DO YOU OWE THE IRS MONEY?

Thanks to Georgia, of Georgias Gourmet Delights.

DO YOU OWE THE IRS MONEY?

Starting in January, the IRS will use ‘pain-in-the butt’
Collection Agencies to hound you for the money you
owe. These Collection Agencies will get a percentage
of the money they collect, so don’t expect them to be
kind and gentle with you. Details coming soon from
“Tax Tips You Can Bank On.”

HAVE YOU BEEN A “NON-FILER?”

Nothing personal, but the IRS doesn’t like you very
much. In fact, they think you have been costing the
U.S. Treasury about $250 Billion a year. So they’re
out to get you.

Suggestion: come clean with them before they come
clean you out. But don’t go do it on your own. Get help
from a good tax attorney, or get advice from my friend
and top IRS guru Dan Pilla. (The Associated Press said he
knows more about the Tax Code than the IRS Commissioner
himself.) Dan’s web site is www.TaxHelpOnline.com.
His number is 1-800-553-6458.

ARE YOU A ‘CHAPTER-S’ CORP
OR A ‘PARTNERSHIP?’

These pesky folks in the IRS want you to tell them what
the tax deduction ‘norms’ are for your kind of business.

So, they’ve decided to audit about 5,000 of you to get the
statistics they’ll later use to skewer you. These audits focus
on both “S-Corps” and Partnership entities. They’ll also be
looking closely into whether or not you reported all of your
income.

Recommendation: If you have unreported or under-
reported income from any of the past three years, quickly
file a Form 1040X, Amended Tax Return. (But first, see
Suggestion made to Non-filers, above.)

GOOD NEWS FOR BUSINESS TRAVELERS!

This announcement is HUGE if you frequently travel away
from home overnight on business.

Revenue Procedure 2005-67, just released, has some
very good news in it for any self-employed person who
travels away from home overnight for business.

Deductible business expenses while on business trips,
fall into two categories: (1) Lodging and (2) Meals and
Incidental Expenses (M&IE).

Lodging deductions won’t be changing. It’s normally
100% deductible, BUT receipts ARE required, even if
you stay at the Bates Motel. If you stay with friends,
you get no deduction – unless they charge you
(so are they REALLY your friends?) and they provide
you with a receipt.

Meals and Incidental Expenses (M&IE) … well that’s
a different story!

First, let’s look at MEALS (which includes both food
and beverages). For the past 30 years, meals consumed
while away on business travel, has been deductible at
only 50%.

That just changed.

In fact, the change is RETROACTIVE!

This good news applies to ALL of 2005!

The tax deduction for meals you have consumed
this year, and will be consuming during the rest
of 2005 while traveling on business, has been
increased from 50% to 70%.

Interpretation: This new Revenue Procedure will
add an additional $200 in deductions for every $1,000
you spent eating while on business travel this year.

And the good news continues…

As of Jan. 1, 2006 the deductible percentage increases
to 75%, and on Jan. 1, 2007 it will jump to 80%!

[Reference: IRS Code, Section 274(n)(3), changed
by the Commissioner under authority granted in
Code Section 1.274-5(j)(1)]

Next, let’s look at INCIDENTAL EXPENSES
(which includes such thing as maps, tips, business-
related publications, local phone calls, etc.).

“Reasonable and necessary” Incidentals normally
are deductible at 100%, but you have to document
every individual expense.

Now, let’s look at Meals &Incidentals TOGETHER.

If you’ve ever served in the military or have been a
Civil Service employee, you’ll be familiar with the
term “Per Diem” (which is Latin for “Each Day”).

Rev. Proc. 2005-67 now gives you the option (it’s
not mandatory) of claim a flat amount per day, instead
of keeping track of each meal and incidental expense.

[Reference: Changed by the IRS Commissioner under
authority of Section 1.274-5(j)(3)]

Per Diem rates are set by the GSA (General Services
Administration), and the allowed dollar amount varies
by locality.

There are five different M&IE rates, ranging from
$39 to $54 per day, depending on the location of your
business travel. You can find the current rates (which
became effective on October 1, 2005) by going to
www.gsa.gov, then click on “Per Diem Rates” in the
upper left corner of the screen.

Sometimes a travel day may be a portion of a day,
rather than a full day. If your business travel includes
portions of days, those 5 daily rates are further broken
down specific amounts for breakfast, lunch, dinner,
and incidentals.

For example, a $49 M&IE rate breaks down to
$9 for breakfast, $13 for lunch, $24 for dinner, and
$3 for incidentals. So you see, if you are someone who
likes to eat “on-the-cheap” or are staying in a hotel with a
kitchenette, you might come out better by claiming the
Per Diem rate instead of actual costs for meals and
incidental expenses.

To view breakdowns of the 5 basic rates, scroll to the
bottom of the “Domestic Per Diem Rates” page, and
click on “06 M&IE Breakdown.”

Note: You will see that the government establishes
Per Diem rates for lodging also. These are “special use”
rates, and do NOT APPLY to travel by self-employed
individuals.

TO SUMMARIZE:

1. For 2005, you can claim 70% (instead of 50%) of
the cost of meals purchased while away from home
overnight on business travel.

2. That percentage will rise to 75% as of the first of
the year, and rise to 80% in 2007.

3. If you don’t want to keep records of meal costs and
incidental expenses while on business trips, you can
claim the Per Diem rate instead.

There THOSE are some “Tax Tips You Can Bank On!”

Save a Bundle!
Ron Mueller, Author of
“It’s How Much You KEEP, That Counts!
Not how much you Make,” available at
www.HomeBusinessTaxSavings.com


PS – If you feel these Tax Tips are worthwhile, feel free
to forward them to anyone you know who might benefit
from them.