New & Expiring LegislationChapter 14 pp. 561 - 577

2015 National IncomeTax Workbook™

New & Expiring Legislation Objectives p. 561

Federal Tax Law Changes in 2015

Federal Credits and Deductions that Expired and are not available in 2015

State of VA Law Changes

Introductionp. 561

This chapter first describes statutory tax law changes that were added by legislation late in 2014 or during 2015.

The chapter then lists the expiration dates of tax provisions that:▪ Expired in 2013 or 2014 ▪ OR ▪ Set to expire in 2015–2021.

Legislation Coveredp. 561

Tax Increase Prevention Act of 2014 (2014 TIPA) Achieving a Better Life Experience Act of 2014

(ABLE Act) Trade Preference Extension Act of 2015 (TPE

Act) Defending Public Safety Employees’ Retirement

Act Surface Transportation and Veterans Health Care

Choice Improvement Act of 2015 (2015 Transportation Act)

2015 Tax Provisions Affected

p. 562 1. Information Reporting 2. Credits and Deductions 3. Income Tax Basis 4. Due Dates of Tax Returns 5. Other Tax Law Changes 6. Technical and Clerical Corrections

1. Information Reporting p. 562

In 2015 Congress made further changes to the information reporting rules with the goal of increasing taxpayer compliance with properly reporting taxable income.

Penalties for late filing or not filing information returns are increased.

Information Reporting – New Law p. 562 - 563

Higher Penalties for non filing of Info Returns or Payee Statements:

1st Tier: Return filed within 30 days of due date▪ $50/return, Max of $500,000

2nd Tier: Return filed from 31 days to August 1▪ $100/return, Max of $1,500,000

3rd Tier: Return filed after August 1▪ $250/return, Max of $3,000,000

Information Reporting – New Law p. 562 - 563

Small Business Penalties for non filing of Info Returns or Payee Statements (Lower Max):

1st Tier: Return filed within 30 days of due date▪ $50/return, Max of $175,000

2nd Tier: Return filed from 31 days to August 1▪ $100/return, Max of $500,000

3rd Tier: Return filed after August 1▪ $250/return, Max of $1,000,000

Mortgage Reporting Requirments p. 563

Beginning in 2016, lenders must include additional information on Form 1098, Mortgage Interest Statement.

Mortgage Reporting Requirements p. 563

Box 2: The amount of outstanding principal on the mortgage as of the beginning of the calendar year

Box 3: The date of the origination of the mortgage

Boxes 7 and 8: The address of the property that secures the mortgage

Box 9: Other description in the case of property without an address

Education Expense Reporting p. 564

Form 1098-T: Tuition Statement

Higher education institutions are not subject to the penalties for failing to file Form 1098-T if they complied with the standards required by the IRS to obtain the student’s tax identification number.

2. Credit and Deductions p. 564

Congress increased the tax benefit of several credits and deductions.

Health Coverage Tax Credit (HCTC) p. 564

Effective for tax years after December 31, 2013, and before January 1, 2020

The health coverage tax credit is retroactively extended 6 years through 2019.

Health Coverage Tax Credit (HCTC) p. 564 - 565

Old Law: HCTC paid 72.5% of premium to make it

more affordable. Available in advance per month or

claimed as a lump sum refundable credit Available from 2002 to 2013

Health Coverage Tax Credit (HCTC) p. 564 - 565

New Law: Extended coverage from 2013 to 2019 Still paid 72.5% of premium to make it more

affordable Coordination with Affordable Care Act

(ACA)▪ Taxpayer not eligible for premium tax credit if

they receive HCTC

Health Coverage Tax Credit (HCTC) p. 566

IRS Guidance: Eligible taxpayers can claim the HCTC for 2014 by

filing an amended return Do not claim the HCTC using an old or altered

Form 8885 because there was not one in 2014. Taxpayers who purchased 2014 insurance coverage

from the Marketplace and received the APTC must file a 2014 tax return with Form 8962, Premium Tax Credit (PTC), before they can amend their return to claim the HCTC.

Health Coverage Tax Credit (HCTC) p. 566

IRS Guidance: Advanced payments (monthly option) for HCTC

are planned to begin in July 2016. The legislation allows the IRS 1 year to implement the monthly option.

Updates and guidance will be posted to the “HCTC: Latest News and Background” page on the IRS.gov website as they become available, and taxpayers should wait for this information before they file an amended return.

Child Tax Credit & Foreign Earned Income Exclusion

p. 566 Beginning in 2015, taxpayers who elect the

foreign income exclusion do not qualify for the refundable child tax credit.

Education Benefits p. 566 - 567

Taxpayers cannot claim the American opportunity credit or the above-the-line tuition deduction if they do not receive Form 1098-T from the school.

Effective for tax years beginning after June 29, 2015

3. Income Tax Basis p. 567

Congress enacted two provisions regarding income tax basis in 2015:

1. Consistent Basis Reporting

2. Overstated Basis Is Understated Income

Consistent Basis Reporting p. 567

Effective for property for which an estate tax return is filed after July 31, 2015

The basis of property received from a decedent

cannot exceed the value of the property reported for purposes

of calculating the estate tax or otherwise reported under new reporting requirements.

Consistent Basis Reporting p. 567

Limit on Basis of Property Acquired from a Decedent

Prior Law: The basis of property acquired from a decedent is its date-of-death fair market value

New Law: Limits the basis of property acquired if the property increased the estate tax on the decedent’s estate.

Consistent Basis Reporting p. 567

Limit on Basis of Property Acquired from a Decedent

New law basis cannot exceed:▪ Final value determined for purposes of the

estate tax▪ OR▪ Value reported by a statement furnished

under a new I.R.C.

