Post by Venturi on Jul 13, 2005 12:25:44 GMT -5
Jul 7, 2005
By: James E. Guyette
Automotive Body Repair News
Industry, business owners and associations are being asked to support efforts to loosen proposed Internal Revenue Service regulations that would impose tighter tax restrictions on technicians who bring their own tools to the job.
Currently, both employees and employers can gain significant tax benefits by setting up Section 62 tool reimbursement plans—a complex procedure usually managed by third-party administrators hired by shop owners to conduct the programs, also known as allowances or accountable plans.
However, the IRS now plans to limit Section 62 tax breaks to equipment purchased only while a given technician is employed at a particular shop, rather than covering the entire inventory of the worker’s toolbox.
A newly formed organization called the American Craftsmen and Tradesmen Association (ACT) is calling on the IRS to defer enactment of the proposed rule changes until a public comment period is held in March 2006. ACT leaders say key senators and representatives on the relevant Congressional committees are leaning toward instructing the IRS to delay making changes pending the industry’s input, yet they would like more participation from automotive repairers to help shape the issue.
“We would love for you to join our coalition,” says lawyer Steven Mopsick, a former chief counsel for the IRS who now works with ACT. This is a multi-million dollar issue contends Mopsick, citing the employment tax savings that shop owners achieve by taking part in Section 62 tool reimbursement programs.
“At risk are several million American craftsmen who are required to provide and maintain their own tools as a condition of employment,” says Mopsick. “They are mechanics in the airline, automotive, diesel and heavy equipment industries, as well as plumbers, roofers, electricians, machinists and many other tradesmen.”
Mopsick cautions that “while the IRS proposed ruling is aimed at motor vehicle service technicians, the ruling will be a clear ‘get tough’ signal to revenue agents as they audit tool reimbursement arrangements across the board. Once the IRS is finished, the only reimbursement plans left standing will be the simplest ‘receipts-based’ reimbursement plans.”
ACT member Brian Barlow, CEO of Tool Benefit, Inc., says, “It’s important for these industries that they be treated fairly. We want to form an association to represent the voice of the employees.”
ACT is confident the IRS’ planned restrictions will be modified—if not eliminated altogether—once the industry is able to present its case. A precise timetable for enacting the IRS proposal has not been established, although ACT’s leadership is concerned that the agency will move quickly on the matter.
When contacted by ABRN, an IRS spokesman was unfamiliar with the issue, and more knowledgeable tax officials were unavailable for comment.
“It’s a ‘draft’ right now,” explains ACT consultant Dennis Frankeberger of Caliphia Advisory Services in Chino Hills, Calif. In a process known as a “revenue ruling,” the IRS is attempting to push the new restriction into the tax code without holding proper public hearings, he says.
“They’re just ramming it down everyone’s throats,” according to Frankeberger. “They have provided no opportunity for commentary” by representatives of the repair industry or input from third party administrators who manage the Section 62 programs for shop ownership.
“Let’s set this aside [until March],” Frankeberger urges. “Let’s open up the doors a little bit so comments can be made, and a better revenue ruling made.”
Those interested in supporting the cause or obtaining more information about the issue can contact Mopsick at (916) 558-6111. He can be reached via the Internet at www.weintraub.com/SteveMopsick.html.
“This is of critical importance to us,” Mopsick maintains. About 10 percent of repair shop owners currently take advantage of using third-party administrators for Section 62 programs, he says, stressing the tax benefits obtained by taking this route.
“[Tool] reimbursements made under accountable plans are not considered wages,” Mopsick points out, thus no employment taxes are due for these amounts. The technician is able to take additional above-the-line deductions for income tax purposes.
“The employers and employees both win,” says Betty Little, a tax lawyer working with ACT.
The IRS’ idea to restrict the write-offs to just the tools purchased while employed at a particular shop is grossly unfair because technicians spend an entire career assembling and updating their tool supply, says Bill Hughes, vice president of market development for Profit Tool USA, a third party administrator.
“They don’t realize the investments these guys make in their tools,” Hughes notes. In the Upstate New York area “our average box [content] is just over $30,000 per tool box,” he reports. “There’s $5,000 in tools in one drawer.”
