- Tax Changes for 2016: A Checklist
- 10 Tax Breaks Reauthorized for Tax Year 2015
- Ensuring Financial Success for Your Business
- Tangible Property Expensing Threshold Increases
- Tax Brackets, Deductions, and Exemptions for 2016
- Advance Payments of the Premium Tax Credit
- ALES: Information Reporting and Health Coverage
- IRS Announces Standard Mileage Rates in 2016
Tax Changes for 2016: A Checklist
Welcome, 2016! As the New Year rolls around, it’s always a sure bet that there will be changes to current tax law and 2016 is no different. From health savings accounts to retirement contributions and standard deductions, here’s a checklist of tax changes to help you plan the year ahead.
For 2016, more than 50 tax provisions are affected by inflation adjustments, including personal exemptions, AMT exemption amounts, and foreign earned income exclusion.
For 2016, the tax rate structure, which ranges from 10 to 39.6 percent, remains the same as in 2015, but tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see the article, “Tax Brackets, Deductions, and Exemptions for 2016,” below.
Alternative Minimum Tax (AMT)
Exemption amounts for the AMT, which was made permanent by the American Taxpayer Relief Act (ATRA) are indexed for inflation and allow the use of nonrefundable personal credits against the AMT. For 2016, the exemption amounts are $53,900 for individuals ($53,600 in 2015) and $83,800 for married couples filing jointly ($83,400 in 2015).
For taxable years beginning in 2016, the amount that can be used to reduce the net unearned income reported on the child’s return that is subject to the “kiddie tax,” is $1,050 (same as 2015). The same $1,050 amount is used to determine whether a parent may elect to include a child’s gross income in the parent’s gross income and to calculate the “kiddie tax.” For example, one of the requirements for the parental election is that a child’s gross income for 2016 must be more than $1,050 but less than $10,500.
For 2016, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to “kiddie tax” is $2,100.
Health Savings Accounts (HSAs)
Contributions to a Health Savings Account (HSA) are used to pay current or future medical expenses of the account owner, his or her spouse, and any qualified dependent. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.
A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.
For calendar year 2016, a qualifying HDHP must have a deductible of at least $1,300 for self-only coverage or $2,600 for family coverage and must limit annual out-of-pocket expenses of the beneficiary to $6,550 for self-only coverage and $13,100 for family coverage.
Medical Savings Accounts (MSAs)
There are two types of Medical Savings Accounts (MSAs): the Archer MSA created to help self-employed individuals and employees of certain small employers, and the Medicare Advantage MSA, which is also an Archer MSA, and is designated by Medicare to be used solely to pay the qualified medical expenses of the account holder. To be eligible for a Medicare Advantage MSA, you must be enrolled in Medicare. Both MSAs require that you are enrolled in a high-deductible health plan (HDHP).
Self-only coverage. For taxable years beginning in 2016, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,250 ($2,200 in 2015) and not more than $3,350 (up $50 from 2015), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450 (same as 2015).Family coverage. For taxable years beginning in 2016, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,450 (same as 2015) and not more than $6,700 (up $50 from 2015), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150 (same as 2015).
AGI Limit for Deductible Medical Expenses
In 2016, the deduction threshold for deductible medical expenses remains at 10 percent (same as 2015) of adjusted gross income (AGI); however, if either you or your spouse were age 65 or older as of December 31, 2015, the new 10 percent of AGI threshold will not take effect until 2017. In other words, the 7.5 percent threshold that was in place in earlier tax years continues to apply for tax year 2016 for these individuals. In addition, if you or your spouse turns age 65 in 2016, the 7.5 percent of AGI threshold applies for that year (through 2016) as well. Starting in 2017, the 10 percent of AGI threshold applies to everyone.
Eligible Long-Term Care Premiums
Premiums for long-term care are treated the same as health care premiums and are deductible on your taxes subject to certain limitations. For individuals age 40 or younger at the end of 2016, the limitation is $390. Persons more than 40 but not more than 50 can deduct $730. Those more than 50 but not more than 60 can deduct $1,460 while individuals more than 60 but not more than 70 can deduct $3,900. The maximum deduction is $4,870 and applies to anyone more than 70 years of age.
