Updated standard mileage rates from the IRS

The IRS has increased the optional standard mileage rate to 55.5 cents per mile in light of recent gas price increases.  This new rate will apply for miles driven between July 1, 2011 and December 31, 2011.  The IRS rate table is below. 

The IRS announcement with the new rates can be found at IR-2011-69

Purpose Rates 1/1 through 6/30/11    Rates 7/1 through 12/31/11  Business 51 55.5 Medical/Moving     19 23.5 Charitable 14 14

Do you need an Estate Plan? Do you need a lawyer to help you with it?

Below great is video by Prof. Dwight Drake at Drake's Plain Talk Planning where he answers two fundamental questions: 

1.  Do I need an estate plan? 

2.  Do I have to use a lawyer to make my estate plan? 

Prof. Drake is a very talented educator and I recommend that you check out his other offerings for business planning and family and financial planning as well. 

Accountant forgot to list $3.4M of income on your return? You will probably still be liable for accuracy related penalties.

In the recent Woodsum  case, the Tax Court ruled that a managing director of a private equity firm could not claim the "my accountant forgot to include the $3.4M of income" defense to avoid accuracy related penalties under code § 6662(a) and § 6662(b)(2).  The Court reminded Mr. Woodsum that “Even if all data is furnished to the preparer, the taxpayer still has a duty to read the return and make sure all income items are included.”

Moral of the story: you need to read your own return before the IRS does it for you. 

Hat Tip: Tax Prof Blog    

275,000 charities lose their tax exemption.

According to IR-2011-63 (June 8, 2011), the IRS has announced that approximately 275,000 organizations have had their tax exemption administratively revoked.  Approximately 7,000 of those organizations are in Washington State.  A state by state searchable list of the revoked organizations can be found here.  Publication of an organization's name on the Auto-Revocation List serves as notice to donors that the organization is no longer eligible to receive tax-deductible contributions.  If a charity has its exemption automatically revoked, it will have to request a reinstatement from the IRS for which more information can be found here.

If your organization has lost its exemption and you would like assistance in the reinstatement process or have other questions, you may contact me office for a consultation.  

Accuracy-related penalty: Corporations can't rely on employee-tax professional, should be an independent third party.

According to a recent Tax Court opinion in Seven W. Enterprises, Inc. & Subsidiaries and Highland Supply Corporation & Subsidiaries, (2011) 136 TC No. 26, which can be found here, a Corporation could not rely on its employee-tax professional to avoid accuracy related penalties under (under IRC §§ 6662(a) and 6662(b)(2)). 

The Court held that while the Corporation engaged an independent consultant tax professional to prepare returns, the Corporation could reasonably rely on him to avoid accuracy related penalties.  However, when that Corporation later employed that same tax professional as Vice President, and he prepared tax returns, the Corporation no longer had reasonable cause to avoid the penalty.  The Court reasoned that while the tax professional was independent from supervision of the Corporation that it could reasonably rely on his advice.  The Corporation lost its reasonable cause once the tax professional was made an officer of the Corporation.