These Are 317 Projects That Will Keep The IRS Busy This Year (And 19 That May Immediately Affect You!)
(This post originally appeared on Inc.)
Think you’ve got a busy year ahead of you? I bet it can’t even compare to the Internal Revenue Service.
Just before the Labor Day Weekend, the Department of the Treasury released the IRS’ 2014-2015 Priority Guidance Plan and if you’re running a business I suggest that you read it, preferably after a shot or two of Jack Daniels. The document lists 317 projects that are the agency’s “priorities for allocation of resources” through June 2015.
A quick review of this document will teach you two important things: the IRS is really busy and thank God you’re not an accountant because this stuff is mega-boring. But the devil’s in the details and if you don’t pay attention it’ll cost you. Because even though most of these projects relate to specific industries (sorry, oil and gas people) and big companies (don’t worry…they’ll be fine) there are plenty of things happening this year at the IRS that will impact your company, your employees and you personally.
As a public service, I have waded through this document, mostly sober, and have highlighted these 19 items that you should discuss with your accountant…now.
ESOPS. Employee Stock Ownership Plans are an increasingly popular benefit and a tax-beneficial way to give your employees equity in your business. This year the IRS will be issuing new rules regarding the tax treatment of such plans.
Contributions to benefit plans. Get ready for new “guidance” (translation: it ain’t the law now, but it will be soon) on what qualifies as contributions to a trust, annuity or deferred payment plan for your employees.
Meals. A look at whether or not the free meals you’re providing at lunchtime are actually taxable to your employees. See? That’s the price you pay for being a nice person!
Cafeteria Plans. In the wake of the Affordable Care Act (ACA), new rules regarding contributions and withdrawals regarding cafeteria plans under Section 125, which are popular with many businesses of all size, will be issued.
Sick pay. If an employee misses work for an extended period of time due to illness, and receives benefits from either you or your insurance company, those benefits have to be reported on his or her W-2. Are you doing this correctly? I didn’t think so. But this year you’ll find out for sure.
Tips. Own a restaurant? Then it’s likely your employees are getting tips. And by now you know there are all sorts of rules about reporting this income. This year, the IRS plans on issuing more guidance on how to report to them the amount of tips your employees are receiving. My tip? Sell.
Travel. Say you require an employee to be away from home half the week and you rent him or her an apartment. Is this fully deductible? Which is really home? Isn’t it where the heart is? The IRS plans to get detailed on these rules but don’t expect any love.
Heavy trucks, tractors, trailers and tires. If you’re in the business of buying or selling these things, you’re already used to the additional taxes involved. This year, the IRS plans to take another look at the treatment of these sales.
Political activity. You’d think with all the heat the agency got over the recent “tea party” scandals that they’d stay far away from this issue. But give credit where credit is due–these people are not backing down. So if you’re thinking of forming a non-profit organization for political purposes under the now infamous Section 501 (c) get ready for further scrutiny.
Charitable contributions. If you make them, particularly in the form of capital or property, then there are new rules. If you receive them from donors, there are new rules to substantiate the amounts. If you do neither then you are heartless.
Dual use facilities. Run a non-profit? Also run a business? Is your business pretty much a non-profit like mine? Yeah, I feel your pain. But if your non-profit is sharing space or assets with a for-profit entity then get ready for more scrutiny. The IRS will be taking a closer look at how your expenses are allocated between the two activities.
REITs. Real Estate Investment Trusts are an increasingly popular way to save taxes for those companies that own real estate and are willing to spin it off into a separate entity. This year, the IRS will be looking closer at how the income generated by these entities impacts their qualification as a REIT. In other words, if your company has or is considering a REIT you should pay close attention.
Health care tax credits. Under the Affordable Care Act, many people are eligible for tax credits if their income is below a certain level. This year, the IRS will be issuing more regulations about such eligibility.
Dependents. Child? Domestic partner? Qualifying relative? Puppy? The IRS plans to issue new regulations regarding who is considered to be a dependent for purposes of filing your tax returns.
Inventory. If some of your inventory related to research and development activities then it may not be inventory.
Medical expenses. You’re allowed to deduct medical expenses on your personal return as long as they exceed 10% of your adjusted gross income. But are all the expenses you’re claiming truly eligible? Look for more rules this year.
Vacation homes. Want to use your home or vacation home for business and deduct some of the related costs. My advice: be careful. You’ll know for certain what’s allowed once the IRS issues their final regulations on this matter.
Retail inventory and gift cards. Run a retail operation? Do you properly capitalize all costs in your inventory? Are you calculating overhead correctly? Are you doing this consistently? This year the IRS will have more rules to help you better understand and calculate your inventory costs for tax purposes. And do you offer gift cards or loyalty stamps that can be redeemed in the future to your customers? How do you treat those advanced payments? Yeah, this may be an issue too.
Payments for contingent sales, long term and multi-year contracts. Are you declaring these payments as income or waiting until you perform the service or deliver the goods? The IRS will be issuing new regulations this year and they may impact what you’re doing.
Of course, these are just the bare-bones highlights. There are many more and a great amount of detail that I haven’t covered here mainly because I don’t want to put you to sleep. And I ran out of Jack Daniels.
All joking aside, is there anything you can do right now? Yes. You can read the document, identify which issues affect your business, and discuss with your accountant. Then you keep a close eye on the IRS’ progress over the next twelve months. Taxes are an enormous expense in your business. Making mistakes not only will cost accounting fees, penalties and interest but also an enormous amount of wasted time. Smart business owners are always looking ahead and planning to minimize surprises. When it comes to your tax bill, now you now know what’s coming. So be smart.