TAX OVERHAUL MAY BE ANOTHER YEAR AWAY: Reports from inside the White House are that President Bush's administration may wait until 2007 to begin pushing a proposal to overhaul the tax code.A proposal was originally planned as a key part of President Bush's second-term agenda, but Republican sources have said that any push would have problems gaining traction in a mid-term election cycle. The Treasury is currently reviewing the recommendations issued by the President's Advisory Panel for Tax Reform before submitting a plan to the president.
The panel had suggested a number of significant changes to the tax code, including reducing deductions for home mortgages and scaling back state and local taxes, but reports say that it is unlikely that the president will stump for particular components of an overhaul in his State of the Union address.
Also, the position at the Treasury that would normally handle the project, the assistant secretary for tax policy, has been vacant since the summer.
IRS ANNOUNCES STANDARD MILEAGE RATES: The Internal Revenue Service has issued its 2006 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning Jan. 1, 2006, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
* 44.5 cents per mile for business miles driven;
* 18 cents per mile driven for medical or moving purposes; and,
* 14 cents per mile driven in service of charitable organizations, other than activities related to Hurricane Katrina relief.
The new rate for business miles compares to a rate of 40.5 cents per mile for the first eight months of 2005. In September, the IRS made a special one-time adjustment for the last four months of 2005, raising the rate for business miles to 48.5 cents per mile in response to a sharp increase in gas prices, which topped $3 a gallon.
"The IRS took the extraordinary step of temporarily increasing the standard mileage rates in the aftermath of Hurricane Katrina," IRS Commissioner Mark W. Everson said in a statement. "We promised to continue closely monitoring the situation. The 2006 mileage rates reflect that gas prices have dropped."
The standard mileage rates for business, medical and moving purposes are based on an annual study of the fixed and variable costs of operating an automobile. Runzheimer International, an independent contractor, conducted the study for the IRS.
For the first eight months of 2005, the standard rate for miles driven for medical or moving purposes was 15 cents per mile, and, except for special Hurricane Katrina rates, the standard rate for miles driven in service of a charitable organization was 14 cents per mile. For the last four months of 2005, the agency raised the standard rate for miles driven for medical or moving purposes to 22 cents per mile. The standard rate for charitable miles remained at 14 cents per mile - except for charitable miles relating to Hurricane Katrina.
GUIDANCE ON HOW KATRINA VICTIMS CAN ACCESS RETIREMENT PLANS: The U.S. Treasury and Internal Revenue Service have issued guidance relating to provisions of the Katrina Emergency Tax Relief Act of 2005 that allow Hurricane Katrina victims to access employer-sponsored retirement plans and IRAs.
Under one provision of the bill, individuals who live in one of the four states affected by Hurricane Katrina, and who suffered an economic loss as a result of that hurricane, will receive favorable tax treatment on early distributions from eligible retirement plans.
Called a Katrina distribution, the money is not subject to the 10 percent additional tax applicable to early distributions from a retirement plan (or 25 percent, in the case of a Simple IRA), and is generally includible in income over a three-year period. In some cases, the distribution may be eligible for tax-free rollover treatment and could be contributed to an eligible retirement plan within a three-year period and not be included in income at all.
Another provision of the law increases the allowable plan loan amount from an employer-sponsored retirement plan and provides for a suspension of payments for plan loans outstanding on or after Aug. 25, 2005, that are made to Katrina victims.
More details are available at www.irs.gov.
