October 2015 Tax Snacks
Tax Snacks: Bite-size tax news and information on the fly
November 15: Extended exempt organization tax returns (Form 990 series) are due for calendar year entities.
Many federal tax-specific amounts are indexed for inflation, and the IRS this month released a pair of updates applicable to 2016. Among many others, the items listed include retirement plan contribution limits, the Child Tax Credit, education credits, personal exemptions and standard deductions. A description of the retirement plan contribution limits may be found in Rev. Proc. 2015-118, as summarized here. A list of the other items may be found in Rev. Proc. 2015-53, as summarized here.
Several differences exist for employers under the Affordable Care Act, depending upon whether they are categorized as small or large employers. Among them, certain restrictions apply to small employers, and some insurers provide coverage only for large employers. This caused a scheduled change that was incorporated into the original “Obamacare” rules five years ago and slated to take effect on 1/1/16 to be unwelcomed by many. Generally in most states in 2015, employers with 1-50 employees are considered small and those with 51-100 are considered large. On 1/1/16 the entire range of 1-100 employees was scheduled to be characterized as small. This created the risk that insurance providers who only offer large coverage might be forced to drop that coverage, leaving employers to seek an alternative.
However, this month the “PACE Act” (H.R. 1624) was signed into law. It gave states the ability to continue to treat employers in the 51-100 employee category as small. But it gave them that ability while retaining the technical definition of that 51-100 group as large, thereby (hopefully) preventing insurers of only large employers from dropping that coverage. This is seen by many as the best of both worlds. (The PACE Act also enjoyed something called “broad bipartisanship support,” or as I like to call it, “an endangered species.”)
Several months ago we published an article sharing many tax changes contained in Maine’s at-the-time proposed budget. That budget bill was passed, and a review of those changes can be found here.
A little-known tax reporting requirement exists that may be of interest to readers with nonresident relatives of means. Amounts received by an individual that are properly reported as gifts are not includible in taxable income of the recipient. Generally if a gift exceeds $14,000 in one year to any one recipient, the donor must file a gift tax return, but the recipient generally has to do nothing. That changes, though, if a larger gift was made to a U.S. person by a foreign person. If a foreign gift exceeding $100,000 is received, the recipient may need to file IRS Form 3520. There is no tax assessed on this amount; the filing is purely informational. However, as is often the case with assets of foreign origin, the penalty for not filing can be truly hideous. In this case, the penalty can be as high as 35% of the amount transferred.
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.