2015 Federal Tax Updates Presented To: Delaware Tax
2015 Federal Tax Updates Presented To: Delaware Tax Institute November 20, 2015 Presented by Stephanie Chapman, CPA Manager, Corporate and International Services Belfint, Lyons & Shuman CPAs Wilmington, DE / West Chester, PA www.belfint.com 302.573.3912/[email protected] Extended to December 31, 2014 Expired provisions include: Sales MIP Tax Insurance
Tuition $250 IRA deduction teacher deductions transfers to charities Personal residence COD exclusion Extended to December 31, 2014 Cont. Expired provisions include: 50% bonus depreciation Enhanced 15-year
Transit S 179 expense life for qualified real property pass allowance fringe Corp 5-year BIG period Certain businesses tax credits (R&D credit again!) What DID Happen in 2015? Highway ABLE Funding Bill
Accounts MyRAs Identity First Theft Time Penalty Abatement Increased Social Penalties on Information Returns Security Loopholes Closed Affordable Inflation Care Act
Highway Funding Bill Highway Funding Bill Mostly effective starting 2017 o o Due dates changed for 2016 returns Enhanced reporting on mortgage information returns (1098s issued after 12.31.16) Outstanding balance at beginning of year Loan origination date Address of securing property Starting 2015: Enhanced estate valuation for stepped up basis Highway Funding New Due Dates
Highway Funding Bill: Estate Valuations Applies to estates in which an estate return is filed after 7-31-2015 Consistency between inherited basis and reported basis Reporting requirements (postponed to 2.29.16): o Basis reporting by executor to IRS and beneficiary identifying value of each interest in such property as reported on the Estate Return o Within 30 days after the due date of the return (including extensions) or the date filed, whichever is earlier ABLE Accounts ABLE Accounts: Achieving a Better Life Experience Similar to 529 Plan for qualified individuals with disabilities
o Administered by state o Earnings not taxable, qualified distributions not taxable o Excess contributions at 6% excise penalty, nonqualified distributions at 10% penalty Funding o May be setup tax years beginning after 12.31.14 o Limited to annual gift tax exclusion ($14,000) ABLE Accounts Beneficiary o Must have become disabled by age 26 o Must be resident of the state in which plan maintained and can have only 1 ABLE at a time.
o Cannot direct the investments more than 2 times a year Qualified Disability Expenses o Health, Education, Housing, Transportation o Employment Training, Assistive Technology, Personal Support MyRAs MyRAs Eligible participants have taxable compensation but no access to employer-sponsored plan. Government-sponsored Roth IRA that holds a Treasury security earning a variable interest rate. Same contribution and withdrawal rules as Roth IRAs Cannot reach balance of more than $15,000 or be held for more than 30 years. As soon as one limit is reached, must transfer to a Roth IRA. Contributions will be reported from Comerica Bank on Form 5498
Apply online at myra.gov Identity Theft Identity Theft Security Summit Formed by Commissioner Koskinen. Late October included 34 states, providers, practitioners etc. Software providers enhance identity requirements in 2016. Passwords to access software (8 characters with upper, lower, alpha, numeric and special characters); Timed lockout features; security questions, etc. IRS/States work together to look for multiple returns from the same foreign internet address, same device, time to file (if machine generated) E-file providers 2,000+ returns self-research/analysis
Speed up Due Dates 1099/W-2s Identity Theft Accelerated Matching Temporary and Proposed Regulations issued in August to eliminate automatic extensions for W-2 and many 1099 reports. Would affect those filed in 2017 Currently automatic 30-day plus additional nonautomatic 30 day extension available. Removes the second and makes the first non-automatic and only in limited cases First Time Penalty Abatement Working with the IRS: First Time Penalty Abatement (FTA)