The additional 0.9 percent Medicare tax on wages above $200,000 for individuals ($250,000 married filing jointly), which went into effect in 2013, remains in effect for 2016, as does the Medicare tax of 3.8 percent on investment (unearned) income for single taxpayers with modified adjusted gross income (AGI) more than $200,000 ($250,000 joint filers). Investment income includes dividends, interest, rents, royalties, gains from the disposition of property, and certain passive activity income. Estates, trusts, and self-employed individuals are all liable for the new tax.
Foreign Earned Income Exclusion
For 2016, the foreign earned income exclusion amount is $101,300, up from $100,800 in 2015.
Long-Term Capital Gains and Dividends
In 2016 tax rates on capital gains and dividends remain the same as 2015 rates; however threshold amounts are indexed for inflation. As such, for taxpayers in the lower tax brackets (10 and 15 percent), the rate remains 0 percent. For taxpayers in the four middle tax brackets, 25, 28, 33, and 35 percent, the rate is 15 percent. For an individual taxpayer in the highest tax bracket, 39.6 percent, whose income is at or above $415,050 ($466,950 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.
Pease and PEP (Personal Exemption Phaseout)
Both Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been permanently extended (and indexed to inflation) for taxable years beginning after December 31, 2012, and in 2016, affect taxpayers with income at or above $259,400 for single filers and $311,300 for married filing jointly.
Estate and Gift Taxes
For an estate of any decedent during calendar year 2016, the basic exclusion amount is $5,450,000, indexed for inflation (up from $5,430,000 in 2015). The maximum tax rate remains at 40 percent. The annual exclusion for gifts remains at $14,000.
Individuals – Tax Credits
In 2016, a non-refundable (only those individuals with tax liability will benefit) credit of up to $13,460 is available for qualified adoption expenses for each eligible child.
Earned Income Tax Credit
For tax year 2016, the maximum earned income tax credit (EITC) for low and moderate income workers and working families rises to $6,269, up from $6,242 in 2015. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.
Child Tax Credits
For tax year 2016, the child tax credit is $1,000 per child.
The enhanced child tax credit was made permanent this year by the Protecting Americans from Tax Hikes Act of 2015 (PATH). In addition to a $1,000 credit per qualifying child, an additional refundable credit equal to 15 percent of earned income in excess of $3,000 has been available since 2009.
Child and Dependent Care Credit
If you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses in 2016. For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher income earners the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.
Individuals – Education
American Opportunity Tax Credit and Lifetime Learning Credits
The American Opportunity Tax Credit (formerly Hope Scholarship Credit) was extended to the end of 2017 by ATRA, but was made permanent by PATH in 2015. The maximum credit is $2,500 per student. The Lifetime Learning Credit remains at $2,000 per return.
Interest on Educational Loans
In 2016 (as in 2015), the $2,500 maximum deduction for interest paid on student loans is no longer limited to interest paid during the first 60 months of repayment. The deduction is phased out for higher-income taxpayers with modified AGI of more than $65,000 ($130,000 joint filers).
Individuals – Retirement
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains at $18,000 . Contribution limits for SIMPLE plans remain at $12,500. The maximum compensation used to determine contributions remains at $265,000.
Income Phase-out Ranges
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by an employer-sponsored retirement plan and have modified AGI between $61,000 and $71,000 (unchanged from 2015).
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by an employer-sponsored retirement plan, the phase-out range remains unchanged at $98,000 to $118,000. For an IRA contributor who is not covered by an employer-sponsored retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s modified AGI is between $184,000 and $194,000, up from $183,000 and $193,000.
The modified AGI phase-out range for taxpayers making contributions to a Roth IRA is $184,000 to $194,000 for married couples filing jointly, up from $183,000 to $193,000 in 2015. For singles and heads of household, the income phase-out range is $117,000 to $132,000, up from $116,000 to $131,000. For a married individual filing a separate return who is covered by a retirement plan, the phase-out range remains $0 to $10,000.
