Money Matters: IRS updated analysis; admission of unequal scrutiny

James W. Rahmlow, The Daily Record Newswire

While the IRS is getting significant media attention, whether it wants it or not relative to the application process for organizations seeking tax-exempt status, it has felt it appropriate to publish its own questions and answers section on its website — www.irs.gov.

The Q&As deal with the application process for all organizations that apply for tax exempt status under Code Sec. 501(c)(3) as well as social welfare organizations that apply under Code Sec. 501(c)(4). The IRS didn’t completely accept blame for the problematic issues, but did acknowledge the much publicized delays and also the lengthy requests for information from certain conservative groups.

While the application process does allow the questioning of the amount of political campaign activity in which the organization participates, the IRS did acknowledge that “During certain periods (August 2010 to July 2011 and January 2012 to June 2012), specific names, terms and policies (such as ‘Tea Party’ and ‘Patriot’) were inappropriately used as criteria in determining which cases should be centralized.”

IRS announces Health Savings Account amounts for 2014

In Rev. Proc. 2013-25, the IRS announced the annual inflation adjustments for HSAs for calendar year 2014. The increases are modest, reflecting the low inflation world in which we live here in the USA.
Next year’s rate for deductible contributions under Code Sec. 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan (HDHP) is $3,300 or $6,550 for an individual with family coverage.

Under a qualifying HDHP, the annual out-of-pocket expenses (but not premiums) must not exceed $6,350 for self-only coverage or $12,700 for family coverage. Note for 2014, a qualifying HDHP is a health plan with an annual deductible that is not less than $1,250 for self-only and $2,500 for family coverage.

Applicable federal rates and adjusted AFRs for June 2013

As it does each month, the IRS issued its interest rate bulletin alerting taxpayers and their advisors of the minimum interest rates to be used that meet IRS approval. In Rev. Rul. 2013-12, the IRS issued its short-term, mid-term, and long-term interest rates for June 2013. Note that both the rates themselves and the adjusted applicable federal rates are identical.

Applicable Federal Rates (AFRs):

Short Term -- 0.18%

Mid-Term -- 0.95%

Long-Term -- 2.44%

Adjusted Applicable Federal Rates (AFRs):
Short-Term: 0.18%

Mid-Term -- 0.95%
Long-Term -- 2.44%

Cents-per-mile method for reporting auto fringe benefits is limiting

An employer who provides a vehicle for personal use to an employee must include the value of that personal use in said employee’s income and wages as a fringe benefit under Code Sec. 61. This seems like an easy computation, multiplying the personal miles by the approved mileage allowance rate for 2013 of 56.5 cents-per-mile and including the total in the employee’s income as wages.

For 2013, the maximum FMV for a vehicle to use the cents-per-mile valuation rule is $16,000 for a passenger vehicle and $17,000 for a truck or van, including passenger automobiles such as mini-vans and sport utility vehicles, which are built on a truck chassis. There are not a lot of new vehicles in 2013 that fall under this FMV value maximum.

As a consequence, employers who exceed the FMV maximums must use the annual lease value tables supplied by the IRS and available on their website.

Final regs issued on broker reporting of debt instruments and options

In the final phase of 2008 legislation designed to require brokers selling securities to report the customer’s basis in the securities and to classify any gain as long-term or short-term, the IRS has issued final, temporary and proposed regs which implement the reporting requirements for debt instruments and options and other securities.

The legislation was phased in. Basis for corporate stock was required to be reported in 2011 or later; stock in a mutual fund or a dividend reinvestment plan was required to be reported in 2012 or later; and debt, options and securities were required to be reported in 2013 or later. Responding to pressure, the IRS delayed the reporting requirements for debt, options and other securities until Jan. 1, 2014.

Under the regulations, less complex debt instruments, options and securities future contracts must implement the reporting requirements as stated above starting Jan. 1, 2014. There is yet another phase-in that allows brokers to delay until Jan. 1, 2016, the reporting of basis for certain complex instruments with a fixed yield and maturity date, and more complex debt without a fixed yield and maturity date.

Finally, the regulations generally exempt short-term debt from basis reporting.

Office closings do not delay IRS filing and payment deadlines

In announcing the closing of IRS offices resulting from mandatory across-the-board spending cuts (sequestration) in the next few months, the IRS has made it clear to taxpayers in information release IR-2013-51, that while offices will be closed on May 24, June 14, July 5, July 22 and Aug. 30, all filings and payments are due on the original due dates because these days are not considered federal holidays under the Internal Revenue Code.

While IRS toll-free hotlines, the Taxpayer Advocate Service and taxpayer assistance centers will be unavailable on the furlough days, neither tax-filing nor tax-payment deadlines are affected or extended by the closures. Additionally, the IRS indicated that two more furlough days may be announced before the end of fiscal 2013.

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James W. Rahmlow, a CPA, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com.