eBulletin

eBulletin is a complimentary service to our clients and friends to provide individual and business tax information throughout the year via short emails. If you would like to receive our eBulletin, simply email Michelle Noonan at michellen@bb-cpa.com and insert "eBulletin" in the subject line. You will be added to the list. We do not share our lists.

eBulletin 2005-15

December 5, 2005

Automobile Standard Mileage Rates

The IRS has announced the standard mileage rates for use in the year 2006 to compute the deductible costs of operating an automobile. The rates are effective January 1, 2006. They are as follows:
 
Business use – 44.5¢ per mile (down from 48.5¢ in the last four months of 2005)
 
Charitable driving – 14¢ per mile (unchanged from 2005; but see below)
 
Driving for medical reasons – 18¢ per mile (down from 22¢ in the last four months of 2005)
 
Moving expenses – 18¢ per mile (down from 22¢ in the last four months of 2005)
  
The IRS said that the lower rates reflect the reduction in gas prices since the previous rate adjustment last September.
 
Employers can reimburse their employee’s business use of their personal cars by the same 44.5¢ per mile in 2006 without the reimbursement being taxable to the employee, if the employer has an “accountable plan”. An accountable plan generally must require the employee to substantiate the business use and, if advance payments are made to the employee, must require any unsubstantiated advances to be repaid within a reasonable period of time.

The standard mileage rate can be used to compute deductible automobile expenses in lieu of computing your actual costs. There are some limitations to the use of the standard mileage rate.

Katrina Relief - Under the Katrina Emergency Tax Relief Act of 2005, the standard mileage rate for charitable driving related to Katrina relief is 70% of the business standard mileage rate. Thus, the rate for such charitable driving will be 32¢ per mile, effective January 1, 2006 (down from 34¢). Charitable driving for non-Katrina purposes is limited to the 14¢ per mile shown above. Note also that, in 2006, charities may reimburse any individual driving on their behalf by the 44.5¢ business rate without having to report the reimbursement to the IRS if the driving is related to Katrina relief.  

Update: In eBulletin 2005-14 we mentioned that the New Orleans office of the Louisiana Department of Revenue had not reopened. The office is scheduled to reopen today on a limited service basis.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

Please forward our eBulletin to a friend who you think would find the information helpful. Anyone can register to receive eBulletin by clicking our website link: www.bb-cpa.com

eBulletin 2005-14

December 2, 2005

Sales Tax Holiday
(Including Why Businesses Need To Act Now)

The Louisiana legislature recently enacted a sales tax holiday. Under the new law, qualifying purchases made on December 16th through December 18th will not be subject to the 4% state sales tax. Businesses can participate, but only if they apply for, and receive, a sales and use tax exemption prior to the above dates.

Sales Tax Holiday - The state sales tax will not apply to the first $2,500 of the sales price of any consumer purchases of tangible personal property made on December 16, 17, and 18, 2005. Consumer purchases do not include vehicles subject to license and title fees or meals furnished for consumption on the premises, including to-go orders.

The provision applies if, on one of the above days, the purchaser (i) takes title to or possession of the property, (ii) puts the purchase into layaway or makes a final payment and takes it out, or (iii) orders and pays for the purchase and arranges for immediate shipment (although the actual shipment date may be after December 18). Special rules apply to rain checks and returned merchandise.

Businesses - The sales tax holiday also applies to purchases made by businesses, but only if the businesses are located in the core Hurricanes Katrina or Rita disaster areas (individual assistance areas) and only to purchases of tangible personal property that will replace property damaged, destroyed or lost as a result of conditions created by the hurricanes (replacement of property lost to looting, for example, would qualify).

To participate in the sales tax holiday, businesses must apply for and receive a certificate of exemption prior to the holiday dates. To apply for the exemption for your business, you should complete Form R-1017 (available on the Department of Revenue's website) and submit it to the Department of Revenue for approval. The Department will sign the form and return it to you. The form can be mailed to Louisiana Department of Revenue, Attn: Taxpayers Services Department, P.O. Box 66362, Baton Rouge, La. 70896-6362. However, since you must have a signed certificate in hand before making your purchases, we strongly encourage you to hand-carry the form to one of the Department of Revenue offices. The offices in Covington, Thibodaux and Baton Rouge are open; the New Orleans office is not .