In 2016, the AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate income workers is $61,500 for married couples filing jointly, up from $61,000 in 2015; $46,125 for heads of household, up from $45,750; and $30,750 for married individuals filing separately and for singles, up from $30,500.
Standard Mileage Rates
The rate for business miles driven is 54 cents per mile for 2016, down from 57.5 cents per mile in 2015.
Section 179 Expensing
The Section 179 expense deduction was made permanent at $500,000 by the Protecting Americans from Tax Hikes Act of 2015 (PATH). For equipment purchases, the maximum deduction is $500,000 of the first $2,010,000 million of qualifying equipment placed in service during the current tax year. The deduction is phased out dollar for dollar on amounts exceeding the $2 million threshold (adjusted for inflation beginning in tax year 2016) amount and eliminated above amounts exceeding $2.5 million. In addition, Section 179 is now indexed to inflation in increments of $10,000 for future tax years.
The 50 percent bonus depreciation has been extended through 2019. Businesses are able to depreciate 50 percent of the cost of equipment acquired and placed in service during 2015, 2016 and 2017. However, the bonus depreciation is reduced to 40 percent in 2018 and 30 percent in 2019.
Work Opportunity Tax Credit (WOTC)
Extended through 2019, the Work Opportunity Tax Credit has been modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more), and is generally equal to 40 percent of the first $6,000 of wages paid to a new hire.
Research & Development Tax Credit
Starting in 2016, businesses with less than $50 million in gross receipts are able to use this credit to offset alternative minimum tax. Certain start-up businesses that might not have any income tax liability will be able to offset payroll taxes with the credit as well.
Employee Health Insurance Expenses
For taxable years beginning in 2016, the dollar amount is $25,900. This amount is used for limiting the small employer health insurance credit and for determining who is an eligible small employer for purposes of the credit.
Employer-provided Transportation Fringe Benefits
If you provide transportation fringe benefits to your employees, in 2016 the maximum monthly limitation for transportation in a commuter highway vehicle as well as any transit pass is $255 and the monthly limitation for qualified parking is $255 (up $5 from 2015). Parity for employer-provided mass transit and parking benefits was made permanent by PATH.
While this checklist outlines important tax changes for 2016, additional changes in tax law are more than likely to arise during the year ahead. Don’t hesitate to call if you want to get an early start on tax planning for 2016!
10 Tax Breaks Reauthorized for Tax Year 2015
Congress finally took action in late December and passed a tax extender bill formally known as the Protecting Americans from Tax Hikes Act of 2015 (PATH), which was then signed into law. Retroactive to January 1, 2015, many tax provisions were made permanent while others were extended through 2016 or 2019. Let’s take a look at some of the tax provisions most likely to affect taxpayers when filing their 2015 tax returns.
1. Teachers’ Deduction for Certain Expenses
Primary and secondary school teachers buying school supplies out-of-pocket may be able to take an above-the-line deduction of up to $250 for unreimbursed expenses. An above the line deduction means that it can be taken before calculating adjusted gross income. This deduction was made permanent and indexed for inflation.
2. State and Local Sales Taxes
The deduction for state and local sales taxes was made permanent by PATH. Taxpayers that pay state and local sales tax can deduct the amounts paid on their federal tax returns (instead of state and local income taxes)–as long as they itemize.
3. Mortgage Insurance Premiums
Mortgage insurance premiums (PMI) are paid by homeowners with less than 20 percent equity in their homes. These premiums were deductible in tax years 2013, 2014, and now, once again in 2015. This deduction was extended through 2016. Mortgage interest deductions for taxpayers who itemize are not affected.
4. Exclusion of Discharge of Principal Residence Indebtedness
Typically, forgiven debt is considered taxable income in the eyes of the IRS; however, this tax provision has been extended through 2016, allowing homeowners whose homes have been foreclosed on or subjected to short sale to exclude up to $2 million of canceled mortgage debt. Also included are taxpayers seeking debt modification on their home.