We all make mistakes . . .first times free o Use for Failure to file, pay or deposit penalties o Not applicable to accuracy-related penalty To use, write a letter citing the FTA request. o File all forms, agree to pay all taxes and have a threeyear clean history of other penalties. o Applies only to one period. If multiple periods, will apply to earliest and the later periods may be abated on reasonable cause. . . . Speaking of Penalties Increased Penalty for Failure to Provide Information Forms Effective this upcoming filing season (2016) for 2015 forms Applies to W-2, 1099-R, 1099-MISC, 1094-B/1094-C, and 1095-B/1095-C Penalty increases from $100 per to $250 per form
o If corrected within 30 days, drops to $50 o If corrected >30 days, but before August 1, penalty is $100 Social Security Loopholes Closed Social Security Loopholes Closed Bipartisan Budget Act 2015 Loophole 1: File and Suspend CLOSES after April 30, 2016 OLD: Higher-earning spouse files and immediately suspends, so that lower earning spouse can claim spousal benefits. NOW: o Spouse can no longer claim benefits off uncollected filing o
Can also no longer change mind and collect backbenefits. Social Security Loopholes Closed Loophole #2: Claim Now, Claim More Later CLOSES for individuals reaching 62 in 2016 onward OLD: Lower-earning spouse files for benefits. Higherearning spouse not at FRA files for spousal benefits, then files at 70 for higher benefits. NOW: If a filer is eligible for both retirement and spousal benefits, will automatically receive the higher of the two. Inflation Adjustments Tax Rates for 2014-2016 Single Filing Status 2014 2015 2016 10% on the first
9,075 9,225 9,275 Plus 15% up to 36,900 37,450 37,650 Plus 25% up to 89,350 90,750 91,150
Plus 28% up to 186,350 189,300 190,150 Plus 33% up to 405,100 411,500 413,350 Plus 35% up to 406,750 413,200
415,050 Plus 39.6% thereafter Tax Rates for 2014-2016 Married Filing Joint 2014 2015 2016 10% on the first 18,150 18,450 18,550 Plus 15% up to
73,800 74,900 75,300 Plus 25% up to 148,850 151,200 151,900 Plus 28% up to 226,850 230,450 231,450
Plus 33% up to 405,100 411,500 413,350 Plus 35% up to 457,600 464,850 466,950 plus 39.6% thereafter Standard Deduction Married Joint Head of
Household Single Married Separate 2013 $12,200 2014 $12,400 2015 $12,600 2016 $12,600 $8,950 $9,100 $9,250
2015 2016 Personal $3,950 $4,000 $4,050 Kiddie Tax* $2,000 $2,100 $2,100 * Include on parents 1040 if kiddie income is:
2014 2014 $117,000 2015 $1,000 - $10,000 $1,050 - $10,500 2016 $1,050 - $10,500 The Kiddie-Tax Rate Kiddie tax applies if: Child is under 19 (24 if a student not supporting self with earned income) Either parent is alive Unearned income exceeds $2,100 and Child doesnt file joint return Return of Pease and Exemption Phaseouts
Personal Exemptions are reduced by 2% for each $2,500 in excess of AGI above the applicable threshold Thresholds 2014 2015 2016 Single $254,200 $258,250 $259,400 Married Joint $305,050
$309,900 $311,300 Head Household $279,650 $284,050 $285,350 Married Separate $152,525 $154,950 $155,650
54% Annual IRA Contributions Year 2008-2012 2013-2016 Max IRA Contribution $5,000 $5,500 IRA Catch-up Contribution $1,000 $1,000 Active Participant(S) Limit
Year Single Taxpayer Joint Return 2013 2014 2015 2016 $59,000 - $69,000 $60,000 - $70,000 $61,000 - $71,000 $61,000 - $71,000 $95,000 - $115,000 $96,000 - $116,000 $98,000 - $118,000 $98,000 - $118,000 One Spouse Active Participant
If one spouse is an active participant and one is not, o Second spouse may contribute o Much higher AGI limits to determine if deduction is allowed Taxable Year 2013 2014 2015 2016 AGI Phaseout Range $178,000 $188,000 $181,000 $191,000 $183,000 $193,000 $184,000 $194,000 Annual Roth IRA Contributions Year Max Roth IRA Contribution
Roth Catch-up Contribution 2008-2012 2013-2016 $5,000 $5,500 $1,000 $1,000 Roth IRA AGI Phase-out Amount Year Single Taxpayer Joint Return
2013 $112,000 - $127,000 $178,000 - $188,000 2014 $114,000 - $129,000 $181,000 - $191,000 2015 $116,000 - $131,000 $183,000 - $193,000 2016 $117,000 - $132,000 $184,000 - $194,000 Note: Active participation is not considered when determining
Roth IRA limitations Pension Limitation Amounts 2014 2015 2016 Max defined contribution plan $52,000 $53,000 $53,000 SEP-IRA $52,000
$53,000 $53,000 Max annual benefit for a defined benefit plan $210,000 $210,000 $210,000 SIMPLES $12,000 $12,500 $12,500 Annual compensation
$12,500 Age 50 Catch-Up Contributions 2009-2014 2015-2016 401(k); 403(b); 457; SARSEP $5,500 $6,000 SIMPLE $2,500 $3,000 Social Security: 2014 - 2016 SSI Beneficiaries receive 1.7% COLA adjustments for 2015.
