What’s New?

Overview for 2015 Taxes

On December 18, 2015 the President signed into law the PATH Act of 2015 and made the provisions retroactive to the beginning of the year and it made some provisions permanent. Most of the laws that had expired at the end of 2014 have been renewed for 2015. Capital gain rates remain at 15% and 0% and for those in the new top bracket of 39.6% the rate is 20% (over $400,000 taxable income). There are two new surtaxes in effect .9%on earned income and 3.8% on unearned income for single folks above $200,000 and $250,000 for married filing jointly.

Effective for 2016 partnership returns will need to be filed March 15th like S corporations this will happen in 2017. C corporations will have a due date of April 15th like the form 1040s.

Employees who claim unreimbursed job expenses mileage, meals, tools, etc. should have a letter from your employer documenting that the employer does not reimburse these expenses or your deduction can be disallowed per the IRS.

The Affordable Care Act (Obamacare) is in effect in 2014 and requires everyone in your household to have health insurance. There are 5 new IRS tax forms and if you receive any of the new 1095 forms your preparer must have them in order to complete your tax return. These new forms are going add additional costs to your return. If you purchased insurance through the exchange your preparer will need all of the income from all household members in order to determine the appropriate credit so do not allow your children to file their own tax returns this year. Those without insurance can expect to pay a penalty this year. If you need to obtain an exemption certificate or for more information contact MNsure at www.mnsure.org or the toll free number is 1-855-366-7873.

A court case in 2008 reminds us that all charitable contributions must have a receipt. Each individual contribution over $250 must also have an acknowledgement letter from the charity.

For businesses the Section 179 write off for assets in service in 2015 is limited to $500,000 maximum on the purchase of $2 million in new assets and brought back bonus depreciation for new (not used) assets placed in service for 2015. The bonus depreciation will be 50% for 2015 through 2017 and will phase down to 40% in 2018 and 30% for 2019. For 2016 the repair regulations safe harbor threshold will be increased to $2,500 instead of the $500 previous. We can start using this amount prior to 2016.

The IRS is looking closely for offshore accounts, or foreign accounts. If you have a bank account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund) special rules may apply to you. These accounts must be disclosed on special form or there are substantial penalties for failure to disclose these accounts.

If you refinanced your home mortgage it is a good idea to furnish your closing statement and form 1098 to your tax preparer especially if you drew money out on a home mortgage for other uses than the home itself.

The physical address is now required for rental property, the type of property (single-family, duplex, etc.) and the number of days rented and the number of days used for personal purposes.

If you are considering a Roth IRA conversion beware that there are a number of advantages but there also a number of disadvantages that carry some major tax consequences. It is a good idea to discuss the positives and negatives with your tax preparer prior to doing a conversion.

Earned Income Credit (EIC)

Attention Parents: To be eligible to receive the EIC credit you must be able to prove that your children lived with you during the tax year. In the past the IRS has asked you to be able to provide them with certain records to prove your qualifying child lived with you. Now we are required to document in our records these same things or we could be liable for a preparer penalty of $500 for failure to comply. The IRS is trying to stop people who are not eligible to claim children. From the list below please bring at least one or two of the necessary documents with you for your tax appointment or we may not be able to get this credit for you.

Residency of qualifying children:

  • School records or statement
  • Landlord or property management statement
  • Medical records
  • Child care provider records
  • Placement agency statement
  • Social service records or statement
  • Indian tribal officer statement
  • Health care provider statement
  • Place of worship statement
  • Employer statement

Disability of qualifying children:

  • Doctor statement
  • Other health care provider statement
  • Social service records or statement

Affordable Care Act

Starting January 1, 2014 most Americans were required to obtain “Minimum Essential Health Care Coverage”. Automatic Qualifying Minimum Essential Coverage is: Medicare, Medicaid, TRICARE, CHIP,

Veterans Health, Employer Sponsored plans starting in 2014, Bronze level or higher individual plans, and Peace Corps Plan. Everyone has to have health care coverage including children that are claimed as dependents on your tax return. There are people who are exempt from the mandate: religious conscience; health care sharing ministry; Indian tribes; no filing requirement; short coverage gap; hardship; unaffordable coverage options; incarceration; or not lawfully present. Members of certain religious groups and some hardships will have to obtain a certificate from MNsure before filing your return. We cannot file your return without the exemption certificate. If you need to obtain an exemption certificate or for more information you can contact MNsure at www.mnsure.org or toll free number is 1-855-366-7873.

There are 5 new forms connected to the ACA. Form 1095 A, B, C and form 8962 Premium Tax Credit (PTC), and form 8965 Health Coverage Exemptions. Form 1095-B issued voluntarily by 3rd party insurance companies and some governmental agencies. Form 1095-C issued voluntarily by employers with 50 or more employees. Both 1095 B & C are proof that you have health insurance. Form 1095-A issued by the Federal or state exchange if insurance was purchased through the exchange. We absolutely cannot file your tax return without this form. Form 8962 PTC is a reconciliation of the amount of subsidy received compared to what actually should have been received. If you did not receive enough subsidy then a credit will be calculated if you were paid too much there will be a payback. There is a limitation on the amount of payback: It will be as low as $300 or as high as $1,250 for single people and for married people as low as $600 or as high as $2,500. The forms 1095-A, Health Insurance Market Place Statement; form 8962, Premium Tax Credit; and form 8965, Health Coverage Exemptions are complex and will take between 1 to 3 hours to complete so there will be a significant charge for completing them. The more entries we need to make for these forms the higher the cost. If you have insurance through your employer or on your own not through the insurance exchange there may not be as large of an increase in your return cost.