Monday, September 19, 2016

Tax Brackets Expected to Rise Slightly Next Year


Inflation-adjusted tax brackets are anticipated to go up a bit next year, according to a pair of new reports, but that could reduce the tax burden for many taxpayers.
According to one report, from Thomson Reuters, the basic standard deduction for heads of household, the additional deduction, and the exemption amounts, will increase to $4,050. The starting point for phasing out taxpayers’ personal exemptions is expected to range from $313,800 for spouses filing jointly and surviving spouses, and $287,650 for heads of household, to $261,500 for single taxpayers. Similar higher dollar thresholds are expected to apply to the phaseout of itemized deductions.
In contrast, this year, phaseouts began at $311,300 of adjusted gross income for joint filers, $285,350 for heads of household, and $259,400 for singles. The higher phaseout levels prevent inflation from eating into the value of these deductions.

A report, from Bloomberg BNA, predicts the top 39.6 percent tax bracket will begin at $470,700 for married taxpayers filing joint returns and at $418,400 for unmarried individuals. This represents an increase from $466,950 and $415,050, respectively in 2016.










Bloomberg BNA predicts that in 2017, the personal exemption amount will stay unchanged from 2016 at $4,050. It is phased out for high-income taxpayers. When calculating deductions, taxpayers can decide to take the higher of their itemized deductions or the standard deduction. The standard deduction amount will differ, depending on the taxpayer’s filing status. The standard deduction amounts for 2017 are projected to increase slightly from 2016.
Standard Deduction





Alternative Minimum Tax
For some taxpayers, inflation adjustments will influence whether they need to pay the alternative minimum tax or not. The projected AMT exemptions for 2017 are as follows:






Estate and Gift Tax Exclusions
Bloomberg BNA anticipates the estate tax basic exclusion for people who die next year will be $5.49 million.
The exclusion amount was $5.45 million this year. The annual gift tax exclusion will still be $14,000 in 2017.
Tax Preparer Penalties
Bloomberg BNA also has predictions for tax preparer penalty amounts, adjusted for inflation next year:

Monday, August 29, 2016

WHY DID THE FASB ISSUE A NEW STANDARD ON NOT-FOR-PROFIT FINANCIAL REPORTING?

On August 18, 2016, the FASB issued a standard intended to simplify and improve how a not-for-profit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. 

The current not-for-profit financial reporting model has held up well for over 20 years since the issuance of Statement of Financial Accounting Standards No. 117, Financial Statements of Not-for-Profit Organizations, in 1993. However, stakeholders voiced concerns about:
  • Complexities in the use of the required three classes of net assets
  • Deficiencies in the transparency and utility of information in assessing an organization’s liquidity
  • Inconsistencies in the type of information provided about expenses, and
  • Misunderstandings about and the limited usefulness of the statement of cash flows, particularly with regards to the reporting of operating cash flows.
Based on these concerns, the FASB’s Not-for-Profit Advisory Committee and other stakeholders suggested that an update would be beneficial.
The FASB added a project to its agenda to improve the current net asset classification requirements and the information presented in financial statements and notes about a not-for-profit entity’s (NFP’s) liquidity, financial performance, and cash flows. 

Sunday, August 21, 2016

Accounting for Spoilage

Accounting for Spoilage

Restaurant books account for overhead, such as the costs of paying employees, utility bills and purchasing food items. Gross profits are the amount of money a restaurant takes in, and net profits are the difference between the gross profits and all operating costs. Restaurants should track the value of all spoiled food every week or month, so the Internal Revenue Service doesn't suspect the business of underreporting profits at tax time. According to an IRS audit guide for restaurants, food spoilage rates above 8 percent may appear suspicious to auditors.

Preventing Spoilage and Waste

Given that too high a rate of spoilage can trigger a tax audit and interferes with profits, restaurants should do all they can to minimize loss due to spoilage. Foods closest to their date of expiration should be used first, make sure perishable items are properly refrigerated and reduce the amount of perishable items kept in stock. Restaurants can even get spoilage insurance to prevent a significant loss of profits.

Friday, August 19, 2016

IRS overreach checked!