0% for 2016. Therefore also no Part B premium increase for many. Max SS Taxable Earnings o 2014: $117,000 o 2015 - 2016: $118,500 Retirement Earnings Limits Under FRA Year Reach FRA After FRA 2014 2015-2016 $15,480 $41,400 No Limit $15,720 $41,880
No Limit Medicare Premiums 2015 and 2016 Medicare B and D Annual Premiums $1,259 - $4,860 Watch for 52% increases for B and D in 2016 Estate Transfer Tax Chart Persons Dying in Applicable Exclusion Amount Applicable Credit Amount Top Marginal Tax Rate
2009 $3,500,000 ($1 million for gift tax) $1,455,800 45% 2010 $5,000,000 or no estate tax if using modified carryover basis $330,800 35% or no estate tax if election made
40% 2014/2015 $5,340,000/$5,430,000 $2,081,800/$2,125,800 40% 2016 $5,450,000 $2,125,800* 40% *Assessing no change to top marginal rate Gift Annual Exclusion
$14,000 unchanged since 2014 Noncitizen spouse o o o Receipt of Gifts Reportable from Foreign Donors: o o 2014: $145,000 2015: $147,000 2016: $148,000 From Nonresident alien or foreign estate: $100,000
From Foreign Corporation or Partnership: 2014: $15,601 2015: $15,671 Transfers from Foreign Donors o Estate tax exclusion for foreign owners of U.S. property: $60,000 o Gifts No lifetime exclusion. Only annual exclusion Real, Tangible, and Cash (U.S. stocks are not reportable for Gift Tax Purposes) 179 Expense Election 2008-2009
2010-2014 2015* Maximum 179 deduction $250,000 $500,000 $25,000 Phase-out begins $800,000 $2,000,000 $200,000 *Unless Congress enacts extender
168(k) Bonus Depreciation Expired for assets purchased after 2014 1/1/10 9/9/10 9/9/10 12/31/11 2012-2014 2015 50% 100% 50% -0-% Federal Mileage Per Diem Rates
Charitable Mileage 14 14 14 Foreign Updates Inflation adjustments o Foreign Earned Income Exclusions 2014 2015 2016 o $99,200 $11,800 $101,300
Expatriation: Average Annual Net Income Tax (Past 5 Years) Market-to-Market Exclusion 2015 2016 $160,000 $161,000 $690,000 $693,000 Foreign Reporting: FinCEN 114 Due June 30, no extensions Two parts:
o Disclosure on Schedule B (with the 1040) even if no Interest or Dividend Income o Filing the FBAR Every U.S. Person with an aggregate value of foreign financial accounts in which there is either signature authority or financial interest at any point in the year reaches $10,000 FinCEN 114 Terms U.S. Person: o USA = 50 states + D.C. + all territories/possessions o person in the legal sense entities, kids, trusts, estates regardless of income tax filing o U.S. residents and citizens o Entities (corporations, LLCs, trusts) formed in the US. NOT IRAs or qualified plans. Aggregate Value o Doesnt require any one account to exceed $10,000 o Convert to USD at www.fms.treas.gov
FinCEN 114 Terms Cont. Foreign - At a branch that is located outside the US o US bank physically located outside the US = FOREIGN o Foreign bank physically located inside the US = DOMESTIC Financial Account o Securities, brokerage, savings, demand, checking, deposit, time deposit o Futures or options contracts o Life insurance or annuities with a cash value Signature Authority o Controls the disposition of assets o Certain exceptions apply if signature authority but NO financial interest FinCEN 114 Terms Cont. Financial o o Interest