5. Distributions from IRAs for Charitable Contributions
Taxpayers who are age 70 1/2 or older can donate up to $100,000 in distributions from their IRA to charity. Some people do not want to take the mandatory minimum distributions (which are counted as income) upon reaching this age and instead can contribute it to charity, using it as a strategy to lower income enough to take advantage of other tax provisions with phaseout limits. This deduction was made permanent by PATH.
6. Parity for Mass Transit Fringe Benefits
This tax extender allows commuters who used mass transit in 2015 to exclude from income (up to $250 per month), transit benefits paid by their employers such as monthly rail or subway passes, making it on par with parking benefits (also up to $250 pre-tax). Like many other tax extenders, this provision was made permanent.
7. Energy Efficient Improvements (including Appliances
This tax break has been around for a while, but if you made your home more energy efficient in 2015, now is the time to take advantage of this tax credit on your 2015 tax return. The credit reduces your taxes as opposed to a deduction that reduces your taxable income and is 10 percent of the cost of building materials for items such as insulation, new water heaters, or a wood pellet stove.
Note: This tax is cumulative, so if you’ve taken the credit in any tax year since 2006, you will not be able to take the full $500 tax credit this year. If, for example, you took a credit of $300 in 2013, the maximum credit you could take this year is $200.
8. Qualified Tuition and Expenses
The deduction for qualified tuition and fees, extended through 2016, is an above-the-line tax deduction, which means that you don’t have to itemize your deductions to claim the expense. Taxpayers with income of up to $130,000 (joint) or $65,000 (single) can claim a deduction for up to $4,000 in expenses. Taxpayers with income over $130,000 but under $160,000 (joint) and over $65,000 but under $80,000 (single) can take a deduction up to $2,000; however, taxpayers with income over those amounts are not eligible for the deduction.
Qualified education expenses are defined as tuition and related expenses required for enrollment or attendance at an eligible educational institution. Related expenses include student-activity fees and expenses for books, supplies, and equipment as required by the institution.
9. Donation of Conservation Property
Also made permanent was a tax provision that allowed taxpayers to donate property or easements to a local land trust or other conservation organization and receive a tax break in return. Under this tax provision, deductions of qualified conservation contributions up to 50 percent of a taxpayer’s contribution base (100 percent for qualified farmers and ranchers) are allowed.
10. Small Business Stock
If you invested in a small business such as a start-up C-corporation in 2015, consider taking advantage of this tax provision on your 2015 tax return. If you held onto this stock for five years, you can exclude 100 percent of the capital gains–in other words, you won’t be paying any capital gains. This deduction was made permanent by PATH.
If you’re wondering whether you should be taking advantage of these and other tax credits and deductions, please call today.
Ensuring Financial Success for Your Business
Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?
Not quite. You can’t let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way – decisions about pricing, hiring, investments, and so on.
So, how do you handle the array of questions facing you?
One way is through cost accounting.
Cost Accounting Helps You Make Informed Decisions
Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions – raw materials, labor, inventory, and overhead, among others.
Note: Cost accounting differs from financial accounting because it’s only used internally, for decision making. Because financial accounting is employed to produce financial statements for external stakeholders, such as stockholders and the media, it must comply with generally accepted accounting principles (GAAP). Cost accounting does not.
Cost accounting allows you to understand the following:
- Cost behavior. For example, will the costs increase or stay the same if production of your product goes up?
- Appropriate prices for your goods or services. Once you understand cost behavior, you can tweak your pricing based on the current market.
- Budgeting. You can’t create an effective budget if you don’t know the real costs of the line items.
Is It Hard?
To monitor your company’s costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.
Fixed costs don’t fluctuate with changes in production or sales. They include:
- dues and subscriptions
- equipment leases
- payments on loans
- management salaries
Variable costs DO change with variations in production and sales. Variable costs include:
- raw materials
- hourly wages and commissions
- office supplies
- packaging, mailing, and shipping costs
Tip: Cost accounting is easier for smaller, less complicated businesses. The more complex your business model, the harder it becomes to assign proper values to all the facets of your company’s functioning.
