The following is a summary of important tax developments that have occurred in the
past three months that may affect you, your family, your investments, and your
livelihood. Please call us for more information about any of these developments
and what steps you should implement to take advantage of favorable developments
and to minimize the impact of those that are unfavorable.
New tax legislation. On July 31, 2015, President Obama signed into law the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" (the Transportation Act), which extended the Highway Trust Fund and included a number of important tax changes. The most important tax changes in the Transportation Act are those that adjust tax-filing deadlines for partnerships and C corporations.Specifically, for tax years beginning after Dec. 31, 2015: Partnerships and S corporations must file their returns by the 15th day of the third month after the end of the tax year. Thus, entities using a calendar year will have to file by Mar. 15 of the following year. Thus, the filing
deadline for partnerships will be accelerated by one month but the filing deadline for S corporations will stay the same. Corporations must file by the 15th day of the fourth month after the end of the tax year. Thus, C corporations using a calendar year must file by Apr. 15 of the following year. Thus, the filing deadline for C corporations will be deferred for one month. Under a special rule for C corporations with fiscal years ending on June 30, the change won't apply until tax years beginning after Dec. 31, 2025.
Due dates for extensions have been adjusted as well, effective generally for returns for tax years beginning after Dec. 31, 2015.For example, the new law creates the following exceptions to the 6-month extension that generally applies to corporations: 1) For any return for a tax year of a C corporation which ends on December 31 and begins before Jan. 1, 2026, the automatic extension period is 5 months. 2) For any tax year of a C corporation which ends on June 30 and begins before Jan. 1, 2026, the automatic extension period is 7 months, And, the maximum extension for the returns of partnerships filing Form 1065 will be a 6-month period (ending on Sept. 15 for calendar year taxpayers) (not 5 months). Other tax changes included in the Transportation Act include the following: Veterans with VA or TRICARE health care coverage aren't counted for purposes of the 50-full-time-employee threshold used to determine if an employer is
subject to the Affordable Care Act employer shared responsibility penalty. This change is retroactively effective for months beginning after Dec. 31, 2013. Effective for months beginning after Dec. 31, 2015, otherwise eligible veterans are not disqualified from contributing to health savings accounts (HSAs) on a pre-tax basis merely because they receive medical care under any laws administered by the VA for a service-connected disability. Effective for returns required to be made and statements required to be furnished after Dec. 31, 2016, lenders must report more information on mortgages,
including the origination date, the amount of outstanding principal, and the property's address. The 6-year statute of limitations applies in cases where any overstatement of
basis results in a substantial (25% or more) omission of income. Effective for property with respect to which an estate tax return is filed after July 31, 2015, large estates (i.e., those required to file a federal estate tax return) are required to provide the IRS with the value of property included in the gross estate, to ensure consistent reporting for
income and estate tax purposes.
Home mortgage interest deduction doubled for unmarried co-owners.The Ninth Circuit Court of Appeals, reversing a Tax Court decision, concluded that the tax law's limits on the amount of debt eligible for the home mortgage interest deduction ($1 million of
mortgage "acquisition" debt and $100,000 of home equity debt) are applied on a per-individual basis, and not a per-residence basis as the IRS has long maintained.Thus, for the unmarried co-owners in the case, their collective limit for the home mortgage interest deduction doubled from a maximum of $1.1 million to a maximum of $2.2 million acquisition and home equity debt.
Simplified per-diem increase for post-Sept. 30, 2015 travel.An employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses (M&IE). If the rate paid doesn't exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn't subject to income- or
payroll-tax withholding and isn't reported on the employee's Form W-2. In general, the IRS-approved per-diem maximum is the GSA per-diem rate paid by the federal government to its workers on travel status.This rate varies from locality to locality.Instead of using actual per-diems, employers may use a simplified "high-low" per-diem, under which there is one uniform per-diem rate for all "high-cost" areas within the continental U.S. (CONUS), and another per-diem rate for all other areas within CONUS.The IRS
released the "high-low" simplified per-diem rates for post-Sept. 30, 2015, travel. The high-cost area per-diem increases $16 to $275, and the low-cost area per-diem increases $13 to $185.