Interesting facts about the IRS and its ability to interact with taxpayers-
 The IRS’s petition to enforce a summons was denied because the IRS issued the summons to an attorney in his personal capacity and he lawfully invoked his right against self-incrimination. Moreover, the foregone-conclusion exception did not apply because the attorney correctly asserted that the only way for the IRS to know that the underlying documents existed was if they were authenticated through his act of production.
Further, the government’s argument that enforcement of the summons would not violate judicial process because the summons was directed to the attorney as his S corporation’s records custodian was rejected. The IRS’s investigation was focused on the attorney’s individual personal income tax liability. In addition, the summons was directed on its fact to the attorney and was served to his wife at his personal residence. Therefore, the record did not support the government’s contention that the IRS directed the summons to the S corporation. Finally, the government presented no legal authority for the proposition that a single summons, issued to an individual who responded in his personal capacity, can somehow be interpreted as a second summons issued to a corporate entity for unspecified corporate records.  Thanks to CCH for the information in this article.

Wednesday, July 27, 2016

Transcripts and Prior Year Tax Returns, requesting them

 How to Request a Transcript or Copy of a Prior Year’s Tax Return
You should always keep a copy of your tax return for your records. You may need copies of your filed tax returns for many reasons. For example, they can help you prepare future tax returns. You’ll need them if you have to amend a prior year’s tax return. You often need them when you apply for a loan to buy a home or to start a business. Or, you may need them to apply for student financial aid. If you can’t find your copies, the IRS can give you a transcript of the information you need, or a copy of your tax return. Here’s how to get your federal tax return information from the IRS:
  • Transcripts are free. You can get them for the current year and the past three years. In most cases, a transcript includes the tax information you need.
  • tax return transcript is a summary of the tax return that you filed. It also includes items from any accompanying forms and schedules that you filed. It doesn’t reflect any changes you or the IRS made after you filed your original return.
  • tax account transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income. It also includes any changes that you or the IRS made to your tax return after you filed it.
  • The quickest way to get a copy of your tax transcript is to use the Get Transcript application. Once you verify your identity, you will be able to view and print your transcript immediately online. This Fact Sheet provides details on how to complete this step.
  • If you're unable or prefer not to use Get Transcript Online, you may order a tax return transcript and/or a tax account transcript using the online tool Get Transcript by Mail or by calling 800-908-9946. Transcripts arrive at the address we have on file for you in five to 10 calendar days from the time IRS receives your request.
oTo order by phone, call 800-908-9946 and follow the prompts. You can also request your transcript using your smartphone with the IRS2Go mobile phone app.
o Businesses that need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.
  • If you need a copy of your filed and processed tax return, it costs $50 for each tax year. You should complete Form 4506, Request for Copy of Tax Return, to make the request. Mail it to the IRS address listed on the form. Copies are generally available for the current year and past six years. You should allow 75 days for delivery.
  • If you live in a federally declared disaster area, you can get a free copy of your tax return. Visit IRS.gov for moredisaster relief information.
You can get tax forms anytime at www.irs.gov/forms
IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scamstaxpayer rights and more.
Additional IRS Resources:
IRS YouTube Videos:
IRS Podcasts:
  • How to Use Get Transcript Online – English

Wednesday, July 20, 2016

Obamacare and seasonal workers

ACA and Employers: How Seasonal Workers Affect Your Workforce Size
For purposes of the Affordable Care Act, an employer’s size is determined by the number of its employees. Employer benefits, opportunities and requirements are dependent upon the employer’s size and the applicable rules. If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an ALE for the current calendar year.  However, there is an exception for seasonal workers.
If you have at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, your organization is an ALE. Here’s the exception: If your workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of 50 during that period were seasonal workers, your organization is not considered an ALE. For this purpose, a seasonal worker is an employee who performs labor or services on a seasonal basis.
The terms seasonal worker and seasonal employee are both used in the employer shared responsibility provisions, but in two different contexts. Only the term seasonal worker is relevant for determining whether an employer is an applicable large employer subject to the employer shared responsibility provisions.  For information on the difference between a seasonal worker and a seasonal employee under the employer shared responsibility provisions see our Questions and Answers page

