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Keeping Your Balance: 2Q interest rates for overpayment, underpayment of taxes

In Rev. Rul. 2015-05, the IRS released the overpayment and underpayment interest rates for taxes for the calendar quarter beginning April 1, 2015, and ending June 30, 2015. Below is a summary of those rates:

3 percent: All underpayments except large corporation underpayments where the rate will be 5 percent.

3 percent: All overpayments other than corporations.

2 percent: All corporate overpayments except those where the overpayment exceeds $10,000, in which case the rate will be 0.5 percent.

Epidemic of refund fraud and identity theft

A 2014 Government Accountability Office report found that identity theft was responsible for in excess of $5.2 billion from the IRS in 2013, an increase of $1.6 billion from the previous year. In a time where partisan politics rule, it seems that the applicable parties could get together and agree that this is a common problem, solutions could be attempted and everyone would benefit.

James W. Rahmlow

James W. Rahmlow

If even a percentage of the $5.2 billion losses could be spent by some of the nation’s IT and accounting firms to solve this problem, the country would be miles ahead. Or, perhaps a panel of practitioners could be convened to investigate this issue. I would certainly participate!

IRS has tax return preparer database

In recent Information Release IR-2015-41, the IRS tried again to advise taxpayers who are searching for a reputable preparer that its website (www.irs.gov) features a searchable database of federal tax return preparers that lists preparers’ names, addresses, qualifications and credentials. While not promising to weed out bad preparers, this database helps to identify preparers who have met minimum levels of competency.

There is also a section on the website alerting taxpayers of tips to use when selecting a tax professional. Make sure that your tax preparer signs your tax returns and includes his or her Preparer Tax identification Number. All paid preparers are required to have a valid PTIN.

Business return audit statistics

Recently released audit coverage statistics for business tax returns in fiscal 2014 indicated that while partnership audits were slightly up, the number of audits of large corporations and S corporations decreased.

Overall, for all types of businesses, the fiscal 2014 audit coverage rate was 0.57 percent, a decrease from 0.61 percent in fiscal 2013. The IRS has acknowledged an intent to audit more partnerships and this is reflected in the fact that while slight, the 2014 audit rate was 0.43 percent compared to 0.42 percent in fiscal 2013.

For corporations with assets in excess of $10 million, the audit rate decreased from 15.84 percent to 12.23 percent year over year. For small corporations (less than $10 million) the rate remained unchanged in 2014 over 2013 at 0.95 percent. Finally, S Corporation return audits decreased in fiscal 2014 (0.36 percent) from fiscal 2013 (0.42 percent).

IRS Commissioner John Koskinen acknowledged that the decline in audit coverage is due to the recent cuts in the IRS’ budget.  The IRS budget has fallen $1.2 billion in the last five years.

Applicable Federal Rates for April 2015

In Rev. Rul. 2015-7, the IRS issued its Applicable Federal Rates and adjusted AFR for April 2015. Below is a summary of those monthly rates.

Short                Mid                 Long

                                                                              Term                Term              Term

Applicable Federal                                                                        0.48%                         1.68%                                       2.44%

Adjusted AFR                                                                   0.40%                          1.37%                        2.44%

FBAR filers get Web page assistance

The Treasury’s Financial Crimes Enforcement network has just launched a Web page to assist individuals and institutions required to file a Report of Foreign Bank Account (FBAR). In general, the FBAR report is required for individuals and institutions who have reportable foreign financial accounts. Go to www.ficen.gov and click on filing information to get up to speed on the requirements.

2015 Vehicle Depreciation Limits

In Rev. Proc. 2015-19, the IRS released limitations on depreciation deductions (inflation adjusted) for business-use passenger automobiles and light trucks and vans placed in service in 2015.

For passenger automobiles, assuming 100 percent business use, the limits are $3,160 (first tax year), $5,100 (second tax year), $3,050 (third tax year), and $1,875 for each successive tax year.

For trucks and light vans, again assuming 100 percent business use, the limits are $3,460 (first tax year), $5,600 (second tax year), $3,350 (third tax year) and $1,975 for each succeeding tax year.

It should be noted that Sports Utility Vehicles and pickup trucks with a gross vehicle weight rating in excess of 6,000 pounds continue to be exempt from the luxury vehicle depreciation limits.

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

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