Consistent Basis Reporting p. 567

The value of property is determined for purposes of the estate tax if:▪ The value is reported on an estate tax return and

the IRS did not contest the value before the statute of limitation for assessing the estate tax expired

▪ The value is specified by the IRS and the executor of the estate does not timely contest that value

▪ The value is determined by a court or pursuant to a settlement agreement with the IRS.

Basis Information Reporting p. 567 - 568

Under prior law, executors of decedents’ estates generally were not required to report basis information to beneficiaries of the estate.

The 2015 Transportation Act added a new information reporting requirement if the estate is required to file an estate tax return.

Late filing or failure to file the information returns subjects the executor to the graduated penalties for information returns.

Accuracy Related Penalty: A 20% accuracy-related penalty is assessed if the basis of property claimed on a return exceeds the basis as determined under I.R.C. § 1014(f).

Overstated Basis Is Understated Income

p. 568 In 2016, overstating basis is an understatement of

income that is included in the more than 25% test for keeping the statute of limitations open for 6 years instead of the general 3 years.

Prior Law: Increased the statute of limitations for assessing taxes under the Internal Revenue Code from 3 years to 6 years if more than 25% of gross income was omitted from the return.

New Law: Clarified that an overstatement of basis is an understatement of income for purposes of this provision.

4. Due Dates of Tax Returns!!!!! p. 568

BIG CHANGES beginning with returns filed in 2017▪ Thus 2016 period returns

Partnership Tax Return = March 15▪ Will be due on the fifteenth day of the third month

after the end of the tax year, C Corporations Tax Return = April 15▪ Will be due on the fifteenth day of the fourth month

after the end of the tax year. S Corporations Tax Return = NO CHANGE

Extension Due Dates p. 569

The length of the period for filing returns on extension was increased for several returns.

See Workbook Figure 14.3 on page 569 for an extensive list of returns with extension deadlines.

5. Other Tax Law Changes p. 570

ABLE Savings Accounts: For some individuals with disabilities

Amounts in tax-exempt Achieving a Better Life

Experience (ABLE) accounts for the benefit of some individuals with disabilities will not jeopardize the individuals’ eligibility for means-tested public assistance.

Federal Public Safety Workers p. 571

Federal public safety workers are added to the public employees that qualify for the separation from service exception to the 10% tax on early withdrawals from qualified retirement plans at age 50 or older.

Old Law: Public safety employees of state or local governments

New Law: Amended to include federal public safety workers

Civil Penalties p. 571-572

ABLE Act amends several sections of the Internal Revenue Code to require an annual inflation adjustment to tax penalty amounts for 5 civil penalties: ▪ Failure to file a tax return [I.R.C. § 6651] ▪ Failure to file certain information returns or registration

statements [I.R.C. § 6652] ▪ Noncompliance of tax return preparers [I.R.C. § 6695] ▪ Failure to file partnership or S corporation returns [I.R.C. §§

6698 and 6699] ▪ Failure to file correct information returns or correct

Professional Employer Organizations (PEO)

p. 572 The ABLE Act authorizes the IRS to certify

professional employer organizations as employers.

Effective for services performed in 2016

Qualifying PEOs will be required to have annual independent financial audits.

Medicare Provider Levy p. 572

I.R.C. § 6331(h) provides for a continuous levy when a Medicare provider or supplier owes overdue taxes.

ABLE Act § 209 increases the levy rate from 15% to 30%, effective 180 days after the date of the enactment.

Personal Holding Company Income p. 572

ABLE Act § 207 excludes controlled foreign corporation dividends from the I.R.C. § 543 definition of personal holding company income for tax years ending after December 19, 2014.

Waterways Fuel Tax p. 572

ABLE Act § 205 amends I.R.C. § 4042 to increase the Inland Waterways Trust Fund financing rate to 29¢ per gallon for fuel used after March 31, 2015.

The tax is charged on fuel used in commercial transportation on inland waterways.

6. Technical & Clerical Corrections p. 573

There were 17 technical and clerical corrections to the Internal Revenue Code that covers:

1. Married Filing Joint 2. Child tax credits 3. Cost of course materials 4. 2008 recovery rebate credit 5. Limitation period of disability compensation 6. Flexible spending accounts 7. Computation of the foreign earned income

exclusion

Technical & Clerical Corrections p. 573

8. Computation of the tax exclusion for extraterritorial income

9. Regulated Investment Companies 10. Withholding Requirements applicable to RIC

under the Foreign Investment in Real Property Tax Act (FIRPTA)

11. Indian Employment Tax Credit 12. Basis of Property for Tax Credit for Alternative

Fuel 13. Excise Tax Exemption for Aircraft

Technical & Clerical Corrections p. 574

14. Tax Credit for Producing Fuel from non-conventional source.

15. Accelerated depreciation for smart meters and smart grid systems.

16. Bonus depreciation for reuse and recycling property.

17. Revenues for the excise tax on aviation fuel and gasoline.

EXPIRATION DATES OF PRIOR LEGISLATION

p. 574 Legislation enacted late in 2014 retroactively

extended more than 50 provisions that expired at the end of 2013.Many of those provisions were extended only until the end of 2014.

Figure 14.4 (p 575 to p 577) lists, in Internal Revenue Code section order, statutory provisions that expired in 2013 or 2014 and those that will expire in 2015– 2021 if Congress does not extend them.

Under present law there are no federal tax provisions scheduled to expire in years after 2021.

New & Expiring LegislationChapter 14

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