Axley & Rode, LLP

The IRS recently announced that it’ll increase the standard mileage rate for qualified business driving for the second half of 2022. The adjustment reflects the soaring cost of gasoline this year. In fact, as of June 13, the nationwide average price of regular unleaded gas was $5.01 a gallon, according to the AAA Gas Prices website. This is compared with $3.08 a gallon a year ago. Beginning July 1, 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the 58.5 cents-per-mile rate effective for the first six months of the year. The IRS also announced an increased standard mileage rate for medical driving and moving for members of the military. “The IRS is adjusting the standard mileage rates to better reflect the recent increase in fuel prices,” said IRS Commissioner Charles Rettig. “We are aware a number of unusual factors have come into play involving fuel costs, and we are taking this special step t...

Some people who begin claiming Social Security benefits are surprised to find out they’re taxed by the federal government on the amounts they receive. If you’re wondering whether you’ll be taxed on your Social Security benefits, the answer is: It depends. The taxation of Social Security benefits depends on your other income. If your income is high enough, between 50% and 85% of your benefits could be taxed. (This doesn’t mean you pay 85% of your benefits back to the federal government in taxes. It merely means that you’d include 85% of them in your income subject to your regular tax rates.) Figuring your income To determine how much of your benefits are taxed, first determine your other income, including certain items otherwise excluded for tax purposes (for example, tax-exempt interest). Add to that the income of your spouse if you file a joint tax return. To this, add half of the Social Security benefits you and your spouse received during the year. The ...

Under a leave-sharing program, employees can elect to forgo vacation, sick or personal leave in exchange for cash payments made by their employers to qualifying charitable organizations. These arrangements have been around for a while, but they’ve gotten more attention in recent years as some employers have launched leave-sharing programs to aid those adversely affected by the COVID-19 pandemic and other disasters. Recently, in Notice 2022-28, the IRS announced special tax relief for leave-based donation programs set up to aid victims of the “further Russian invasion of Ukraine,” which began on February 24, 2022. Here are some pertinent details. Tax issues addressed Ordinarily, leave-based charitable donations must be included in a donating employee’s income. In addition, the opportunity to elect such contributions usually raises the concern that eligible employees might be taxed o...

Under some circumstances, an employer that sponsors a 401(k) might wish to amend its plan to exclude part-time employees and offer the benefit only to full-time staff members. Is such an approach allowed under the rules for qualified plans? Coverage and service rules Employers have considerable freedom to decide which categories of employees can participate in their 401(k) plans. However, this freedom isn’t unlimited. For example, eligibility restrictions must avoid violating the minimum coverage rules. And service-based exclusions cannot violate the minimum service rules. Under those rules, employees generally can’t be required to have more than 1,000 hours of service in a designated 12-month period before being eligible to participate in a 401(k) plan. In addition, long-term part-time employees can’t be required to have more than three consecutive 12-month pe...

The downturn in the stock market may have caused the value of your retirement account to decrease. But if you have a traditional IRA, this decline may provide a valuable opportunity: It may allow you to convert your traditional IRA to a Roth IRA at a lower tax cost. Traditional vs. Roth Here’s what makes a traditional IRA different from a Roth IRA: Traditional IRA. Contributions to a traditional IRA may be deductible, depending on your modified adjusted gross income (MAGI) and whether you (or your spouse) participate in a qualified retirement plan, such as a 401(k). Funds in the account can grow tax deferred. On the downside, you generally must pay income tax on withdrawals. In addition, you’ll face a penalty if you withdraw funds before age 59½ — unless you qualify for a handful of exceptions — and you’ll face an even larger penalty if you don’t take ...

Are you a partner in a business? You may have come across a situation that’s puzzling. In a given year, you may be taxed on more partnership income than was distributed to you from the partnership in which you’re a partner. Why does this happen? It’s due to the way partnerships and partners are taxed. Unlike C corporations, partnerships aren’t subject to income tax. Instead, each partner is taxed on the partnership’s earnings — whether or not they’re distributed. Similarly, if a partnership has a loss, the loss is passed through to the partners. (However, various rules may prevent a partner from currently using his or her share of a partnership’s loss to offset other income.) Pass through your share While a partnership isn’t subject to income tax, it’s treated as a separate entity for purposes of determining its income, gains, losses, deductions and credits. This makes it possible to pass t...