Tuesday, June 28, 2016

Tax Tips for Students Working this Summer

Tax Tips for Students Working this Summer
Many students get summer jobs. It’s a great way to earn extra spending money or to save for later. Here are some tips for students with summer jobs:
1. Withholding and Estimated Tax. If you are an employee, your employer normally withholds tax from your paychecks. If you are self-employed, you may be responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments on set dates during the year. This is essentially how our pay-as-you-go tax system works.
2. New Employees. When you get a new job, you need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from your pay. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form.
3. Self-Employment. Money you earn working for others is taxable. Some work you do may count as self-employment. These can be jobs like baby-sitting or lawn care. Keep good records of your income and expenses related to your work. You may be able to deduct those costs. A tax deduction generally reduces the taxes you pay.
4. Tip Income. All tip income is taxable. Keep a daily log to report your tips. You must report $20 or more in cash tips received in any single month to your employer. And you must report all of your yearly tips on your tax return.
5. Payroll Taxes. You may earn too little from your summer job to owe income tax. But your employer usually must withhold social security and Medicare taxes from your pay. If you’re self-employed, you may have to pay them yourself. They count for your coverage under the Social Security system.
6. Newspaper Carriers. Special rules apply to a newspaper carrier or distributor. If you meet certain conditions, you are self-employed. If you do not meet those conditions, and are under age 18, you may be exempt from Social Security and Medicare taxes.
7. ROTC Pay. If you’re in ROTC, active duty pay, such as pay you get for summer advanced camp, is taxable. Other allowances you may receive may not be taxable, seePublication 3 for details.
8. Use IRS Free File. You can prepare and e-file your tax return for free using IRS Free File, available only on IRS.gov. You may not earn enough money to be required to file a federal tax return. Even if that is true, you may still want to file. For example, if your employer withheld income tax from your pay, you will have to file a return to get a tax refund.

Tuesday, June 21, 2016

CPA Peer Review

Currently going through the FICPA's Peer Review process.  A lot of work showing how we operate, a lot of work.  But we hope the procedure will be beneficial and earn the firm some insights not currently had.

Orlando Scams to be on the lookout for!

Beware- Orlando-Related Scams: IRS


The IRS has issued a consumer alert about possible fake charity scams in the wake of last weekend’s mass shooting in Orlando, Fla.
Scam artists commonly try to take advantage of generosity after such a headline tragedy by impersonating charities to get money or private information from taxpayers, the agency warns. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.
The IRS cautions donors to follow these tips:
  • Donate to recognized charities and beware of charities with names similar to familiar or nationally known organizations. Some phony charities use names or Web sites that sound or look like those of respected, legitimate organizations. The IRS Exempt Organizations Select Check feature, helps find qualified charities. Donations to these charities may also be tax-deductible.
  • Don’t give out personal financial information such as Social Security numbers or credit card and bank account numbers and passwords to anyone who solicits a contribution.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
  • Bogus Web sites may solicit funds for victims of this tragedy, frequently mimicking the sites of legitimate charities or claiming to be affiliated with legitimate charities.
  • Scammers often send e-mails that steer recipients to bogus sites that appear to be affiliated with legitimate charitable causes.