If you’d like to understand the ins and outs of your business better and create sound guidance for internal decision making, consider setting up a cost accounting system.
Please call if you need assistance setting up cost accounting and inventory systems, preparing budgets, cash flow management or any other matter related to ensuring the financial success of your business.
Tangible Property Expensing Threshold Increases
The safe harbor threshold for small businesses deducting certain capital items has increased from $500 to $2,500. The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.
The change affects businesses that do not maintain an applicable financial statement (audited financial statement). It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.
For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.
The new $2,500 threshold applies to any such item substantiated by an invoice. Small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions, simplifying paperwork and recordkeeping requirements.
During the February comment period, the IRS received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce the administrative burden on small business. Moreover, the cost of many commonly expensed items such as tablet-style personal computers, smartphones, and machinery and equipment parts typically surpass the $500 threshold.
As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.
Please call if you have any questions or would like additional details about this change.
Tax Brackets, Deductions, and Exemptions for 2016
More than 50 tax provisions, including the tax rate schedules, and other tax changes are adjusted for inflation in 2016. Let’s take a look at the ones most likely to affect taxpayers like you.
The tax rate of 39.6 percent affects singles whose income exceeds $415,050 ($466,950 for married taxpayers filing a joint return), up from $413,200 and $464,850, respectively. The other marginal rates–10, 15, 25, 28, 33 and 35 percent–and related income tax thresholds–are found at IRS.gov.
The standard deduction remains at $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly. The standard deduction for heads of household rises to $9,300, up from $9,250.
The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
The personal exemption for tax year 2016 rises to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
The Alternative Minimum Tax exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly). For tax year 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
For 2016, the maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000, up from a total of $5,430,000 for estates of decedents who died in 2015.
For 2016, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $148,000, up from $147,000 for 2015.
For 2016, the foreign earned income exclusion rises to $101,300, up from $100,800 in 2015.
The annual exclusion for gifts remains at $14,000 for 2016.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains at $2,550.
Under the small business health care tax credit, the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,900 for tax year 2016, up from $25,800 for 2015.
Need help with tax planning in 2016? Help is just a phone call away!
Advance Payments of the Premium Tax Credit
When you enroll in coverage through the Marketplace during Open Season, which runs through Jan. 31, 2016, you can choose to have monthly advance credit payments sent directly to your insurer. If you get the benefit of advance credit payments in any amount, or if you plan to claim the premium tax credit, you must file a federal income tax return and use Form 8962.
Form 8962, Premium Tax Credit (PTC), reconciles the amount of advance credit payments made on your behalf with the amount of your actual premium tax credit. You must file an income tax return for this purpose even if you are otherwise not required to file a return.
Here are four things to know about advance payments of the premium tax credit:
- If the premium tax credit computed on your return is more than the advance credit payments made on your behalf during the year, the difference will increase your refund or lower the amount of tax you owe. This will be reported in the ‘Payments’ section of Form 1040.
- If the advance credit payments are more than the amount of the premium tax credit you are allowed, you will add all or a portion of the excess advance credit payments made on your behalf to your tax liability by entering it in the ‘Tax and Credits’ section of your tax return. This will result in either a smaller refund or a larger balance due.
- If advance credit payments are made on behalf of you or an individual in your family, and you do not file a tax return, you will not be eligible for advance credit payments or cost-sharing reductions to help pay for your Marketplace health insurance coverage in future years.
- The amount of excess advance credit payments that you are required to repay may be limited based on your household income and filing status.
If your household income is 400 percent or more of the applicable federal poverty line, you will have to repay all of the advance credit payments. Repayment limits by household income as a percentage of the federal poverty line are listed below.
If your household income is less than 200 percent of the Federal Poverty Line, the limitation amount is $300 for single filers and $600 for all other filing statuses.
If your household income is at least 200 percent, but less than 300 percent of the Federal Poverty Line the limitation amount is $750 for single filers and $1,500 for all other filing statuses.
If your household income is at least 300 percent, but less than 400 percent of the Federal Poverty Line the limitation amount is $1,250 for single filers and $2,500 for all other filing statuses.
