Tax Extenders for the 2015 Tax Year

by NFS | Dec 28, 2015 | Archives

On December 18, 2015, the President signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The new law extends several tax provisions retroactive to the beginning of 2015, and also makes some provisions permanent.

The list that follows identifies tax extender items that have been reinstated retroactive to January 1, 2015, along with a brief description of the provision.

Additional Child Tax Credit. The refundable portion of the Child Tax Credit had an income threshold amount of $10,000, indexed for inflation. The extender legislation permanently sets the threshold at an unindexed $3,000, which will allow for a higher credit for taxpayers who qualify.

Enhanced American Opportunity Tax Credit (Hope Credit). The American Opportunity Tax Credit (AOTC) is an enhanced version of the Hope Credit, allowing a credit of up to $2,500 for four years of post-secondary education. The new law makes the enhanced AOTC permanent.

Enhanced Earned Income Credit (EIC). As an extender item, the EIC credit amount was temporarily increased for taxpayers with three or more children, and the marriage penalty was reduced by increasing phaseout ranges. The new law makes the enhanced EIC permanent.

Educator expenses. The new law makes the adjustment to income for qualified expenses of elementary and secondary school teachers permanent. The law also indexes the current expense cap of $250 for inflation beginning in 2016.

State and local general sales taxes. The provision allowing an itemized deduction for state and local general sales taxes instead of state and local income taxes on Schedule A, Form 1040, expired and was extended several times in the past. The new law makes the provision permanent.
Charitable contributions of IRA distributions. A qualified charitable contribution (QCD) from an IRA is nontaxable if made directly to an eligible charitable organization. This lowers the taxpayer’s AGI, reducing the negative effect of AGI phaseouts. A QCD was dependent on extender legislation in prior years. The new law makes the provision permanent.

Qualified leasehold improvements, restaurant buildings and improvements, and retail buildings and improvements. Recovery periods for qualified leasehold improvements, restaurant buildings and improvements, and retail buildings and improvements were temporarily set at 15 years under extender legislation instead of requiring longer recovery periods. The 15-year recovery period for these assets was made permanent.

Enhanced Section 179 expense. A temporary Section 179 expense limit of $500,000 and investment limit of $2 million before phaseout was made permanent. Note: Beginning in 2016, the $250,000 cap on the Section 179 expense for qualified real property was eliminated. The provision allowing a Section 179 expense for off-the-shelf computer software was also made permanent.

Special depreciation allowance. The provision extends the special depreciation allowance for property acquired and placed in service during 2015 through 2019. The special depreciation percentage is 50% for property placed in service during 2015, 2016, and 2017, and phases down to 40% in 2018 and 30% in 2019.

Discharge of principal residence indebtedness. The provision allowing exclusion from income for discharge of qualified principal residence indebtedness was extended through 2016.

Itemized deduction for mortgage insurance premiums. The provision allowing mortgage insurance premiums to be deducted as an itemized deduction on Schedule A of Form 1040 was extended through 2016.

Tuition and fees deduction. The provision allowing an above-the-line deduction for tuition and fees paid for the taxpayer, spouse, or dependents and claimed as an adjustment to income, was extended through 2016.

Nonbusiness energy property. The credit for purchases of nonbusiness energy property was extended through 2016.

Additional extender items for individuals include:

• Increased monthly exclusion amount for transportation benefits.
• Charitable contributions of capital gain real property for conservation purposes.
• Exclusion for gain on sale of small business stock.
• Five-year recognition period for built-in gains for S corporations.

Additional extender items for businesses include:

• Extension of research and development (R&D) tax credit.
• S corporation basis adjustment from charitable contributions of property.
• Employer wage credit for active duty members of the uniformed services.
• Low-income housing credit rates for non-federally subsidized buildings.
• Military house allowance exclusion for low-income housing tax credit buildings.
• New markets tax credit.
• Work opportunity tax credit.
• Indian employment tax credit.
• Qualified zone academy bonds.
• Race horses as three-year property.
• Seven-year recovery period of motorsports entertainment complexes.
• Accelerated depreciation for business property on an Indian reservation.
• Empowerment zone tax incentives.
• Moratorium on medical device excise tax for sales during 2016 and 2017.
• Alternative fuel vehicle refueling property.
• Credit for energy-efficient home manufacturers.
• Energy-efficient commercial buildings deduction.
• Qualified fuel cell motor vehicles.

For assistance on how these tax law changes affect your particular situation, please contact our office.

New Client Discount

Happy Holidays from NFS

by NFS | Dec 25, 2015 | Archives

2016 Tax Season Opens Jan. 19 for Nation’s Taxpayers

by NFS | Dec 22, 2015 | Archives

WASHINGTON ― Following a review of the tax extenders legislation signed into law last week, the Internal Revenue Service announced today that the nation’s tax season will begin as scheduled on Tuesday, Jan. 19, 2016.

The IRS will begin accepting individual electronic returns that day. The IRS expects to receive more than 150 million individual returns in 2016, with more than four out of five being prepared using tax return preparation software and e-filed. The IRS will begin processing paper tax returns at the same time. There is no advantage to people filing tax returns on paper in early January instead of waiting for e-file to begin.

“We look forward to opening the 2016 tax season on time,” IRS Commissioner John Koskinen said. “Our employees have been working hard throughout this year to make this happen. We also appreciate the help from the nation’s tax professionals and the software community, who are critical to helping taxpayers during the filing season.”

