Tax year 2015 is shaping up to be another busy year for tax professionals across the country, and keeping up to date with the latest tax law changes is instrumental in servicing your clients the best way possible. Below, we have summarized the most important tax regulation and compliance issues that you, your staff and your clients should be aware of as we navigate through tax season. Intuit’s software development staff has incorporated these changes, where applicable, into its best-in-class professional tax products: Lacerte®, ProSeries® and Intuit Tax Online.
Due Dates of Tax Returns
- Monday, April 18, 2016, for taxpayers living in states outside of Maine and Massachusetts because it’s Emancipation Day in Washington, DC, on Friday, April 15, 2016.
- Tuesday, April 19, 2016, for taxpayers living in Maine and Massachusetts because it’s Patriot’s Day on Monday, April 18, 2016.
IRS Raises Tangible Property Expensing Threshold to $2,500 in Tax Year 2016
The IRS will also provide audit protection and not challenge the use of the elevated levels in tax years before 2016. This change simplifies the filing and recordkeeping requirements and impacts small businesses that don’t maintain audited financial statements. The reason for the change is the cost of many commonly expensed items, such as cell phones and tablets, typically surpassing the $500 level.
Changes Related to the Affordable Care Act
Tax year 2015 marks the second year taxpayers are required to report their health insurance status on tax returns, and the first time in which some provisions of the ACA apply to employers. Key changes in 2015 include:
Changes for Individual Taxpayers
- Form 1095-A: Those who purchased a health insurance plan on healthcare.gov or a state Marketplace will receive Form 1095-A, which confirms coverage, premiums and subsidies received to help pay for health insurance. Intuit’s products make all of the necessary calculations for reconciliation to make tax preparation easy for tax professionals. This form is needed for accurate filing. If taxpayers underestimate their income and owe a portion of the subsidy back to the IRS, they may be able to reduce their household income and the amount owed by contributing money to a retirement account or health savings account.
- Form 1095-B and C: This year, people who were insured through their employer, a government program such as Medicaid or other private insurance, will most likely receive a new tax form – 1095-B or 1095-C – confirming coverage or offer of coverage. While forms may not be provided to taxpayers until March 31, tax professionals do not need these forms to file 2015 taxes for their clients, if they know their coverage status for the year. To independently corroborate a client’s health coverage, tax preparers can look at insurance cards, Explanation of Benefits (EOBs), payroll stubs or W2s.
- Penalty: The fee for not having health coverage in 2015 increased to $325 per adult ($162.50 per child), or two percent of household income above the threshold, whichever is greater. Individuals may be able to claim an exemption.
Changes for Small Businesses
- Form 1095-B: Employers with fewer than 100 employees are not subject to the employer shared-responsibility provision this tax year, and employers with fewer than 50 employees will not issue form 1095-B unless they offer employee insurance that is self-funded.
- Small Business Options Program: Small businesses can purchase health insurance for their employees through the Small Business Options Program (SHOP) through the Marketplace. Employers with fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit. SHOP enrollees will not receive a 1095-A.
Earned Income Tax Credit Due Diligence Checklist (Form 8867)
The IRS has been increasing compliance audits for the earned income tax credit, and retaining the proper documentation is the key to passing the audit without incurring any penalties. Preparers will prepare the EITC checklist, but oftentimes, they don’t keep a copy of the document from the client that the preparer relied on (Form 8867, Part V). A good practice would be to not only keep the document, but also attach a copy with a printed return or attach a PDF copy with the e-filed return.
Intuit Security Enhancements
For tax year 2015, Intuit has implemented the following security enhancements for its professional tax products – Intuit Tax Online, ProSeries and Lacerte – to further strengthen customer identity authentication and notification:
- Multi-factor authentication: New for tax year 2015, Intuit has implemented multi-factor authentication in its professional tax products to help authenticate user identities and help tax professionals securely sign into their account. When tax professionals access their account for the first time or from a new device, they will automatically be sent a unique, six-digit code to their pre-designated, trusted device to be used in combination with their password to access their account.
- E-file Identification Number Requirements: Intuit requires that all Electronic Return Originators (EROs) possess IRS-issued e-file Identification Numbers (EFIN) before e-filing. New tax professional customers must have IRS documentation of EFIN registration on file before they can e-file through Intuit’s professional tax products. In addition, Intuit will proactively notify tax preparers who use the company’s professional tax software when it appears that their EFIN may have been compromised so that they can reinstate their EFIN with the IRS.
Tips to Help Tax Professionals Fight Fraud
As tax professionals head into the tax season, Intuit offers the following tips to help further protect themselves, their clients and their office:
- Shred financial records: Shred all documents that include sensitive client information before throwing them away.
- Restrict access to client files and computers: All computers with sensitive client records should be protected with a strong password. Create a combination of upper and lower case letters, numbers, and symbols. Don’t use passwords that are generic and easy to guess, such as your firm name, the word “password” or a numeric sequence. Paper files should be kept locked and access restricted.
- Beware of phishing scams: Criminals use fraudulent emails and create fake websites to lure unsuspecting users into revealing private account information, like your EFIN. Be suspicious of unsolicited emails that ask for confidential or sensitive information, and include a link to a website. Mouse over the link, look at the site’s address and make certain that it appears legitimate before clicking. Intuit posts notices for phishing emails on the Intuit Online Security Center.
- Install or update anti-virus software on computers: Use the latest version of your web browser. Install security patches and software updates as soon as they are available.
- Educate clients: Help educate clients about what they can do to protect themselves online, including protecting their computer and mobile device, creating strong passwords, and being aware of phishing scams.
Same Sex Marriage
All states now must license a marriage between two people of same sex. Same sex married couples must file returns as the married filing status (either joint or separate). You no longer have to file a married return for federal purposes and two individual returns in states that didn’t adopt same sex marriage.
New ABLE Accounts
For families of those with disabilities, there has been no tax-advantaged way to save for individuals with disabilities. Beginning in tax year 2015, states are allowed to create “Achieving a Better Life Experience” (ABLE) accounts, which are tax-free accounts used to save for disability-related expenses for individuals to support themselves, or by families to support dependents. There is no federal taxation on funds held in an ABLE account.
Assets can be accumulated, invested, grown and distributed without any federal tax impact. Contributions are made on an after-tax basis, and assets grow tax-free and are not subject to tax if used for disability related expenses. The expenses must benefit the disabled individual and be related to the disability, such as, education, housing, transportation, employment support, health, prevention and wellness costs, assistive technology, and personal support services.
Under the Protecting Americans from Tax Hikes Act of 2015 (PATH), Congress has retroactively extended many expiring tax breaks. Almost half of the tax provisions were extended permanently, and the remaining provisions were extended for at least a year. About 11 million tax filers claimed one or more tax extender benefits when filing in the past. The following are some of the higher impact items. For a full list, please refer to the Technical Explanation.
- Enhanced child tax credit, American opportunity tax credit and earned income tax credit
- Deduction for expenses of elementary and secondary school teachers
- Deduction of State and local general sales taxes
- Tax-free distributions from individual retirement plans for charitable purposes
- Increased expensing limitation ($500,000)
Extensions Through 2019
- Bonus depreciation (50 percent through 2017)
Extensions Through 2016
- Above-the-line deduction for qualified tuition and related expenses
- Exclusion from gross income of discharge of qualified principal residence indebtedness
- Mortgage insurance premiums treated as qualified residence interest
- Credit for nonbusiness energy property