Wednesday, May 11, 2016

2015 Not For Profit Returns due soon!

May 16 Is Filing Deadline for Many Tax-Exempt Organizations; Do Not Include Social Security Numbers or Personal Data
IRS YouTube Videos
Do Not Include SSNs on Form 990:  English | Spanish | ASL
WASHINGTON — The Internal Revenue Service today reminded tax-exempt organizations that many have a filing deadline for Form 990-series information returns in mid-May.
With the May 16 filing deadline facing many tax-exempt organizations, the IRS today cautioned these groups not to include Social Security numbers (SSNs) or other unneeded personal information on their Forms 990, and consider taking advantage of the speed and convenience of electronic filing.
Form 990-series information returns and notices are due on the 15th day of the fifth month after an organization’s tax year ends. Many organizations use the calendar year as their tax year, making May 15 the deadline for them to file for 2015. However, because May 15 falls on a Sunday, the deadline this year moves to Monday, May 16.
Many Groups Risk Loss of Tax-Exempt Status
By law, organizations that fail to file annual reports for three consecutive years will see their federal tax exemptions automatically revoked as of the due date of the third required filing. The Pension Protection Act of 2006 mandates that most tax-exempt organizations file annual Form 990-series information returns or notices with the IRS. The law, which went into effect at the beginning of 2007, also imposed a new annual filing requirement for small organizations. Churches and church-related organizations are not required to file annual reports.
No Social Security Numbers on Forms 990
The IRS generally does not ask organizations for SSNs and, in the Form 990 instructions, and cautions filers not to provide them on the form. By law, both the IRS and most tax-exempt organizations are required to publicly disclose most parts of Form 990 filings, including schedules and attachments. Public release of SSNs and other personally identifiable information about donors, clients or benefactors could give rise to identity theft.
The IRS also urges tax-exempt organizations to file forms electronically in order to reduce the risk of inadvertently including SSNs or other unneeded personal information. More details can be found on IRS.gov.
Tax-exempt forms that must be made public by the IRS are clearly marked “Open to Public Inspection” in the top right corner of the first page. These include Form 990, Form 990-EZ, Form 990-PF and others.
What to File
Small tax-exempt organizations with average annual gross receipts of $50,000 or less may file an electronic notice called a Form 990-N (e-Postcard), which asks organizations for a few basic pieces of information. Tax-exempt organizations with average annual gross receipts above $50,000 must file a Form 990 or 990-EZ depending on their receipts and assets. Private foundations must file Form 990-PF.
Organizations that need additional time to file a Form 990, 990-EZ or 990-PF may obtain an automatic three-month extension. An organization may also request an additional three-month extension; however, the organization must show reasonable cause for the additional time requested. Use Form 8868, Application for Extension of Time to File an Exempt Organization Return, to request extensions. The request for extension must be filed by the due date of the return. Note that no extension is available for filing the Form 990-N (e-Postcard).
Check Tax-Exempt Status Online
The IRS publishes the names of organizations identified as having automatically lost their tax-exempt status for failing to file annual reports for three consecutive years. Organizations that have had their exemptions automatically revoked and wish to have that status reinstated must file an application for exemption and pay the appropriate user fee.
The IRS offers an online search tool, Exempt Organizations Select Check, to help users more easily find key information about the federal tax status and filings of certain tax-exempt organizations, including whether organizations have had their federal tax exemptions automatically revoked.

Tuesday, April 05, 2016

IRS Offers Tax Tips

IRS Offers 10 Tax-Time Tips
The April 18 deadline to file your federal tax return is less than two weeks away. Don’t wait until the last minute. If you haven’t filed yet, the IRS has these 10 tax-time tips to help you.
1. Gather your records.  Make sure you have all your tax records. This includes receipts, canceled checks and other records that support income, deductions or tax credits that you claim. If you purchased health insurance through theMarketplace, you will need the information in Form 1095-A to file.
2. Report all your income. You will need to report your income from all of your Forms W-2, Wage and Tax Statements, Forms 1099 and any other income – even if you don’t receive a statement – when you file your tax return.
3. Try IRS Free File. Free File is available only on IRS.gov. If you made $62,000 or less, you can use free name-brand tax software to file your federal tax return. If you earned more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. If you need more time to file, you can also use IRS Free File to get an automatic six-month extension to file your taxes. Remember, an extension to file your tax return is not an extension to pay taxes you owe, which are due April 18.
4. Try IRS e-file. Electronic filing is the best way to file a tax return. It’s accurate, safe and easy. If you owe taxes, you have the option to e-file early and pay by April 18 to avoid penalties and interest.
5. Use Direct Deposit.  The fastest and safest way to get your refund is to combine e-file with direct deposit. The IRS issues more than nine out of 10 refunds in less than 21 days.
6. Visit IRS.gov. IRS.gov is a great place to get what you need to file your tax return. Click on the "Filing" icon for links to filing tips, answers to frequently asked questions and IRS forms and publications. Get them all at any time. The IRS Services Guide outlines the many ways to get help on IRS.gov.
7. Use IRS online tools. The IRS has many online tools on IRS.gov to help you file. For instance, the Interactive Tax Assistant tool provides answers to many of your tax questions. The tool gives the same answers that an IRS representative would give over the phone. If you want to find a tax preparer with the qualifications and credentials that you prefer, use the IRS Directory of Federal Tax Return Preparers. IRS tools are free and easy to use. They are also available 24/7.
8. Weigh your filing options. You have different options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free help at aVolunteer Income Tax Assistance or Tax Counseling for the Elderly site.
9. Check out number 17. IRS Publication 17, Your Federal Income Tax, is a complete tax resource that you can read on IRS.gov. It’s also available as an eBook. It can help you with many tax questions, such as whether you need to file a tax return, or how to choose your filing status.
10. Review your return.  Mistakes slow down your tax refund. If you file a paper return, be sure to check all Social Security numbers. That’s one of the most common errors. Remember that IRS e-file is the most accurate way to file.