More Information - For more information about the sales tax holiday, including how your business may qualify for the state's cash register reprogramming credit, see Revenue Information Bulletin No. 05-032. You can find this document at: http://www.revenue.louisiana.gov/forms/lawspolicies/RIB05032.pdf . Addresses for Department of Revenue offices can be found at: http://www.rev.state.la.us/sections/aboutus/offices.asp.

BB recommends: Businesses need to act now so that they have the required certification by December 16th. If you need a copy of Form R-1017 or Revenue Information Bulletin No. 05-032, call or e-mail Ted Stacey in our New Orleans office.

eBulletin 2005-13

November 16, 2005

Disaster Relief Payments

From Government Agencies and Employers - We have received a number of questions concerning payments to individuals from government agencies and from employers for disaster relief. Such "qualified disaster relief payments" made to an individual may, in fact, be tax-free.

These rules apply to qualifying payments made in both the Hurricane Katrina and Hurricane Rita disaster areas.

Payments from government agencies and employers are not taxable if they are made to or on behalf of an individual

  • to reimburse or pay reasonable and necessary personal, family, living or funeral expenses incurred as a result of the disaster;
  • to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that such needs are attributable to a qualified disaster; and
  • by a federal, state or local government, agency or instrumentality to promote the general welfare, when the applicable federal, state or local authority, as determined by the Secretary of the Treasury, determines that disaster relief is warranted.

Payments are not excludible if the expenses covered by the payments have otherwise been covered by insurance or otherwise.

Payments that employees receive under an employer's program to pay or reimburse these expenses are excludable from income as disaster relief payments. However, payments that are measured by the recipient's rent or mortgage are not designed to reimburse disaster expenses and so are not excluded from income.

Excludable payments are not subject to payroll taxes or self employment tax. Apparently, employers do not have to require individuals to provide proof of actual expenses to receive such a payment. However, the employer's reimbursement program should contain requirements (described in the program documents) to ensure that the grant amounts are reasonably expected to be commensurate with the amount of unreimbursed reasonable and necessary medical, temporary housing, and transportation expenses its employees incur as a result of the disaster.

The recipient cannot double dip, e.g., he or she cannot separately deduct any expense that has been reimbursed under this provision.

From Insurance Companies - Reimbursements for Temporary Living Expenses - Insurance payments for temporary living expenses are excludible from income only to the extent the temporary living expenses exceed your normal living expenses. For example, if you paid $800 eating at restaurants while evacuated and would have only paid $250 for food if you were cooking at home, the excludible extra living expense would be $550. Similarly, if you paid $1,250 for a motel room, but didn¹t have to pay the $650 rent on your residence, the excludible extra expense would be $600.

You must consider all living expenses. In one example in the regulations, the taxpayer paid $1,000 for motel expenses, but his utility bill at home decreased by $175 because he wasn¹t there. Thus, the extra living expense is $825.

You do not count mortgage payments as a living expense, since it is a fixed expense.

We Are Back! We have moved our New Orleans office back to Heritage Plaza. Repair work to minor hurricane damage is still ongoing, but we are back to help our clients and friends with their accounting, tax and business needs.

eBulletin 2005-11 & 12

October 14, 2005

New Social Security Numbers Announced
The Social Security Administration announced that benefits paid to recipients will rise 4.1% in 2006. In addition, the maximum amount of wages subject to Social Security withholding (and earned income subject to self-employment tax) will increase. The relevant amounts are as follows:

Maximum earnings subject to Social Security withholding:

Social Security taxes must be withheld from wages until the wages reach the following amounts:
2005 - $90,000
2006 - $94,200

There is no earnings limit for Medicare withholding. The same limits apply to earned income subject to the self employment tax. The tax rate of 7.65% (15.30% for self-employed taxpayers) will not change.