Businesses should be aware that they may be responsible for issuing more information reporting forms for 2022 because more workers may fall into the required range of income to be reported. Beginning this year, the threshold has dropped significantly for the filing of Form 1099-K, “Payment Card and Third-Party Network Transactions.” Businesses and workers in certain industries may receive more of these forms and some people may even get them based on personal transactions. Background of the change Banks and online payment networks — payment settlement entities (PSEs) or third-party settlement organizations (TPSOs) — must report payments in a trade or business to the IRS and recipients. This is done on Form 1099-K. These entities include Venmo and CashApp, as well as gig economy facilitators such as Uber and TaskRabbit. A 2021 law dropped the minimum threshold for PSEs to file Form 1099-K for a taxpayer fr...

Many people own Series E and Series EE bonds that were bought many years ago. They may rarely look at them or think about them except on occasional trips to a file cabinet or safe deposit box. One of the main reasons for buying U.S. savings bonds (such as Series EE bonds) is the fact that interest can build up without the need to currently report or pay tax on it. The accrued interest is added to the redemption value of the bond and is paid when the bond is eventually cashed in. Unfortunately, the law doesn’t allow for this tax-free buildup to continue indefinitely. The difference between the bond’s purchase price and its redemption value is taxable interest. Series EE bonds, which have a maturity period of 30 years, were first offered in January 1980. They replaced the earlier Series E bonds. Currently, Series EE bonds are only issued electronically. They’re issued at face value, and the face value plus accrued interest is pa...

Employers that sponsor a health care plan know they must comply with various provisions of the Health Insurance Portability and Accountability Act (HIPAA). One of these is that you must notify all persons from whom you collect medical information — whether directly or indirectly (such as when filling a prescription) — of their rights to privacy. This notification is generally carried out by distributing a “Notice of Privacy Practices,” which is sometimes also referred to as a “Notice of Information Practices.” A couple common questions that arise regarding a HIPAA Notice of Privacy Practices are: 1) How often should it be updated? 2) When should an updated notice be distributed to plan participants? Material changes The good news is you don’t need to update a notice according to an annual deadline. However, the most current notice must accurately describe: Your plan’s ...

Are you a charitably minded individual who is also taking distributions from a traditional IRA? You may want to consider the tax advantages of making a cash donation to an IRS-approved charity out of your IRA. When distributions are taken directly out of traditional IRAs, federal income tax of up to 37% in 2022 will have to be paid. State income taxes may also be owed. Qualified charitable distributions One popular way to transfer IRA assets to charity is via a tax provision that allows IRA owners who are age 70½ or older to direct up to $100,000 per year of their IRA distributions to charity. These distributions are known as qualified charitable distributions (QCDs). The money given to charity counts toward your required minimum distributions (RMDs) but doesn’t increase your adjusted gross income (AGI) or generate a tax bill. Keeping the donation out of your AGI may be important...

The next quarterly estimated tax payment deadline is June 15 for individuals and businesses so it’s a good time to review the rules for computing corporate federal estimated payments. You want your business to pay the minimum amount of estimated taxes without triggering the penalty for underpayment of estimated tax. Four methods The required installment of estimated tax that a corporation must pay to avoid a penalty is the lowest amount determined under each of the following four methods: Under the current year method, a corporation can avoid the estimated tax underpayment penalty by paying 25% of the tax shown on the current tax year’s return (or, if no return is filed, 25% of the tax for the current year) by each of four installment due dates. The due dates are generally April 15, June 15, September 15 and January 15 of the following year....

For employers of all types, the notion of a single leader dictating orders from on high has increasingly fallen out of favor. As concepts such as diversity, equity and inclusivity have flourished, management-level employees now generally expect to get a say in how work is done and even the organization’s strategic direction. With this in mind, more and more employers are turning to a collaborative management model to set strategic priorities, adjust work practices, improve HR policies and look for growth opportunities. Form a leadership team Successful collaboration starts with a new mindset. Whether you’re a business owner, nonprofit exec or agency head, the first step is to stop thinking of managers as employees and instead regard them as members of a leadership team working toward fulfilling your organization’s mission. To promote collaboration and make the best use of your human resources, clearly commu...

The IRS is reminding all businesses, including self-employed and gig workers, to make estimated tax payments quarterly. Individuals and businesses are required to pay taxes as income is earned or received throughout the year, either through withholding or estimated tax payments. That’s why those who are self-employed or in the gig economy usually need to make estimated tax payments. Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. If taxpayers don’t pay enough tax through withholding and estimated tax payments, they may be charged a penalty. Contact your Axley & Rode advisor for additional information or visit the  IRS webpage.