As you prepare to file taxes for your clients and yourselves this tax season, we’ve highlighted the most important tax court decisions, tax law changes, and IRS rulings that will impact your filings.
Filing deadline changes
The deadline for individual tax filings was extended three days to April 18, 2017. Partnership returns (Form 1065) are due the month prior on March 15, 2017. Corporate returns for a C corporation (Form 1120) are due on April 18th, but corporation returns for an S corporation (Form 1120-S) must be filed on March 15, 2017. And don’t forget the January 31, 2017 deadline for W-2, W-3, and returns to report non-employee compensation (e.g. 1099-MISC).
New, expanded, and restricted tax credits from The Path Act
The PATH Act was introduced in December 2015 to provide more tax credit opportunities for individuals and families and to help the IRS safeguard against tax fraud. The following provisions are relevant for practitioners this filing season:
- The Work Opportunity Tax Credit (WOTC) is available to employers who hired individuals from certain target groups faced with significant employment barriers.
- The R&D credit was expanded. Beginning in 2016, eligible small businesses with $50,000,000 or less in gross receipts may claim the credit against alternative minimum tax (AMT) liability, and the credit can be utilized by certain small businesses against the employer’s payroll tax (i.e. FICA) liability.
- Bonus depreciation. This allowance extends bonus depreciation for property acquired and placed in service during 2016 to 50%; it will remain the same for 2017.
- ABLE accounts no longer have to operate in the same state as the beneficiary. They can now be set up in any state.
- Refunds for Earned Income Tax Credits or Additional Child Tax Credits are delayed until February 15.
- Individual Taxpayer Identification Numbers (ITINs) that have not been used on a federal tax return at least once in the past three years will no longer be valid unless renewed by the taxpayer.
Mortgage Interest Deduction limit application and information. The IRS acquiesced to the 9th Circuit’s decision in the Voss case, holding that the $1.1M mortgage interest deduction debt limits apply to unmarried co-owners of real estate on a per taxpayer, not a per residence, basis. Additionally, Form 1098 now requires more mortgage information including the amount of interest, the address of the property securing the mortgage, and the loan origination date.
Health Care tax penalties. The 21st Century Cures Act enables small employers to offer a health-related benefit without the previous IRS-sanctioned penalty. Individuals who failed to obtain health insurance will be taxed $695 or 2.5 percent of their annual household income (up from $325 or 2% of annual household income in 2015).
New Partnership Audit Rules. The new Partnership Audit Rules apply to tax years beginning after 2017, namely beginning in 2018. Prior to that, a partnership can voluntarily opt-in.
Tax breaks that expired at the end of 2016. Several tax breaks (some that were extended in 2015) expire this year, including two related to energy-efficiency efforts in residences, two related to energy-efficient motor vehicles, a tuition and fees deduction, a medical expense deduction for individuals 65 or older, and also a deduction for private mortgage insurance.
Surgent’s experts are tracking the legislative and regulatory changes through tax season and on the horizon in 2017. Stay up-to-date by subscribing to our blog and by attending our live webinars, on-demand webcasts, and self-study courses.