Tax breaks extended retroactively; some are permanent

Tax breaks extended retroactively; some are permanent

In mid-December, Congress renewed a long list of tax breaks known as "extenders" that have been expiring on an annual basis. This year many of the rules are retroactive to the beginning of 2015. You may be able to benefit from some of them as you prepare your 2015 federal income tax return.

In addition, the Protecting Americans from Tax Hikes Act of 2015, which was signed into law on December 18, 2015, makes some of the rules effective through December 31, 2016. Others are effective through 2019, and some are effective permanently. Provisions in the Act also make changes to existing tax rules that were not part of the extenders. All of these changes will affect your tax planning for 2016 and future years.

Here's an overview of selected provisions.

●  The rule allowing tax-free distributions from IRAs to charities is now permanent. When you're age 70½ and over, this break lets you make a qualified distribution of up to $100,000 from your IRA to a charity.

●  If you or a family member is an eligible student, you may be able to claim a tuition and fees above-the-line deduction for qualified higher education expenses for 2015 and 2016.

●  The deduction for up to $250 of out-of-pocket educator expenses is now permanent. It will be indexed for inflation beginning with 2016 tax returns. You claim this deduction "above the line," meaning it's available even if you don't itemize.

●  The optional itemized deduction for state and local sales taxes in lieu of deducting state and local income taxes is now permanent.

●  The maximum Section 179 deduction for qualified business property, including off-the-shelf software, is now permanently set at $500,000 (subject to a taxable income limitation). The deduction is phased out above a $2,000,000 threshold.

●  The additional first-year depreciation deduction, known as "bonus depreciation," is generally extended through 2019 when you buy qualified business property. You can claim this deduction in conjunction with Section 179.

Please call for additional information about the new law.

New rules relax ABLE account requirements

New rules relax ABLE account requirements

Are you planning to set up an "Achieve a Better Life Experience" (ABLE) account? A recent IRS notice and changes enacted in a tax law passed in December 2015 can help ease the administrative requirements. ABLE accounts are tax-advantaged accounts designed to help you build savings to care for yourself or a loved one with disabilities while maintaining eligibility for benefit programs such as Medicaid. Generally, you'll qualify for an ABLE account if your disability occurred before age 26.

Call us for details about the latest changes.

Identity theft: The IRS offers tips to protect your data

Identity theft: The IRS offers tips to protect your data

The IRS has launched a new campaign to encourage you to protect your tax and financial data, both digital and paper. As part of the campaign, the IRS plans to release videos and consumer friendly tax tips, and sponsor local events across the country. You can get started by reading the new Publication 4524, Security Awareness for Taxpayers, on the IRS web site (https://www.irs.gov/pub/irs-pdf/p4524.pdf). Other suggestions are on the Security Awareness Tax Tips page (https://www.irs.gov/uac/IRS-Security-Awareness-Tax-Tips). The campaign will continue through April.

Are you saving for retirement?

Are you saving for retirement?

While retirement plan contribution limits have not increased for 2016, taking full advantage of allowable contributions and any amounts your employer matches is still a good idea. Contributions you make to employer-sponsored retirement plans reduce your taxable income because your employer deducts the amount you specify from your paycheck before taxes.

For 2016, you can contribute $18,000 to your 401(k), plus another $6,000 if you're celebrating your 50th or older birthday during 2016. You can save up to $12,500 in your SIMPLE account this year, plus another $3,000 if you're age 50 or over.

Does your business need to file Form 1099?

Does your business need to file Form 1099?

Forms 1099 are due to recipients by February 1, 2016. You may be most familiar with Form 1099-MISC, which you use when your business makes miscellaneous payments in excess of $600 for services to non-employees. What are miscellaneous payments? Reportable payments can include fees for services paid to independent contractors, such as consultants, lawyers, and cleaning services. Generally, you don't report fees paid to corporations, but there are exceptions (payments to lawyers, for example).

For filing assistance, give us a call.

Adjust your mileage reimbursements for 2016

Adjust your mileage reimbursements for 2016

Standard mileage rates for deductible vehicle expenses have decreased from the 2015 rates. Here are the rates to use to calculate 2016 reimbursements and deductions.

Business. Starting January 1, the rate is 54 cents per mile for the use of a vehicle for business purposes. That's down from 57.5 cents in 2015.

Medical and moving. The rate for medical and moving mileage decreases from last year's 23 cents a mile to 19 cents a mile.

Charitable. The standard per-mile rate for charitable service remains at 14 cents.

Keep track of these upcoming tax deadlines

Keep track of these upcoming tax deadlines

●   January 15 – Final 2015 individual estimated tax payment is due, unless your 2015 tax return is filed and taxes are paid in full by February 1, 2016.

●   January 15 – Due date for calendar-year trusts and estates to pay final installment of 2015 estimated tax.

●   February 1 – Employers must furnish employees with W-2 statements for 2015. Payers must furnish 1099 information statements for 2015 to payees. (Deadline for Form 1099-B and consolidated statements is February 16.)

●   February 1 – Employers must generally file 2015 federal unemployment tax returns and pay any tax due.