As part of the Security Summit initiative, the IRS has been working closely with the tax industry and state revenue departments to provide stronger protections against identity theft for taxpayers during the coming filing season.

The filing deadline to submit 2015 tax returns is Monday, April 18, 2016, rather than the traditional April 15 date. Washington, D.C., will celebrate Emancipation Day on that Friday, which pushes the deadline to the following Monday for most of the nation. (Due to Patriots Day, the deadline will be Tuesday, April 19, in Maine and Massachusetts.)
Koskinen noted the new legislation makes permanent many provisions and extends many others for several years. “This provides certainty for planning purposes, which will help taxpayers and the tax community as well as the IRS,” he said.

The IRS urges all taxpayers to make sure they have all their year-end statements in hand before filing, including Forms W-2 from employers, Forms 1099 from banks and other payers, and Form 1095-A from the Marketplace for those claiming the premium tax credit.

“We encourage taxpayers to take full advantage of the expanding array of tools and information on IRS.gov to make their tax preparation easier,” Koskinen said.

Although the IRS begins accepting returns on Jan. 19, many tax software companies will begin accepting tax returns earlier in January and submitting them to the IRS when processing systems open.

Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund. The IRS anticipates issuing more than nine out of 10 refunds in less than 21 days.

The IRS also reminds taxpayers that a trusted tax professional can provide helpful information and advice about the ever-changing tax code. Contact our office for assistance and take advantage of our New Client Special $30 Discount.

New MA Gambling Deduction and Withholding Requirements

by NFS | Dec 10, 2015 | Archives

MA DOR TIR 15-14 explains the new MA gambling deduction as well as gambling tax reporting and withholding requirements.

The new MA gaming deduction is restricted to MA based casino and racing losses to the extent that they can be matched to MA source casino and racing winnings. MA casino winnings are taxed as MA sourced income for residents and non-residents alike. MA defines gaming occasions and record keeping requirements the same as the IRS.

Although much attention is paid to gambling establishments, make note that TIR 15-124 also identifies beano gaming and raffles. Within ten days of an event, information returns must be filed with DOR with names and addresses when winnings exceed the threshold for that activity. A 5% MA withholding rate is required when state lottery winnings exceed $600, bingo $1,200, slots $1,200, keno $1,500, beano $500 and table games $5,000.

Thank You Wrentham First Responders

by NFS | Dec 8, 2015 | Archives

Medicare Open Enrollment: Five Things You Need to Do

by NFS | Dec 2, 2015 | Archives

Routines help keep us focused, organized, and even healthy. However, if your health routine doesn’t include preparing for Medicare’s Open Enrollment, now’s the time to kick-start a new healthy habit.

If you have a Medicare health or prescription drug plan, you should review and compare coverage options. The Open Enrollment runs through December 7 and is the time you can make changes to your plan. Even if you’re happy with your current coverage, you might find a better fit for your budget or your health needs. If you miss an Open Enrollment deadline, you’ll most likely have to wait a full year before you can change your plan.

Here are five things every Medicare beneficiary can do to get in the Medicare Open Enrollment routine.

1. Review your plan notice. Be sure to read any notices from your Medicare plan about changes for next year, especially your “Annual Notice of Change” letter. Look at your plan’s information to make sure your drugs are still covered and your doctors are still in network.

2. Think about what matters most to you. Medicare health and drug plans change each year and so can your health needs. Do you need a new primary care doctor? Does your network include the specialist you want for an upcoming surgery? Does your current plan cover your new medications? Does another plan offer the same value at a lower cost? Take stock of your health status and determine if you need to make a change.

3. Find out if you qualify for help paying for your Medicare. Learn about programs in your state to help with the costs of Medicare premiums, your Medicare Part A (hospital insurance) and Medicare Part B (medical insurance) deductibles, coinsurance and co-payments, and Medicare prescription drug coverage costs. Visit Medicare.gov or make an appointment with a local State Health Insurance Assistance Program (SHIP) counselor if you need help.


4. Shop for plans that meet your needs and fit your budget. You can use the Medicare Plan Finder tool to see what other plans are offered in your area. A new plan may:

• Cost less;
• Cover your drugs costs; or
• Let you use the providers you want, like your doctor or pharmacy.

If you find that your current coverage still meets your needs, then you don’t need to make any changes. Remember, during Medicare Open Enrollment, you can decide to stay in Original Medicare or join a Medicare Advantage Plan. If you’re already in a Medicare Advantage Plan, you can switch back to Original Medicare.

5. Check your plan’s star rating before you enroll. The Medicare Plan Finder includes Star Ratings for the 2016 Medicare health and prescription drug plans. Plans are rated for quality on a one- to five-star scale: one star represents poor performance and five stars represent excellent performance. Be sure to use the ratings to compare the quality of any health and drug plans you are considering.

These are a few easy ways to get a jump-start on your Medicare Open Enrollment. For more information, call 1-800-MEDICARE (1-800-633-4227) and say “Agent.” TTY users should call 1-877-486-2048. Help is available 24 hours a day, including weekends. If you need help in a language other than English or Spanish, let the customer service representative know the language. You can also visit a local SHIP counselor. SHIP counselors provide free, one-on-one, non-biased Medicare assistance. Get free personalized health insurance counseling by calling your SHIP at the number listed on the Medicare contacts page or call 1-800-MEDICARE.