Friday, March 04, 2016

Captial Gains and Losses

Capital Gains and Losses – 10 Helpful Facts to Know
When you sell a capital asset, the sale normally results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:
1. Capital Assets.  Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.
2. Gains and Losses.  A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
3. Net Investment Income Tax.  You must include all capital gains in your income and you may be subject to the Net Investment Income Tax if your income is above certain amounts. The rate of this tax is 3.8 percent. For details, visit IRS.gov.
4. Deductible Losses.  You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
5. Limit on Losses.  If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
6. Carryover Losses.  If your total net capital loss is more than the limit you can deduct, you can carry it over to next year’s tax return.
7. Long and Short Term.  Capital gains and losses are treated as either long-term or short-term, depending on how long you held the property. If you held it for one year or less, the gain or loss is short-term.
8. Net Capital Gain.  If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain. 
9. Tax Rate.  The tax rate on a net capital gain usually depends on your income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.  
10. Forms to File.  You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses, with your tax return.

Saturday, February 06, 2016

Who can claim the student loan interest deduction?

Can You Claim the Deduction?

Generally, you can claim the deduction if all of the following requirements are met.
  • Your filing status is any filing status except married filing separately.
  • No one else is claiming an exemption for you on his or her tax return.
  • You are legally obligated to pay interest on a qualified student loan.
  • You paid interest on a qualified student loan.
Claiming an exemption for you.   Another taxpayer is claiming an exemption for you if he or she lists your name and other required information on his or her Form 1040 (or Form 1040A), line 6c, or Form 1040NR, line 7c.
Example 1.
During 2015, Josh paid $600 interest on his qualified student loan. Only he is legally obligated to make the payments. No one claimed an exemption for Josh for 2015. Assuming all other requirements are met, Josh can deduct the $600 of interest he paid on his 2015 Form 1040 or 1040A.
Example 2.
During 2015, Jo paid $1,100 interest on her qualified student loan. Only she is legally obligated to make the payments. Jo's parents claimed an exemption for her on their 2015 tax return. In this case, neither Jo nor her parents may deduct the student loan interest Jo paid in 2015.
Interest paid by others.   If you are the person legally obligated to make interest payments and someone else makes a payment of interest on your behalf, you are treated as receiving the payments from the other person and, in turn, paying the interest.
Example 1.
Darla obtained a qualified student loan to attend college. After Darla's graduation from college, she worked as an intern for a nonprofit organization. As part of the internship program, the nonprofit organization made an interest payment on behalf of Darla. This payment was treated as additional compensation and reported on her Form W-2, box 1. Assuming all other qualifications are met, Darla can deduct this payment of interest on her tax return.
Example 2.
Ethan obtained a qualified student loan to attend college. After graduating from college, the first monthly payment on his loan was due in December. As a gift, Ethan's mother made this payment for him. No one is claiming a dependency exemption for Ethan on his or her tax return. Assuming all other qualifications are met, Ethan can deduct this payment of interest on his tax return.

Sunday, January 31, 2016

Figuring a Shareholder's Basis

The Calculation for figuring shareholder basis is as follows:
1) Beginning Stock Basis (cost or FMV of Stock)

Increases to Basis
2) Money or property contributed to the corporation
3) Your percentage of a corporation's  earnings (or a decrease if the corporation sustains loses)
4) Other increases, such as your share of excess deductions of a depleatible asset

Decreases to Basis
5) Distributions of money and FMV of property
6) Your share of the corporation's nondeductible expenses, if applicable, your share of corp loses under Reg section 1.1367-1(g), your share of the Sec 179 deduction, or any corporation charitable deductions
7) If Reg Section 1.1367-1(g) applies, add the amount of a corp's nondeductible expenses
8) The smaller of the excess, at 1/1/xx, of the amount you are owed for loans you made to the corp OR the sum of lines 1-7 above.  (This amount increases you loan basis)

9) Equals: Your stock basis in the corporation at the end of the year..

We would love to help with the computation!  Call me at my cell to talk more (813)309-0504.

