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Citing higher gasoline prices, the IRS has increased the optional business standard mileage rate from 50.5 cents per mile to 58.5 cents per mile for July-December of 2008. Taxpayers can use the optional standard rates to calculate the deductible costs of operating an automobile for business. This is also the rate at which your company will typically reimburse you for business mileage using your personal automobile.

This update is great news for business owners who use the rate to calculate deductions and employees who get reimbursed. Normally, the IRS Mileage Rate is set once for the entire year, so it’s nice to see that this special adjustment was made, considering how high gas prices have risen this year. The standard mileage rate covers not just gas, but also all other costs of operating the vehicle. Business typically have two options for deducting transportation expenses. They could either buy a company car and pay for all of the insurance, gas, maintenance, etc, or use personal vehicles and reimburse at the standard mileage rate. The standard rate is used to simplify reimbursements, but actual costs of operating a personal car for business use may also be used in some cases.

As part of the update, the new six-month rate for computing deductible medical or moving expenses will also increase by eight cents to 27 cents a mile.

My latest book review is for Perfectly Legal: The Covert Campaign To Rig Our Tax System To Benefit The Super Rich - And Cheat Everybody Else.

When I first heard that Perfectly Legal was written by someone who works for the New York Times, I was hesitant to waste my time, fearing that the book would have the same liberal bias that makes the paper hardly worth a glance. I was pleasantly surprised that author David Cay Johnston largely succeeded in presenting a balanced view of the issues surrounding the tax system. In fact, I only thought “what a load of crap” a few times throughout the book, and only yelled it out once. Even the sections with which I did not agree were valuable because they presented an alternative view and inspired consideration. I can imagine that the author would be open to debate the issues, giving respect to those with differing opinions. The entire book was well presented, well written, and seemed to present the issues in a completely unbiased manner.

I particularly enjoyed

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The IRS has released the schedule of when economic stimulus payments will be issued for most taxpayers who filed their 2007 return by April 15th. I say most because a few taxpayers will get their payments later than this schedule, regardless of when they filed, due to the complexity of the amount of their economic stimulus package payment. The schedule is based on the last two-digits of the filer’s Social Security number. For joint filers, the SSN of the first person listed on the 2007 return will be used. Taxpayers will get their economic stimulus payment in the same form as they used for their 2007 return, either direct deposit or paper check.

The schedule is as follows:

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Creditors may forgive, but the IRS won’t forget. That’s the takeaway for many types of canceled debt. The forgiven debt is often seen as income subject to taxes.

For example, if you are unable to pay your credit card bill and negotiate with the card issuer to a reduced amount, the amount of reduction is what is subject to taxes. So if they are willing to accept $4000 even though you owe $5000, you’ll owe taxes on the $1000 that they forgave. Negotiating a lower interest rate for future payments

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One of the side effects of filing our taxes each year is that many of us are introduced to estimated taxes. Depending on your situation, you may have to pay estimated taxes, but some people choose to do so as well. If you owed money with your 2007 income tax return paying estimated taxes is one way to prevent that from happening again. The other way would be to increase your withholding by submitting an updated W-4 with your employer. Estimated taxes payments can also be used to cover income not subject to withholding, such as self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards.

This post covers estimated tax payments to the federal government, but many states have estimated tax systems as well. Boiling estimated taxes down to their simplest form, they basically allow you to pay taxes throughout the year instead of owing a lot of tax (and potential penalties) at the end of the year. So if you were going to owe $4000 when you file your 2008 return you might pay $1000 at the 4 regular scheduled estimated tax due dates. For 2008, estimated tax payments are due

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Just hearing today’s date out load can send shivers down the spine of many a taxpayer. While the deadline to file your taxes may seem scary to some, it really isn’t much different than most other deadlines. Filing your taxes may invoke fear in addition to the actual time crunch, such as fear of audit, inability to pay, making a mistake, etc, but most of the angst comes from the fact that they must be filed by a specific time. Sure, it’s easy to file an extension (use Form

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Below is a list of some of the top tax deductions that are often overlooked. Many of these common deductions have limits and qualification rules, so don’t assume any entitlement. Review the list and look into any of the items that sound like they may apply in more detail. Also remember that the rules change often. Some of these items were often overlooked in prior years, but have become easier to spot on the latest forms. Others may have reduced benefits, or none at all, compared to previous years. Even if you do qualify for the deduction, some are either/or, meaning that an alternative deduction might be more valuable. If nothing else, you’ll be aware of these items when the relevent section of Turbo Tax is reached, or when you discuss deductions with your accountant or tax preparer.

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At tax time, the question always comes up about whether to use software or hire someone to do your taxes for you. While this post is titled, TurboTax versus CPA, those are really just specific examples of each side of the argument.

When I say Turbo Tax, I mean:

• TurboTax
• TaxCut
• Filing online at irs.gov
• Filing out a paper 1040
• etc

When I say CPA, I mean:

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I’ve mentioned it in the past, but confusion over the tax deduction for mortgage interest warrants it being repeated: the deduction is not a reason to have a big mortgage. Too many people get talked into buying more house than they can afford because they get sold on the idea that a big mortgage means a big deduction from the interest you pay. While it’s true that the more you pay in interest, the larger your deduction will be, that deduction is simply returning a portion of your money to you. You would be much better off not paying the interest in the first place.

The amounts vary with your tax bracket, but let’s assume that you are in the 28% bracket. That would mean that for every dollar you spend in mortgage interest, you’d reduce your taxable income by a dollar, which would save you 28 cents in taxes. If you were in the 25% bracket, you’d save 25 cents per dollar spent, etc. Spending a dollar to save 28 cents means that you are losing money. Having a larger mortgage and paying more in interest means that you are losing more money.

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The date when the average taxpayer will have earned enough to cover taxes for the year is calculated and reported annually by The Tax Foundation. Their date is the one most often reported in the media. Many people consider that date a holiday of sorts, when they have finally broken free from the grip of taxes. In theory, any money earned after that day truly belongs to the worker. Your actual date may vary from the average, but the reported date gives a general indication of when you will reach it.

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