If your household income is more than 400 percent of the Federal Poverty Line, there is no limitation amount for any filing status.
If you have any questions, don’t hesitate to call the office.
ALES: Information Reporting and Health Coverage
The Affordable Care Act requires applicable large employers (ALEs) to file information reporting returns with the IRS and employees. ALEs are generally those employers with 50 or more full-time employees, including full-time equivalent employees in the preceding calendar year.
The vast majority of employers are not ALEs and are not subject to this health care tax provision. However, those who are must use Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, to report the information about offers of health coverage and enrollment in health coverage for their employees.
Here are eight things ALEs should know about the information returns they must file at the beginning of 2016.
1. Form 1095-C is used to report information about each employee who was a full-time employee of the ALE member for any month of the calendar year.
2. Form 1094-C must be used to report to the IRS summary information for each employer, and to transmit Forms 1095-C to the IRS.
3. ALEs file a separate Form 1095-C for each of its full-time employees, and a transmittal on Form 1094-C for all of the returns filed for a given calendar year.
4. Employers that offer employer-sponsored self-insured coverage use Form 1095-C to report information to the IRS and to employees about individuals who have minimum essential coverage under the employer plan.
5. The information reported on Form 1094-C, and Form 1095-C is used in determining whether an employer owes a payment under the employer shared responsibility provisions.
6. Form 1095-C is used by the IRS and the employee in determining the eligibility of the employee for the premium tax credit.
7. An ALE may satisfy this requirement by filing a substitute form, but the substitute form must include all of the information required on Form 1094-C and Form 1095-C and satisfy all form and content requirements as specified by the IRS.
8. Forms 1094-C and 1095-C, or a substitute form must be filed regardless of whether the ALE member offers coverage, or the employee enrolls in any coverage offered.
Questions?If you have any questions regarding information reporting and health coverage, please call.
IRS Announces Standard Mileage Rates in 2016
Beginning on Jan. 1, 2016, the standard mileage rates for the use of a car, van, pickup or panel truck are:
- 54 cents per mile for business miles driven, down from 57.5 cents for 2015
- 19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
- 14 cents per mile driven in service of charitable organizations
The business mileage rate decreased 3.5 cents per mile and the medical, and moving expense rates decrease 4 cents per mile from the 2015 rates. The charitable rate is based on statute.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
These optional standard mileage rates are used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously. Call if you need additional information about these and other special rules.
In addition, basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) Plan were also announced by the IRS.
If you have any questions about standard mileage rates or which driving activities you should keep track of as tax year 2016 begins, do not hesitate to call the office.
Get Ready for 2016: QuickBooks Can Help
There’s something very satisfying about turning our calendars to January. It always feels like a fresh start. We resolve to develop new, better ways of using our work and leisure time. We reflect on what we accomplished in the last 12 months, and we look forward to achieving even more in the next 12.
But sometimes we have a nagging feeling that we forgot something. And it often has to do with our finances, both personal and professional.
You can take steps now to make the new year less worrisome. Doing some extra work in QuickBooks now will ensure that you start the new year ready to move ahead, rather than scrambling to see what you missed on come January.
Where to start? Depending on how conscientiously you entered transactions and ran reports, you might need to set some extra time aside in the midst of your other year-end and holiday-related commitments.
For example, did you instruct QuickBooks to “close your books” at the end of the year? QuickBooks will automatically make year-end adjustments if you entered December 31 as a closing date in Preferences. However, it is not required, and there are both advantages and disadvantages to doing so. We can help you decide if this is the best decision for your company.
Figure 1: If you set a closing date of December 31 in QuickBooks’ Preferences, you need to prepare your company file for this deadline in advance.
Prior to this, though, there’s another important task you should complete before the end of the year. It is common sense, but not everyone thinks of it during the December rush: Make sure you have entered all transactions and payments that should be included in your QuickBooks file for 2015.
If anyone else on your staff works in QuickBooks, make sure they know that you are trying to wrap up the year. If they are holding anything back because of questions and comments, now is the time to confer with you.