Friday, January 29, 2016

Tax changes to Partnerships and Due Dates for 2016

A large number of important tax changes go into effect for partnerships this year, along with due dates for business tax returns.
Many were ushered in by the Protecting Americans from Tax Hikes (PATH) Act of 2015, although legislation enacted earlier in 2015 and in 2014 also contributed a fair share. Still other changes are the result of various administrative pronouncements by IRS.
This article reviews the important changes that apply to partnerships and those that apply to due dates for business returns. There are a number of other important business tax changes this year that I covered in a previous article (seeMajor Business Tax Changes for 2016).
Partnership ChangesThe recent legislation responsible for the lion's share of the changed rules for 2016 consists of the Protecting Americans from Tax Hikes (PATH) Act of 2015; the Fixing America's Surface Transportation (FAST) Act; the Bipartisan Budget Act of 2015; the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015; the Trade Preference Extension Act of 2015; and the Achieving a Better Life Experience Act of 2014 (ABLE Act), part of the Tax Increase Prevention Act of 2014
Taxpayers may elect new partnership rules: The Bipartisan Budget Act of 2015 repeals the TEFRA uniform partnership audit rules and similarly repeals the electing large partnerships rules. These rules are replaced with a streamlined single set of rules for auditing partnerships and their partners at the partnership level. Under the new streamlined audit approach, any adjustment to items of income, gain, loss, deduction or credit of a partnership for a partnership tax year (and any partner's distributive share of such adjustment) is determined at the partnership level. Similarly, any tax attributable to such an adjustment is assessed and collected, and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to any such item or share is determined, at the partnership level.
The new rules generally apply to partnership tax years that begin after Dec. 31, 2017. However, except for certain small partnership election-out rules, partnerships may also elect (as directed by the IRS) for the changes to apply to any return of the partnership filed for partnership tax years beginning after Nov. 2, 2015 and before Jan. 1, 2018.
Family partnership rule clarified: A partnership generally is an unincorporated organization in which the parties (i.e., partners) have joined together to conduct an active trade or business. Under former Code Sec. 704(e)(1), a person can also be recognized as a partner if capital is a material income-producing factor, whether his partnership interest was obtained by purchase or by gift (the so-called "family partnership rule").
Some taxpayers have argued that this family partnership rule provides an alternative test for determining who is a partner without regard to how the term is generally defined in the partnership tax rules. Thus, they asserted that if a partner holds a capital interest in a partnership, the partnership must be respected regardless of whether the parties have demonstrated that they joined together to conduct an active trade or business.
For partnership tax years beginning after Dec. 31, 2015, the Bipartisan Budget Act of 2015 (1) amends the general definition of a partner to provide that, in the case of a capital interest in a partnership in which capital is a material income-producing factor, whether a person is a partner with respect to that interest is determined without regard to whether that interest was derived by gift from any other person (Code Sec. 761(b)) and (2) eliminates the pre-Act rule (at Code Sec. 704(e)) regarding the recognition of partners.
These changes clarify that family partnership rules were not intended to provide an alternative test for whether a person is a partner in a partnership. The determination of whether the owner of a capital interest is a partner is made under the generally applicable rules defining a partnership and a partner.
Due Dates for Business Returns
Revised due dates for partnership and C corporation returns: Domestic corporations (including S corporations) currently must file their returns by the 15th day of the third month after the end of their tax year. Thus, corporations using the calendar year must file their returns by March 15 of the following year. The partnership return is due on the 15th day of the fourth month after the end of the partnership's tax year. Thus, partnerships using a calendar year must file their returns by April 15 of the following year. Since the due date of the partnership return is the same as the due date for an individual tax return, individuals holding partnership interests often must file for an extension to file their returns because their Schedule K-1s may not arrive until the last minute.
Under the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, in a major restructuring of entity return due dates, effective generally for returns for tax years beginning after Dec. 31, 2015 (i.e., for 2016 tax year returns filed in 2017):
• Partnerships and S corporations will have to file their returns by the 15th day of the third month after the end of the tax year. Thus, entities using a calendar year will have to file by Mar. 15 of the following year. In other words, the filing deadline for partnerships will be accelerated by one month; the filing deadline for S corporations stays the same.
• C corporations will have to file by the 15th day of the fourth month after the end of the tax year. Thus, C corporations using a calendar year will have to file by Apr. 15 of the following year. In other words, the filing deadline for C corporations will be deferred for one month. (Under a special rule, for C corporations with fiscal years ending on June 30, the rule change won't apply until tax years beginning after Dec. 31, 2025.)
Revised automatic extension rules for corporations: Under the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, effective generally for returns for tax years beginning after Dec. 31, 2015, the three-month automatic extension of time for corporate returns in Code Sec. 6081(b) is changed to an automatic six-month extension (this change conforms the statutory rule with the six-month automatic extension for corporate returns in Reg. § 1.6081-3(a)).
However, for any return for a tax year of a C corporation which ends on Dec. 31 and which begins before Jan. 1, 2026, the automatic extension period is five months (not six months). And, for any return for a tax year of a C corporation which ends on June 30 and begins before Jan. 1, 2026, the automatic extension period is seven months (not six months).
Note that the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 also revised the extended due dates for various other returns.
Thanks to Thompson Reuter's Robert Trinz  for much of this research

