February Newsletter

As your mailbox fills up with information required to organize your 2015 tax records, there is still time to reduce 2015’s tax obligation with a contribution to an IRA. This issue covers recent news from the IRS and provides an important update for small business treatment of small capital purchases. An interesting perspective on the popular “free shipping” marketing technique rounds out this month’s newsletter.

As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

A Couple IRS Wrinkles That May Impact You

The IRS made two recent announcements that may impact you this tax-filing season. Being aware of these announcements may keep you from unknowingly delaying filing your tax return.

One topic is regarding proof you have qualified health insurance and the other topic is an error in notices sent to victims of IRS identity theft.

Extension in
Form 1095 reporting

IRS logo

For 2015 tax returns, everyone employed by a company with 50 or more employees will receive a new Form 1095. This form is in addition to the Form 1095-A’s received by other taxpayers using the Marketplace to purchase their health insurance. You need this form to file your taxes as it provides the necessary proof that you have adequate health insurance for the year. Without this proof you could be subject to the new shared responsibility tax.

What is happening

The IRS has granted an extension for Form 1095 B and 1095 C being sent to employees. Here are the old and new dates.

Form Purpose Original
due date
due date
1095 B & 1095 C Report to employees of adequate health insurance coverage by month 2/1/2016 3/31/2016
Summary forms 1094 B & 1094 C Summary forms sent to the government confirming employee health care coverage 2/29/2016
(3/31 if filing electronically)
(6/30 if filing electronically)

Note: This delay does not impact the timing of Form 1095 A, Health Insurance Marketplace Statement. 1095 A is the form you receive if you purchase your health insurance through the Marketplace and not through your employer.

What it means to you

Since the IRS understands that taxpayers do not wish to wait to file their 2015 tax returns, the IRS is allowing you to file your 2015 tax return without receiving this form. Here are some suggestions.

Check Check with your employer. If you work for an employer with more than 50 employees, check with your human resources department to find out when you can expect to receive the 1095 form. If there is no delay, then wait for Form 1095.
Check Look for other supporting documents. For 2015, the IRS will allow you to support your insurance coverage with means other than Form 1095. Simply collect this proof of insurance and save it in case of a future audit.
Check Wait. If you changed jobs or have a situation that suggests there may be a gap in insurance coverage you may wish to wait until you receive your documents. There is no corresponding delay granted to file your tax return. Federal taxes owed are still due on or before April 18th.
Identity theft PINs are for 2015 not 2014

If you are one of the unfortunate victims of IRS identity theft you will need a one time PIN to file your tax return. This numeric identifier is sent to you via mail by the IRS.

What has happened

IRS PIN notice ( letter: CP01A) is being mailed to identity theft victims right now. The tax year on many notices is incorrectly stated as 2014, when the PIN is to be used for your 2015 tax return. This mistake is causing confusion among taxpayers.

What to do

Check Do not throw out the notice! This PIN is for your 2015 tax return. Without it you cannot file your 2015 tax return.
Check File your tax return. Remember identity theft victims who are provided this PIN must submit their tax return with this PIN entered in the correct field. You may not efile your tax return without it.

There is Still Time for Retirement Funding

There is still time to make a contribution to a Traditional IRA or Roth IRA for the 2015 tax year. The annual contribution limit is $5,500 or $6,500 if you are age 50 or over. Prior to making the contribution, if you (or your spouse) are an active participant in an employer’s qualified retirement plan, you will want to make sure your modified adjusted gross income (MAGI) does not exceed certain thresholds. There are also income limits to qualify to make Roth IRA contributions. The limits are outlined here. Financial papers

2015 IRA Contribution limit: $5,500 or $6,500 (with age 50+ catch up provision)

2015 IRA Income (MAGI) Limits
Traditional IRA
allowed contribution range
Roth IRA
allowed contribution range
SINGLE $61,000 $71,000 $116,000 $131,000
both participating
both participating
$183,000 $193,000
spouse participating
spouse participating

Note: Married Traditional IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer-provided retirement plan. If married filing separate and either spouse participates in an employer’s qualified plan, the income phase-out to contribute is $0 – $10,000.

A final thought

If your income is too high to take advantage of these IRAs you can always make a non-deductible contribution to an IRA. While the contributions are not tax-deferred, the earnings are not taxed until they are withdrawn.

Free Shipping is Not so Free

One of the most successful selling techniques used today is to offer “free” shipping for mail and internet orders. But shipping is never free. So why is it such a popular offer to buyers of goods and services?

Icon The average order size play. The classic way sellers pay for the shipping is to get you to increase your average order size. The hope is that your increased purchases will not only cover the cost of shipping, but will enhance their per order profitability. Amazon does this with their $35 order size requirement and their annual Prime fee.
Icon Upcharge shipping. Another way to get free shipping is to entice you to pay for more expedited shipping. Remember, part of your cost of free shipping is paid for in the slower shipping time. If enough customers pay to receive their orders sooner it can cover the seller’s cost of free shipping to everyone else.
Cardboard box at front door
Icon It is in the cost. Don’t be fooled. Shipping charges are built into the cost of what you are buying. Even worse, if you live in a state that does not charge sales tax on shipping charges, you actually pay more money for free shipping as the buried shipping costs are now being subjected to sales tax.
Icon What are companies paying for shipping? Companies like Fed Ex and UPS offer large discounts to major customers like Amazon. Small companies’ shipping costs can be much higher. In addition, Fed Ex and UPS add fees onto deliveries such as fuel surcharges, residential delivery fees and non-urban delivery fees. A minimum undiscounted, one pound ground shipment (with tracking information) can easily range from $5.75 to well over $8.00.
Icon So what? If you have a small business and wish to try free shipping, you need to understand your costs and what the lift in business sales free shipping will yield. As a consumer, don’t be fooled. You are paying for shipping. Try to calculate the trade-off on this popular consumer hook with the value of a discount offer on your desired purchase. You may be surprised at what you find.

IRS Revises Safe Harbor Repair Regulations

In November the IRS increased the amount your business can expense versus capitalize from $500 to $2,500. This change impacts businesses that do not publish applicable financial statements. The new rule takes effect starting in 2016, but there is audit protection for using this new limit in prior years.

What this means


This new rule is typically referred to as the safe harbor de minimis limit. Now small businesses may expense versus capitalize purchases of equipment that cost less than $2,500 and not have it challenged by the IRS. Without this change, small businesses would need to capitalize these purchases and then recapture the cost using depreciation over many years.

The irony is that with the recent extension of bonus depreciation through 2019, many small businesses would already expense many of these purchases. If this change could impact recent purchases of your business please ask for a review of your situation.

As always, should you have any questions or concerns regarding your situation please feel free to call.

This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does R.D.M. Tax Service & Notary Public have any control over, or responsibility for, the content of any such Websites.
All rights reserved.

This entry was posted in Newsletter. Bookmark the permalink.