Maximum amount of earned income you can receive without losing Social Security Benefits:

Individuals who have not reached full retirement age (defined below) can lose Social Security benefits if their earned income exceeds a defined amount. For individuals under the age of 65 during the entire year, the maximum amounts they can earn without losing benefits are as follows:

2005 - $12,000 per year ($1,000 per month)
2006 - $12,480 per year ($1,040 per month)

A special test applies to taxpayers who reach full retirement age during the year. For these individuals, the maximum amounts they can earn before reaching full retirement age are as follows:

2005 - $31,800 per year ($2,650 per month)
2006 - $33,240 per year ($2,770 per month)

Full retirement age is 65 years, 6 months for those born in 1940 and is 65 years, 8 months for those born in 1941.

Individuals who have reached full retirement age may earn any amount of income without losing benefits.

Average benefits:

The Social Security Administration estimates that average monthly Social Security benefits are as follows:

All retired workers: Before 4.1% increase - $963 After 4.1% increase - $1,002

Aged couple, both receiving benefits: Before 4.1% increase - $1,583
After 4.1% increase - $1,648

For more information, you can go to the Social Security Administration website at www.ssa.gov.

A Special Note to Our New Orleans Clients and Friends – We have temporarily relocated our New Orleans office to Houma. The Houma office address is 1340 West Tunnel Blvd., Suite 430, Houma, La. 70360. The phone number is 985.868.0139 and the fax number is 985.879.1949. Calls and faxes to the Heritage Plaza office will automatically forward to Houma. Our building suffered minimal damage and our electronic and paper files are undamaged. We look forward to being back in Heritage Plaza as soon as the building is available for occupancy. In the meantime, you can continue to reach us via e-mail and at the above numbers. Also, check our web page www.bb-cpa.com for current updates and other relevant information

eBulletin 2005-12

October 17, 2005

Special Credit for Employers
The Katrina Emergency Tax Relief Act of 2005 includes a special credit for eligible small employers located in the core Katrina disaster area who were displaced by the storm.

Eligible small employers can claim a Federal tax credit of 40% of the first $6,000 in wages paid to each employee after August 28, 2005 and before January 1, 2006.

An eligible employer is one who conducted an active trade or business on August 28, 2005 in the core Katrina disaster area and whose trade or business was inoperable on any day after August 28, 2005 and before January 1, 2006 as a result of Hurricane Katrina. A "small" employer is defined as one with an average of 200 or fewer employees on all business days during the year.

Qualified wages are wages paid or incurred by an eligible employer with respect to an eligible employee on any day after August 28, 2005, and before January 1, 2006, during the period (1) beginning on the date on which the trade or business first became inoperable at the principal place of employment of the employee immediately before Hurricane Katrina, and (2) ending on the date on which such trade or business has resumed significant operations at such principal place of employment. Qualified wages include wages paid without regard to whether the employee performs no services, performs services at a different place of employment than the principal place of employment, or performs services at such principal place of employment before significant operations have resumed.

BB Recommends: Thus, a qualifying small employer should keep accurate records of the salaries paid or accrued from August 29, 2005 through the earlier of December 31, 2005 or the date the business is able to resume its activities at its principal place of employment.

A Special Note to Our New Orleans Clients and Friends – We have temporarily relocated our New Orleans office to Houma. The Houma office address is 1340 West Tunnel Blvd., Suite 430, Houma, La. 70360. The phone number is 985.868.0139 and the fax number is 985.879.1949. Calls and faxes to the Heritage Plaza office will automatically forward to Houma. Our building suffered minimal damage and our electronic and paper files are undamaged. We look forward to being back in Heritage Plaza as soon as the building is available for occupancy. In the meantime, you can continue to reach us via e-mail and at the above numbers. Also, check our web page www.bb-cpa.com for current updates and other relevant information.

For more information - Call Ted Stacey in our New Orleans office at (504) 831-4949 or contact your Bourgeois Bennett professional.

Please forward our eBulletin to a friend who you think would find the information helpful. Anyone can register to receive eBulletin by clicking our website link: www.bb-cpa.com

Disclaimer: This eBulletin contains general information and cannot substitute for individual consultation. You should obtain professional advice before making financial, business or tax decisions. 

Ted Stacey

Director of Tax Services
Bourgeois Bennett, LLC
(504) 831-4949
teds@bb-cpa.com

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