Tuesday, January 26, 2016

Obama care required documents

The reporting requirements are considered the glue that holds together two of the largest pieces of PPACA: the individual and employer mandates. Since 2014, the individual mandate has required most Americans to purchase minimum essential coverage, qualify for an exemption from this requirement, or pay a penalty on their tax return. Beginning in 2015, the employer mandate places a requirement on applicable large employers (ALEs)—which are businesses with 50 or more full-time plus full-time equivalent (FTE) employees—to provide health insurance to 95% or more of their employees and dependents up to age 26.
Several new forms have been issued for both employers and insurance providers to file to comply with the new reporting rules. ALEs will file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns. The type of information reported by an ALE on the forms is meant to help the IRS pinpoint those employers that are required to but do not offer minimum essential coverage to their employees and their employees’ spouses and dependents. If it fails to provide the appropriate insurance, the employer is subject to steep penalties. The information reported on the returns also lets the IRS know if an employee is eligible for the premium tax credit.
Providers of minimum essential coverage will file Form 1095-B, Health Coverage, and Form 1094-B, Transmittal of Health Coverage Information Returns, to report information to the IRS and enrollees about individual coverage. Recipients of Form 1095-B can show they have minimum essential coverage and will not owe a penalty on their tax return associated with the individual mandate.
Who is subject to the information-reporting requirements?
ALEs are subject to the information-reporting requirements of Sec. 6056.
Any provider, such as an insurance company that issues minimum essential coverage to an individual, is subject to the information-reporting requirements of Sec. 6055.
Which form to file?
Which form to file?

What information is necessary to complete the forms?
The type and sheer volume of data that an employer has to gather to file Forms 1095-C and 1094-C is overwhelming, especially since certain information must be tracked by month. Employers have found themselves in the difficult position of having to implement new systems to track reportable data such as the following:
  • Whether the employer offered minimum essential coverage each month to the employee and the employee’s spouse and dependents;
  • Whether the employee and the employee’s spouse and dependents were enrolled in the coverage;
  • Whether the employee’s share of the lowest-cost monthly premium for self-only minimum essential coverage provides minimum value;
  • Which affordability safe harbor was used for each employee;
  • Whether the employee was full-time or part-time, on a monthly basis;
  • The total number of employees, by month, and the total number of full-time employees, by month;
  • Whether the employee was a new hire eligible for the coverage waiting period;
  • Whether the employee was a new variable-hour, seasonal, or part-time employee in the initial measurement period; and
  • Whether the employer was a member of a controlled group or affiliated service group.
An insurer will have to report the following information on Forms 1095-B and 1094-B:
  • Enrollee’s name, address, and Social Security number;
  • Employer’s name, address, and federal employer identification number;
  • Insurance provider’s name, address, and federal employer identification number; and
  • Covered individual’s name, Social Security number, and months of coverage.
What are the penalties for noncompliance?
The information-reporting rules are a serious business. ALEs as well as providers of minimum essential coverage can be hit with penalties of $250 for each information return not filed and another $250 for not providing each employee/enrollee with an accurate return. The total amount of penalties is capped at $3 million annually—a staggering amount! As you can see, the penalties provide employers and insurers a significant incentive to file the forms correctly and on time.
Thanks for the compilation of this info to Kristin Esposito, CPA, MST, is the senior technical manager–tax advocacy at the AICPA.