Archive for December, 2011

Wrangling Continues over the Payroll Tax Cut

Tuesday, December 27th, 2011

By AccountingWEB Staff

Time is running out before the payroll tax rate automatically increases in two weeks, and the dispute over how to fund it continues.

The tax measure at issue would maintain the payroll tax rate at 4.2 percent for the year 2012 instead of allowing it to revert to 6.2 percent January 1. It’s a tax cut worth about $1,000 to families earning $50,000 a year. The payroll tax bill also would renew benefits for the long-term unemployed and prevent a cut in Medicare benefits for seniors.

This morning (December 19), the Associated Press reported that “Boehner spoke after a chaotic weekend in which Senate leaders first failed to agree on a full-year bill, then coalesced around the two-month extension that passed overwhelmingly, only to spark a revolt among GOP conservatives in the House.”

Here’s a summary of what’s been happening:

While the GOP-led House passed a bill on December 14 extending the tax cut, the legislation relied on a pay freeze and increased pension contributions for civilian federal employees. In addition, it raised Medicare premiums for seniors, and it raised a fee that’s charged to banks with mortgages guaranteed by Fannie Mae and Freddie Mac. The bill didn’t have the votes to pass the Senate.

On Friday, December 16, Senate leaders reached an agreement to pass a two-month extension on the payroll tax cut, keeping the 4.2 percent rate through February. The agreement requires the administration to decide within 60 days if the controversial 1,700-mile Keystone XL pipeline is in the nation’s best interests. Some environmental groups oppose the project, but several unions support it.

Senate Republican Leader, Mitch McConnell, said Keystone XL would create about 20,000 jobs. Critics say the figure would be fewer than 3,500, including fewer than 1,000 that would be permanent.

House Speaker, John Boehner, said Friday that his chamber will not sign off on an extension of the payroll tax cut without including a provision to force a quick decision on the pipeline construction.

Obama would prefer to postpone the controversial matter, and he threatened to veto any bill that forces a decision. Because the project crosses international borders, it requires White House approval. The administration complained that House Republicans are injecting “ideological issues into what should be a simple debate about cutting taxes for the middle class.”

Original Article: http://www.accountingweb.com/topic/tax/wrangling-continues-over-payroll-tax-cut

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2012 Mileage Rates Released by IRS

Tuesday, December 13th, 2011

RS Announces 2012 Standard Mileage Rates, Most Rates Are the Same as in July

IR-2011-116, Dec. 9, 2011

WASHINGTON — The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 55.5 cents per mile for business miles driven
  • 23 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.

Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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