Recent Tax Law Changes and Mid-Year Healthcare Update

At the end of the last Congressional session, there were a couple of new bills signed into law by President Obama. In these bills, there were a few tax items passed that may affect you

First, if you’ve ever been in college or had kids in college, you might have been able to take an education credit/deduction on your tax return.  You might have even received a Form 1098-T from the college that showed how much was paid for the student’s education that year.  Effective for the 2016 tax year, in order for an individual to claim the education credits or deductions, the individual must have received a 1098-T. Most education institutions already provide the forms, so you likely won’t see a change, but if you’ve paid for education expenses in the past and taken credits without having a form to support the amounts paid, you’ll want to make sure you have the form for your 2016 return.

Second, for businesses that file annual tax forms, like 1099s, or should file Form 1099s and currently do not, the failure to file penalties have increased on returns/statements that are due after 12.31.15 – so for this upcoming filing season. For an unintentional late filing by a small business of no more than 30 days, the per-return penalty will go from $30 to $50 and the maximum penalty for a calendar year goes from $75,000 to $175,000.

Third, for those individuals or businesses that file an annual return (known as the FBAR, Form 114 or FinCen Report), which reports a foreign bank or investment account and was due by June 30^th each year, there is a new filing due date.  For tax years beginning after 12.31.15 (2016 tax year), the due date will now be April 15th. A maximum extension of 6 months will be allowed, so the filing would be due on October 15th.

Another big change on filing due dates is that partnership tax returns will be due on March 15th and C Corporations will be due on April 15th. This is effective for tax years beginning after 12.31.15 – so it will be effective for 2016 filings due in early 2017.

A final tax change from these bills is that under the ACA (Affordable Care Act), there is a revision that is retroactive to months beginning after 12.31.13. When an employer is doing the monthly calculation of employees to determine whether they meet the 50 full-time equivalent requirement to be an applicable large employer (ALE), the employer does not include an employee if he/she has medical coverage for the month under the government’s TRICARE program or under the Veteran’s Administration (VA).

Next, we have a few healthcare reminders for you. At this time, businesses are no longer allowed to reimburse or pay a premium for an individual’s non-group health insurance policy. In the past, small businesses may have reimbursed employees for their cost of insurance, rather than providing the insurance. As of 7/1/15, businesses who do reimburse for insurance are subject to a $100 per day per employee penalty. As an alternative, businesses are allowed to increase employee’s compensation; however there cannot be any conditions on that increase. For example, if XYZ Company didn’t offer insurance to its 10 employees in the past and instead they reimbursed the employees 50% of insurance costs, prior to 7/1/15, XYZ was allowed to do so. Now, XYZ will provide additional compensation to the employees and hope that they use it to purchase health insurance.

The second healthcare reminder is also an update for you.  The 2015 healthcare information forms that some employers may need to file this year are currently due to employees by January 31, 2016 and to the IRS by February 28, 2016 (or March 31, if electronically filed) (same timing as W-2s and 1099s). The healthcare information returns (Forms 1095-B, 1095-C, 1094-B, 1094-C) are for applicable large employers (50+ full-time equivalent employees) or for employers who are self-insured, regardless of the number of employees. As an update to this, the IRS will be allowing extensions on these forms (but for a limited amount of time). Extensions will be filed using Form 8809 (the same form that employers can use to request extensions for filing W-2s and 1099s). This extension is just on filing the forms that are due to the IRS. The IRS may address an extension of providing forms to the employees. Currently, the IRS does allow a request for an extension to provide employees with W-2s and 1099s, but the IRS has to approve it – it’s not automatic. The IRS may include the healthcare forms for which employers can request an extension of time to provide to the employees. However, starting with the 2017 filing season, the IRS will be ending the automatic extension for W-2s and 1099s in order to reduce the number of fraudulent returns being filed with the IRS.

And, finally, for individuals that purchased insurance through the Marketplace in 2014, if they received a Premium Tax Credit, they are required to file a tax return and reconcile the advanced credits they received with the actual credits they get based on 2014 income. If a return isn’t filed, or if a return is filed and Form 8962 isn’t included, those individuals will not be able to receive credits when they renew their insurance coverage for 2016. The IRS will be sending out letters to individuals that may still need to file their returns/forms.

If you have questions about any of these matters, please give us a call.