle just about anyone. And they’ve ripped-off people in every state in the nation.

Stay alert to scams that use the IRS as a lure. Tax scams can happen any time of year, not just at tax time. For more, visit “Tax Scams and Consumer Alerts” on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

If you need to get in touch with one of our tax experts to discuss your specific situation, call us today at 919-787-7711 or fill out our online contact form.

Victims of the severe storms and flooding that took place beginning on October 1, 2015 in parts of South Carolina may qualify for tax relief from the Internal Revenue Service. Following the recent disaster declaration for individual assistance issued by the Federal Emergency Management Agency, the IRS announced today that affected taxpayers in South Carolina will receive tax relief. The President has declared Berkeley, Calhoun, Charleston, Clarendon, Darlington, Dorchester, Florence, Georgetown, Horry, Kershaw, Lee, Lexington, Orangeburg, Richland, Sumter and Williamsburg counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Oct. 1, and on or before February 16, 2016 have been postponed to February 16, 2016. This includes the Oct. 15 deadline for those who received an extension to file their 2014 return. In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Oct. 1, as long as the deposits were made by Oct. 16, 2015.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period. The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A- 1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area that was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Feb. 16, 2016 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Oct. 1 and on or before Feb. 16, 2016. The IRS also gives affected taxpayers until Feb. 16, 2016 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Oct. 1 and on or before Feb. 16, 2016. This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above. The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Oct. 1, and on or before Oct. 16 provided the taxpayer made these deposits by Oct. 16, 2015.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors. Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions. Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “South Carolina, Severe Storms and Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation “Severe Storms and Flooding in South Carolina” in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS. Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case. Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-829-3676. The IRS toll-free number for general tax questions is 800-829-1040.

Call Our Tax Planning Experts

If you have been affected by the historical flooding and storms in South Carolina and have tax questions, call one of our tax planning experts today at 919-787-7711 to get a review of your specific situation.