The Webinar “Plan for 2015 Year End and Beyond” was sponsored by Wolters Kluwer and hosted by AccountingToday. The live version took place on November 12, 2015, but the recording is available for free. Moderator Dan Hood, Editor-in-Chief at AccountingToday, and presenter Mark Luscombe, JD, LL.M, CPA, a key member of the Wolters Kluwer Tax & Accounting US tax legislation team talk about what is new for 2015 tax returns. They also cover what might still happen to affect 2015 returns and what new tax law might look like for 2016 and beyond.
New Tax Provisions Enacted in 2015
There have been many new provisions enacted in 2015. We’ll cover some of the main points of the presentation here.
- New Due Dates for Partnership and Corporate Tax Returns
This applies to tax returns due in 2017. Partnership information returns are now due on or before the 15th day of the 3rd month after close of fiscal year. This means individuals should get their K-1 documentation about 1 month before their individual return is due. Previously, the deadline for partnership returns coincided with the deadline for personal tax returns, requiring many individuals to file an extension. Additionally, for corporations the return deadline is now due on or before the 15th day of the 4th month after close of fiscal year.
- New FBAR Deadline
The new deadline is now April 15th with a new 6-month extension. The deadline now coincides with the regular filing deadline. The extension was not available before.
- Form 3520 filing change
This form relates to reporting transactions with foreign trusts and receipt of foreign gifts. April 15th is the due date for calendar-year taxpayers. Form 3520-A with respect to foreign trusts with a US owner will be due the 15th day of the 3rd month after the close of the trust’s tax year.
- Mortgage Reporting
Lenders are now required to report additional information about the mortgage and the property it relates to on Form 1098. The IRS is trying to ensure that individuals don’t deduct more interest than they’re allowed to. Lenders have to make this additional information available on all returns and statements after December 31, 2016.
The new tax provisions also affect the following areas:
- Consistent Basis Reporting for Estates
- Statute of Limitations of Overstated Basis
- Transfers of Excess Pension Assets
- Equalization of Excise Taxes
- Veteran’s Health Coverage
- Health Coverage Tax Credit
- Refundable Child Tax Credit
- Domestic Production Activities Deduction
Continued Rollout of Affordable Care Act
There is a continued rollout of the requirements of the Affordable Care Act. Here is some examples of 2015 requirements:
- Employer-shared responsibility payment
- Increase in individual responsibility payment
- Employer reporting on Forms 1095-C and 1094-C
- Private health insurer reporting
- State option with respect to definition of small employer
- HRAs may result in $100 per employee per day penalty
- Status of court challenges: funding without congressional authorization, contraceptives requirement are still in active litigation
With the legalization of same-sex marriage comes an added layer of complications for tax purposes. Legislation hasn’t dealt with all of these concerns yet, but here are some of the issues that may be affecting taxpayers:
- Estate planning
- Civil unions and domestic partnerships (which the IRS does not recognize)
- Employer benefits. Some employers are dropping domestic partner benefits (because now marriage is permitted everywhere), joint and survivor annuities, Family & Medical Leave Act, bereavement and leave of absence policies, Uniform Services Employment and Reemployment Act
- Religious freedom
Retirement Plan Changes
Here is a highlight of changes to legislation affecting retirement planning:
- IRS permits taxable and non-taxable portions of distributions from 401(k), 403(b), and 457(b) plans to be directed to separate accounts. You can roll the taxable portion into a successor 401(k) and use the Roth-conversion for the nontaxable structure.
- Longevity annuities. If you purchase a longevity annuity, this will not have an adverse effect on your required minimum distributions.
- Deferred annuities are permitted to offer deferred annuities through target date funds.
- Salary-deduction arrangements, low contribution amounts, invest in government bonds, making it appealing to low-income employees.
- IRA Rollovers. Restricted to one 60-day rollover per year for all IRA accounts, not for each IRA account.
- Inherited IRAs. Not retirement assets and therefore not subject to creditor protection.
- IRA distributions to charity for people over age 70 1/2 is not available for 2015 (Congress is still expected to make a ruling on this).
The ABLE Act allows the creation of tax-free savings accounts for individuals with disabilities. Many of these ABLE accounts are expected to start up in 2016.
- Majority of states have now adopted enabling legislation.
- Contributions are limited to annual gift tax exclusion ($14,000 for 2015 and 2016).
- Use in conjunction with special needs trust.
- Still some dispute over whether states or federal government have the burden of determining who is eligible and what considered is a proper expense.
There are some minor changes for repair regulations. Most notably, there is a new Form 3115.
- Annual de minimis safe harbor expense election is an annual election and must be made again: $5,000 or less (per item or invoice) if you have an applicable financial statement, $500 or less if you don’t have an applicable financial statement.
- New draft Form 3115, Application for Change in Accounting Method.
With marijuana being legalized in some states but not on a federal level, there are some difficulties with bookkeeping filing tax returns. The IRS doesn’t allow illegal business, which they consider marijuana business to be. Therefore, there may be some trouble with the deduction of business expenses unless they are treated as cost of goods sold. Any efforts to segregate businesses to increase business deductions have not been very successful in court. Plus, advisers have to review professional ethical guidance in determining the scope of representation of these businesses and best practices.
Congressional Action for Remainder of 2015
There are many expired tax provisions, including over 50 tax breaks that are not currently available for 2015. Congress is expected to do another year-end two-year extension. These year-end decisions may be late enough to interfere with the timely start of tax filing season.
A tax reform has been discussed, but it’s off the table for 2015 and probably 2016 as well. The recent focus has been on international tax reforms.
Last but not least, Congress is currently looking at the funding of the Highway Trust Fund using non-tax sources. The current funding expires on November 20, 2015.