Tax

Safe harbor methods are used by individual taxpayers when determining the amount of their casualty and theft losses for their homes and personal belongings. Four of the safe harbor methods may be used for any qualifying casualty or theft loss, and three are specifically applicable only to losses occurring as a result of a Federally declared disaster.

For instance, one of the safe harbor methods allows a homeowner to determine the amount of loss, up to $20,000, by obtaining a contractor estimate of repair costs. Another safe harbor method allows a homeowner to determine the amount of loss resulting from a Federally declared disaster using the repair costs on a signed contract prepared by a licensed contractor. The guidance also provides a handy table for determining the value of personal belongings damaged, destroyed or stolen as a result of a Federally declared disaster.

Under the safe harbor method individuals may use one or more cost indices to determine the amount of loss to their homes as a result of Hurricane and Tropical Storm Harvey, Hurricane Irma and Hurricane Maria (2017 Hurricanes). The cost indices provide tables with cost per square foot for Texas, Louisiana, Florida, Georgia, South Carolina, Puerto Rico and the U.S. Virgin Islands (2017 Disaster Area).

These safe harbor methods are effective on Dec. 13, 2017, for losses that are attributable to the 2017 Hurricanes and that arose in the 2017 Disaster Area after August 22, 2017. IRS Publication 547, Casualties, Disasters, and Thefts provides more information on casualty and theft losses. Taxpayers can explore claiming these losses by filing an original or amended return for Tax Year 2016 or using the new revision of the 2016 Form 4684.

Questions about navigating casualty loss issues? Help is just a phone call away.

Late-Filing Penalty Relief for Partnerships

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (Surface Transportation Act) changed the date by which a partnership, real estate mortgage investment conduits (REMICs), or other entity must file its annual return. For calendar year filers, the due date for filing the annual return or request for an extension changed from April 15 (April 18 in 2017) to March 15.

Many entities filed their returns or their extension request for tax year 2016 by the April deadline, and if not for the Surface Transportation Act, these returns and requests for extension of time to file would have been on time.

Fortunately, penalty relief is now available from the IRS for certain partnerships, real estate mortgage investment conduits (REMICs), and other entities that did not file the required returns by the new due date for tax years beginning in 2016 provided that the following conditions are met:

• The partnership filed the returns (Forms 1065, 1065-B, 8804, 8805, 5471, or other returns) with the IRS and furnished copies (or Schedules K-1) to the partners (as appropriate) by the date that would have been timely before the amendment made by the Surface Transportation Act (April 18, 2017, for calendar year taxpayers); or
• The partnership filed Form 7004 to request an extension of time to file by the date that would have been timely before the amendment made by the Surface Transportation Act and files the return with the IRS and furnishes copies (or Schedules K-1) to the partners by the 15th day of the ninth month after the close of the partnership’s tax year (September 15, 2017, for calendar year partnerships). If the partnership files Form 1065-B and was required to furnish Schedules K-1 to the partners by March 15, 2017, it must have done so to qualify for the penalty relief.

Notice 2017-71, which amplifies, clarifies, and supersedes Notice 2017-47, provides that additional acts, such as the making of various elections, of partnerships, REMICs, and certain other entities made by the date that would have been timely prior to amendment by the Surface Transportation Act are treated as timely.

An earlier release provided this relief only to taxpayers whose taxable years began and ended in 2016, but the revised guidance also applies to fiscal-year filers whose taxable years began in 2016 but did not end until 2017.

Please contact the office if you need further clarification.

• By Leon Clinton
• January 28, 2018

Beginning on January 1, 2018, the standard mileage rates for the use of a car, van, pickup or panel truck are:

• 54.5 cents for every mile of business travel driven, up 1 cent from the rate for 2017.
• 18 cents per mile driven for medical or moving purposes, up 1 cent from the rate for 2017.
• 14 cents per mile driven in service of charitable organizations.

The business mileage rate and the medical and moving expense rates each increased 1 cent per mile from the rates for 2017. The charitable rate is set by statute and remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas, and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than 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. Please call if you need additional information about these and other special rules.

In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.

If you have any questions about standard mileage rates or which driving activities you should keep track of as tax year 2018 begins, do not hesitate to contact the office.

• By Leon Clinton
• January 25, 2018

The due date for certain entities to provide 2017 health coverage information forms to individuals in 2018 has been extended.

Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2018, to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of January 31, 2018.

Insurers, self-insuring employers, other coverage providers, and applicable large employers must furnish statements to employees or covered individuals regarding the health care coverage offered to them. Individuals may use this information to determine whether, for each month of the calendar year, they may claim the premium tax credit on their individual income tax returns.

The 30-day extension is automatic, and employers and providers don’t have to request it; however, the due dates for filing 2017 information returns with the IRS are not extended. For 2018, the due dates to file information returns with the IRS are:

• February 28, 2018 for paper filers
• April 2, 2018 for electronic filers

Due to these extensions, some individuals may not receive their Forms 1095-B or 1095-C by the time they are ready to file their 2017 individual income tax return. However, while information on these forms may assist in preparing a return, the forms are not required to file a 2017 tax return. Taxpayers do not have to wait for Forms 1095-B or 1095-C to file. Instead, they can prepare and file their returns using other information about their health coverage.

Don’t hesitate to call if you have any questions about extended due dates for employers and providers that issue Health Coverage Forms to individual taxpayers in 2018.

• By Leon Clinton
• January 22, 2018