Taxes and Accounts
You may already be working with us on tax planning, but if you are not, then it is never too early to project your incoming and outgoing funds for the new year.
Figure 2: Use QuickBooks to make decisions about income and/or expenses to reduce your tax obligation next year.
Talk to us about your tax situation if you think this may be necessary. We may not be able to prepare your taxes just yet, but we can create financial reports and projections that help you prepare for filing.
Odds and Ends
How do you back up your QuickBooks company file? Is it on a local drive or in the cloud? How often do you do this? Archiving your data is critical. Think about what would happen if you lost your customer records or a month’s worth of transactions or multiple payments. This is an area where we can provide guidance. Is there a better, safer way to ensure data security? Are there special backup activities you should do at year’s end?
Some companies wait until the end of January to do a physical inventory count. Rather than being surprised, you may want to consider doing this now if it is feasible.
And when you think you have entered everything but payments or transactions that may come in at the end of the year, all accounts should be reconciled.
Figure 3: By late December or early January, you should do a final reconciliation of all accounts for the previous year.
QuickBooks makes it easy to do this regularly, but if you need assistance, we can help you ring in the New Year on a more confident note.
Tax Due Dates for January 2016
All employers – Give your employees their copies of Form W-2 for 2015 by February 1, 2016. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee of the posting by February 1.
All Businesses – Give annual information statements to recipients of certain payments you made during 2015. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient.
Employees – who work for tips. If you received $20 or more in tips during December, report them to your employer. You can use Form 4070, Employee’s Report of Tips to Employer.
Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in December 2015.
Individuals – Make a payment of your estimated tax for 2015 if you did not pay your income tax for the year through withholding (or did not pay in enough tax that way). Use Form 1040-ES. This is the final installment date for 2015 estimated tax. However, you do not have to make this payment if you file your 2015 return (Form 1040) and pay any tax due by February 1, 2016.
Employers – Nonpayroll Withholding. If the monthly deposit rule applies, deposit the tax for payments in December 2015.
Farmers and Fisherman – Pay your estimated tax for 2015 using Form 1040-ES. You have until April 18 to file your 2015 income tax return (Form 1040). If you do not pay your estimated tax by January 15, you must file your 2015 return and pay any tax due by March 1, 2016, to avoid an estimated tax penalty.
Employers – Federal unemployment tax. File Form 940 for 2015. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you already deposited the tax for the year in full and on time, you have until February 10 to file the return.
File Form 943 to report social security and Medicare taxes and withheld income tax for 2015. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
Certain Small Employers – File Form 944 to report Social Security and Medicare taxes and withheld income tax for 2015. Deposit or pay any undeposited tax under the accuracy of deposit rules. If your tax liability is $2,500 or more from 2015 but less than $2,500 for the fourth quarter, deposit any undeposited tax or pay it in full with a timely filed return. If you deposited the tax for the year timely, properly, and in full, you have until February 10 to file the return.
Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the fourth quarter of 2015. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.
Employers – Nonpayroll taxes. File Form 945 to report income tax withheld for 2015 on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, gambling winnings, and payments of Indian gaming profits to tribal members. Deposit any undeposited tax. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.
Payers of Gambling Winnings – If you either paid reportable gambling winnings or withheld income tax from gambling winnings, give the winners their copies of Form W-2G.
Employers – Give your employees their copies of Form W-2 for 2015 by February 1, 2016. If an employee agreed to receive Form W-2 electronically, post it on a website accessible to the employee and notify the employee by February 1, 2016.
Businesses – Give annual information statements to recipients of certain payments made during 2015. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with the consent of the recipient. This due date only applies to certain types of payments.
Individuals – who must make estimated tax payments. If you did not pay your last installment of estimated tax by January 15, you may choose (but are not required) to file your income tax return (Form 1040) for 2015 by February 1. Filing your return and paying any tax due by February 1, 2016, prevents any penalty for late payment of the last installment. If you cannot file and pay your tax by February 1, file and pay your tax by April 18.