Owner of Record or Holder of Legal Title, regardless of whether the account is maintained for client or someone else, OR The Owner of Record or Holder of Legal Title is Agent, attorney, nominee acting on behalf of US person Corporation, Partnership or other entity in which US person owns directly or indirectly > 50% stock/profits interest Trust US person is grantor AND has an ownership interest for US tax purposes, OR A US Person has a > 50% present beneficial interest in assets or income FinCEN 114 Examples U.S. LLC (holding company) owns 65% of a foreign corporation o No bank accounts of its own o LLC reports the full value of bank accounts of its offshore corporate subsidiary U.S. individual with a Caribbean rental unit
o Managed by Property Manager o Report the escrow balance FBAR Failure-to-file penalties are enormous For willful failure, penalty is greater of 50% of foreign accounts highest balance or $100,000 $10,000 for non-willful violations Dont Forget Sch. B Question James Moore answered no to Foreign Account
question on Schedule B Failure negated reasonable cause argument to reverse FBAR penalty Penalty was $40,000 ($10,000 for each year) for failure to file an FBAR FinCEN 114 Lesson Learned Organizers are likely inadequate. o There have been cases where a no checked on the organizer was deemed intentional concealment in applying the non-filing penalties. o Spend a few more minutes asking about offshore interests. Reportable accounts may not be top-ofmind. Should I file? Probably. Foreign Financial Asset: FATCA IRS Form 8938 required if: Individual exceeds filing threshold
o No reporting for domestic entities (trusts, partnerships, etc.) Report aggregate balance in foreign financial assets o o Financial accounts o Stock or security Contract, interest o Form 8938 Filing Threshold If Total Value of Foreign Financial Assets Exceed Not Living Abroad Last Day of Year
Any Time During Year $50,000 OR $75,000 $100,000 OR $150,000 Single and MFS $200,000 OR $300,000 Married Filing Joint $400,000 OR $600,000
Single and MFS Married Filing Joint Living Abroad Duplicate Reporting Not Required Form 8938 reporting not required if assets reported on: Form 3520 Foreign Trusts Form 5471 Foreign Corporations Form 8621 Passive Foreign Investment Companies Form 8865 Foreign Partnerships IRS says failure file Form 8938 with tax return suspends statute of limitations Offshore Voluntary Disclosure Program (OVDP)
50,000 More voluntary disclosures to date than $7 billion collected Dont use if tax previously paid, but FBAR report not filed. File late FBARs and attach explanation Filing Status Supreme o o Court on 6/26/2015: Legally married same-sex couples Married for income tax purposes Form 8958 required to split community income
Switching from MFS to MFJ is allowed while statute is open and prior to 90 day notice Spouse wont sign, MFS it is (Salzer) 2015 Tax Rulings Voss: Mortgage Interest Deduction o $1,000,000 threshold on unmarried joint ownership of residence o Limit per person, not per residence Bobrow: only one 60-day rollover per year, not per IRA account (use trustee-to-trustee still) Gambling Winnings IRS
Notice 2015-01 proposes using gambling sessions to determine wins instead of single wins Proposal includes changing rules for W-2G This will allow gamblers to net gains and losses per session Session day defined as same game, same casino, same Questions?
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