January Newsletter

Happy New Year! With the recent passing of the PATH Act, many temporary tax laws have been made permanent. Other popular tax laws have been extended through 2016 and beyond. A recap of the more commonly used tax benefits in this new tax law is summarized for you here. Also included is a new legally required debt collection practice for the IRS and a recap of standard mileage rates for use in 2016. All this and a reminder to start collecting your 2015 tax information round 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.

PATH Act Passes: What you need to know

Once again, with the signature of the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), many popular tax items have either been made a permanent part of the tax code or have been extended to 2016 and beyond. Here are the more commonly used tax savings items and their new status;
Icon Teacher $250 deduction for qualified classroom expenses.

Check Impacts: All qualified elementary and secondary educators. This deduction does not require itemizing and the provision is now a permanent part of the tax code.
Check What’s new? Starting in 2016 you can also deduct the cost of qualified continuing education courses.
Icon Deduction for state and local general sales taxes (in place of state income tax deduction) as an itemized deduction.
Check Impacts: All taxpayers in states without income taxes who itemize deductions and taxpayers who have high sales tax obligations versus state income tax obligations. This provision is now permanent.
Icon Deductibility of home mortgage insurance premiums.

Check Impacts: All qualified home-owners required to carry mortgage insurance by their lenders. This provision is extended through 2016.
Icon Tuition and fees deduction

Check Impacts: All students now have an additional program to help reduce the cost of their education. This provision is now valid through 2016.
Icon 50% additional first year depreciation deduction and higher Section 179 expense limits. The new Section 179 annual expense limit is now $500,000 (up from $25,000 prior to the extension.)

Check Impacts: All businesses who have acquired and placed qualified assets into service during 2015. The expanded Section 179 is now made permanent while the bonus depreciation program now runs through 2019.
Icon Tax-free deductions from retirement plans for charitable contributions.

Check Impacts: All taxpayers over 70½ years old who make qualified charitable contributions of up to $100,000 directly from their IRAs. This provision is now a permanent benefit in the tax code.
There are many other changes in this tax law. Clarifications on the signed bill will become known over the next few months.

IRS Now Required to Use Collection Agencies

In a 1,300 page Transportation Bill signed into law in December, 2015, there are eight pages that require the IRS to assign unpaid tax bills to outside collection agencies. This means that third party companies will now be calling taxpayers as representatives of the IRS to collect unpaid taxes.
What you need to know

Icon What has changed. Prior to this bill, the IRS had the option, but not therequirement, to use other companies to try to collect past due tax bills. The IRS is now required to assign some of these unpaid taxes to outside companies for collection whether it is cost effective or not.
Icon Non-IRS companies may call you. If the IRS thinks you owe money and the statute of limitations for collection is approaching, you may have your tax bill assigned to a debt collector. This means you could receive phone calls and communication from a third party company that has your tax information.
Collection agency
Icon Your fraud alert senses should go up. This debt collector requirement may open the door to more tax fraud as thieves know they can falsely represent themselves as an agent of the IRS. Please be vigilant to this risk.
Icon The $900 million problem? The IRS acknowledges over $900 million in premium health care credits during 2014 will need to be repaid by taxpayers. There is the possibility of having some of this collection activity assigned to third party companies due to lack of IRS resources.
Icon There are rules. While the IRS may assign any unpaid debt to collection agencies, the “required transfer” of unpaid debts has specific rules. You may NOT be asked to pay tax bills from a third party debt collector if:

Check You are under age 18
Check The taxpayer is deceased
Check You are a victim of identity theft
Check You have an innocent spouse case
Check Your tax case is active within the IRS
Remember to be cautious if you are contacted by someone representing themselves as an agent of the IRS. When in doubt ask for help before providing any information.

Time to Start Preparing

While most see January as the start of something new, you should also see it as a time to start the collection of your prior year information. Here are some things to consider:

Receive and Review Informational Tax Forms. Create a list of all your anticipated W-2s, 1099-MISC, 1099-DIV, 1099-B, and SSA-1099s. Check them off as you receive them, but not before confirming the information is accurate.

Magnifying glass and papers
Be aware of other informational tax form needs. Here are some of the more common.
Arrow W2-G for any gambling winnings
Arrow 1099-G for any tax refunds or unemployment payments
Arrow 1099-K for any credit card activity over $20,000 and 200 transactions. Look for this if you are a heavy seller on sites like Amazon or E-bay.

Don’t forget your 1098s. Like 1099’s, Form 1098’s provide information to help maximize your possible tax deductions. Here are some of the most common.

Arrow 1098 mortgage interest statement
Arrow 1098-T for confirmation of tuition and fee payments to colleges and universities.
Arrow 1098-C for confirmation of the value of contributed property like a used car to a charitable organization.
Arrow 1098-E to report any student loan interest

The NEW 1095. Most taxpayers will now need to provide proof of adequate health insurance. This proof will be required to file your tax return and is typically done using Form 1095. Your employer will usually provide this to you if you are not purchasing insurance through Medicare or through the new Federal Affordable Care Act marketplace. Please be aware of this new form and look for it.

Other records; Collect your receipts and sort them. Using last year’s tax return, begin to gather and sort your necessary tax records. Sort your tax records to match the items on your tax return. Make sure you have the necessary documentation. Here is a master list of the more common in no particular order:

Check Informational tax forms (W-2, 1099, 1098, 1095-A, plus others) that disclose wages, interest income, dividends, and capital gain/loss activity
Check Other forms that disclose possible income (jury duty, unemployment, IRA distributions and similar items)
Check Business K-1 forms
Check Social Security records
Check Mortgage interest statements
Check Tuition paid statements
Check Property tax statements
Check Mileage log(s) for business, moving, medical, and charitable driving
Check Medical, dental and vision expenses
Check Business expenses
Check Records of any asset purchases and sales
Check Health insurance records (including Medicare and Medicaid)
Check Charitable contribution receipts and documentation
Check Bank and investment statements
Check Credit card statements
Check Records of any out of state purchases that may require use tax
Check Records of any estimated tax payments
Check Home sales records
Check Educational expenses (including student loan interest expense)
Check Casualty and theft loss documentation
Check Moving expenses
Check Retirement contribution records

Remember, if in doubt whether something is important for tax purposes, retain the documentation. It is better to save unnecessary documentation than to wish you had saved the documents to support your deduction. By starting now, you can identify missing items in time to meet the tax filing deadline.

2016 Standard Mileage Rates

The IRS recently announced mileage rates to be used for travel in 2016. The Business mileage rate decreases by 3.5 cents while Medical and Moving mileage rates are lowered by four cents. Charitable mileage rates are unchanged.

2016 Standard Mileage Rates
Mileage Rate/Mile
Business Travel 54.0¢
Medical/Moving 19.0¢
Charitable Work 14.0¢
Mileage Rates

Here are the 2015 rates for your reference as well.

2015 Standard Mileage Rates
Mileage Rate/Mile
Business Travel 57.5¢
Medical/Moving 23.0¢
Charitable Work 14.0¢
Mileage Rates

Remember to properly document your mileage to receive full credit for your miles driven.

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

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