Source: Automotive Digest.com
By: James E. Guyette
Automotive Body Repair News
Industry, business owners and associations are being asked to support efforts to loosen proposed Internal Revenue Service regulations that would impose tighter tax restrictions on technicians who bring their own tools to the job.
Currently, both employees and employers can gain significant tax benefits by setting up Section 62 tool reimbursement plans—a complex procedure usually managed by third-party administrators hired by shop owners to conduct the programs, also known as allowances or accountable plans.
However, the IRS now plans to limit Section 62 tax breaks to equipment purchased only while a given technician is employed at a particular shop, rather than covering the entire inventory of the worker’s toolbox.
A newly formed organization called the American Craftsmen and Tradesmen Association (ACT) is calling on the IRS to defer enactment of the proposed rule changes until a public comment period is held in March 2006. ACT leaders say key senators and representatives on the relevant Congressional committees are leaning toward instructing the IRS to delay making changes pending the industry’s input, yet they would like more participation from automotive repairers to help shape the issue.
“We would love for you to join our coalition,” says lawyer Steven Mopsick, a former chief counsel for the IRS who now works with ACT. This is a multi-million dollar issue contends Mopsick, citing the employment tax savings that shop owners achieve by taking part in Section 62 tool reimbursement programs.
“At risk are several million American craftsmen who are required to provide and maintain their own tools as a condition of employment,” says Mopsick. “They are mechanics in the airline, automotive, diesel and heavy equipment industries, as well as plumbers, roofers, electricians, machinists and many other tradesmen.”
Mopsick cautions that “while the IRS proposed ruling is aimed at motor vehicle service technicians, the ruling will be a clear ‘get tough’ signal to revenue agents as they audit tool reimbursement arrangements across the board. Once the IRS is finished, the only reimbursement plans left standing will be the simplest ‘receipts-based’ reimbursement plans.”
ACT member Brian Barlow, CEO of Tool Benefit, Inc., says, “It’s important for these industries that they be treated fairly. We want to form an association to represent the voice of the employees.”
ACT is confident the IRS’ planned restrictions will be modified—if not eliminated altogether—once the industry is able to present its case. A precise timetable for enacting the IRS proposal has not been established, although ACT’s leadership is concerned that the agency will move quickly on the matter.
When contacted by ABRN, an IRS spokesman was unfamiliar with the issue, and more knowledgeable tax officials were unavailable for comment.
“It’s a ‘draft’ right now,” explains ACT consultant Dennis Frankeberger of Caliphia Advisory Services in Chino Hills, Calif. In a process known as a “revenue ruling,” the IRS is attempting to push the new restriction into the tax code without holding proper public hearings, he says.
“They’re just ramming it down everyone’s throats,” according to Frankeberger. “They have provided no opportunity for commentary” by representatives of the repair industry or input from third party administrators who manage the Section 62 programs for shop ownership.
“Let’s set this aside [until March],” Frankeberger urges. “Let’s open up the doors a little bit so comments can be made, and a better revenue ruling made.”
Those interested in supporting the cause or obtaining more information about the issue can contact Mopsick at (916) 558-6111. He can be reached via the Internet at www.weintraub.com/SteveMopsick.html.
“This is of critical importance to us,” Mopsick maintains. About 10 percent of repair shop owners currently take advantage of using third-party administrators for Section 62 programs, he says, stressing the tax benefits obtained by taking this route.
“[Tool] reimbursements made under accountable plans are not considered wages,” Mopsick points out, thus no employment taxes are due for these amounts. The technician is able to take additional above-the-line deductions for income tax purposes.
“The employers and employees both win,” says Betty Little, a tax lawyer working with ACT.
The IRS’ idea to restrict the write-offs to just the tools purchased while employed at a particular shop is grossly unfair because technicians spend an entire career assembling and updating their tool supply, says Bill Hughes, vice president of market development for Profit Tool USA, a third party administrator.
“They don’t realize the investments these guys make in their tools,” Hughes notes. In the Upstate New York area “our average box [content] is just over $30,000 per tool box,” he reports. “There’s $5,000 in tools in one drawer.”
Source: Automotive Digest.com