March 2017 Tax Snacks
Tax Snacks: Bite-size tax news and information on the fly
Note: The filing deadlines for several forms have changed, effective this filing season. The most commonly-encountered forms affected by this change undergo a swap in the deadlines between Forms 1120 and 1065 (C-corporations vs. partnerships/LLCS).
March 31: 1099s and W-2s are due to IRS for those who e-file
April 1: The initial Required Minimum Distribution (RMD) must be taken by beneficiaries of Qualified Retirement Plans (like IRAs) who turned age 70 ½ anytime during 2016
- 2016 income tax returns are due for individuals and calendar year C-corporations and trusts
- 1st quarter 2016 estimated tax payments are due for individuals and calendar year trusts and corporations
- Last day to make an IRA contribution for the 2016 tax year
May 15:: Tax-exempt organization returns (Form 990 series) are due for calendar year entities
On March 24, the bill referred to as the “American Health Care Act” (AHCA), the Republican’s plan to repeal and replace the Affordable Care Act (ACA), was shot down after failing to gain support by both Republicans and Democrats. The numerous tax law changes the AHCA would have enacted will not exist, and the tax-related characteristics of the ACA remain intact. As noted in a previous Tax Snack, in anticipation of ACA repeal President Trump previously issued directives to government agencies (including the IRS) instructing them to forgo enforcing provisions of the ACA that impose tax. We have no word on whether that directive will be rescinded now that the repeal seems unlikely anytime soon, but our stance continues to be that taxes imposed by Congress and codified in the Internal Revenue Code cannot be circumvented by an Executive Order.
In the meantime, noises from the White House and Congress suggest that attention will turn to matters other than health care reform. It is reasonable to assume that tax reform will be high on that list, and we will begin to learn more in the months to follow. House Republicans and the White House have released broad descriptions of two different tax plans. In most areas they are quite similar, but they vary significantly in their treatment of cross-border transactions.
Republicans plan to use the “reconciliation” process to allow tax reform to take place with a 51% vote that will be “immunized” from the 60% level required to close a Democrat filibuster. But these rules are incredibly complex, and the conservative members of the Republican Party that steadfastly opposed the AHCA are also very opposed to the “border adjustment tax” proposed by the existing Republican plan. This means that the path forward for any sort of tax reform will be difficult, and can be successful only with concessions by everyone.
Some customers are receiving notices this month from a large brokerage firm, explaining that for years 2013-2016, some amounts reported to them on Forms 1099-B were reported in error. (Some media sources reference years 2011-2016, but the statute of limitations for 2011 and 2012 returns is now closed.) In turn, this caused those customer’s income tax returns for those years to be filed in error. Rather than issuing corrected 1099-B forms that might create the need for its customers to amend federal income tax returns, the broker negotiated a direct settlement with the IRS on behalf of all taxpayers who underpaid their taxes as a result of the errors, and will reimburse taxpayers directly who overpaid. The letters we have seen do not mention disposition of state taxes, but most of the amounts involved are relatively small. It should be noted that the years in question were subject to greatly expanded IRS reporting requirements that put far more burdens on brokers and tax preparer than in the past.
Interestingly, if some new-for-2016 IRS rules had been created earlier, no need for any action would be required. Those rules allow honest income reporting errors of $100 or less to be exempt from the need to issue corrected Forms 1099.
At the time of publishing this tax snack, it is not yet reported on Amazon’s website, but numerous sources, including U.S. News & World Report, explain that beginning April 1, 2017, Amazon will begin collecting Maine’s 5.5% sales tax for packages sent to addresses in Maine. Such items in the past have generally been subject to use tax via the “honor system,” and are self-reported on taxpayer’s individual Maine income tax returns.
AL, OH, and NY now require presentation of the filer’s state driver’s license number on their income tax returns, beginning with 2016 returns being filed now. A number of other states request, but do not require them. Their intention is to reduce instances of identity theft. Hopefully they are effective in doing so, because with even more personally-identifying information stored in one place, a successful thief’s bounty will be that much more useful.
Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.