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1 Welcome to Tax Update Your hosts: For Businesses & Estates Gary McBride and Annette Nellen Federal and California Tax Update for Businesses & Estates Dec 2015/Jan Slides Supplements to Outlines A and B Various links 2

2 2015 Chapter 1 New Law 3 Public Laws for 2015 with Tax Changes PL (4/16/15) Medicare Access and CHIP Reauthorization Act Medicare changes (AGI can be relevant) + start process to remove SSN from Medicare cards PL (5/22/15) Don t Tax Our Fallen Public Safety Heroes Act 104 exclusion PL (6/29/15) Defending Public Safety Employees Retirement Act 10% penalty exemption PL (6/29/15) Trade Preferences Extension Act 1098-T, 911 & Child credit, increase info return penalties, HCTC, more PL (7/31/15) Surface Transportation and Veterans Health Care Choice Improvement Act Due dates, basis consistency, 1098 for mortgage interest, more 5

3 Public Laws for 2015 with Tax Changes PL (9/30/15) Continuing Appropriations Act Extend Internet Tax Freedom Act to 12/11/15 PL (10/7/15) Protecting Affordable Coverage for Employees ACA definitional change PL (11/2/15) Bipartisan Budget Act of 2015 Partnership audit changes PL (12/4/15) - Fixing America's Surface Transp Act or FAST Act Passport denial, outside collectors, back to original extended due date for Public Laws for 2015 with Tax Changes PL (H.R. 2250, 12/11/15) Further Continuing Appropriations Act, 2016 Extend PL through 12/16/15 (so extends ITFA to 12/11/15) PL (12/16/15) H.J.Res.78 - Making further continuing appropriations for fiscal year 2016, and for other purposes Extend PL to 12/22/15 (once more extend ITFA) P.L (12/18/15) H.R. 2029, Consolidated Appropriations Act 2016 Appropriations with a few tax changes AND Protecting Americans from Tax Hikes Act of 2015 (PATH) (extenders) 7

4 The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (PL , 7/31/15) Changes Return Filing Dates and Extension Dates Starting with 2016 Returns (tyba 2015)

5 Due Date Chart from AICPA Print it! ments/due-dates-summary-chart.pdf Effective For TY Beg After 12/31/2015 With Special Rules for C Corps (2016 Returns)

6 April 15 Sept 15 March 15 Sept 15 March 15 Sept 15 March 15 Sept 15 No Change

7 April 15 Sept 15 April 15 Sept 30 Fiscal Year Other Than June 30

8 March 15 Sept 15 April 15 Sept 15 Calendar Year Before 2026 After 2025 April 15 Oct. 15 Sept. 15 March 15 Before 2026 After 2025 Sept. 15 April 15 Oct. 15 April 15 June 30 FY End

9 May 15 Aug. 15 Nov. 15 May 15 Nov. 15 July 31 Oct. 15 July 31 Nov. 15 This one repealed already by PL (12/4/15).

10 June 30 No Ext. April 15 Oct. 15 For returns for tax years beginning after Dec. 31, 2015 (2016 FBARS) California Does Not Conform to Due Date Changes (stay tuned) 22

11 Regulations See list at (new URL; also lists regs going back to 2011) Also linked at 24

12 No Automatic Extension of Time to File Form W-2 with IRS TD 9730 (9/13/15) temp and prop regs To reduce identity theft and refund fraud Effective for returns due after So, for 2016 W-2s due in early W-2 (other than W-2G) no automatic 30- day extension, only non-automatic 30-day if show extraordinary circumstances. 25 No Automatic Extension of Time to File Form W-2 with IRS - more TD 9730 (9/13/15) temp and prop regs Most other info forms, including 1095-B and 1095-C 1 auto 30-day extension 1 non-automatic extension after that But for some in future, IRS likely to remove auto ext option Form 8809, Application for Extension of Time to File Information Returns 26

13 Chapter 2 Expiring Provisions and 2016 Inflation Adjustments 27 Expired 12/31/14 52 at 12/31/14 (see JCT list in Chapter 2) Including: 50% bonus depreciation Higher 179 amounts 15 year life qualified leasehold, restaurant or retail improvements 100% exclusion on qualified small business stock acq in 2014 Research tax credit Other credits 7 year (rather than 10) BIG tax for S corps 30

14 PATH (PL (12/18/15) includes Permanent research credit with modifications 15-year life leasehold impr + restaurant and retail permanent Permanent higher inflation adjustments+ other modifications Several energy credits extended through 2016 Suspension of medical device excise tax for 2016 and 2017 Several changes to 501(c)(4) entities and administration Numerous REIT changes IRS can allow truncated numbers on W-2s; effective on enactment 31 Bonus depreciation Additional first-year depreciation for 50% of basis of qualified property (sunset 12/31/19) Property placed in service after 12/31/14 280F passenger cars $8, %; 280F $6, %; 280F $4,800 Election to accelerate AMT credit in lieu of bonus (sunset 12/31/19). Special rules for specified plants bearing fruits and nuts (sunset 12/31/19). 32

15 Also QSBS exclusion of 100% and no AMT hit permanent. Work opportunity tax credit extended 5 years (thru 2019) Add for qualified long-term unemployment recipient 33 Extended for 2015 and year life for race horses 7-year life for motorsports entertainment complexes 181 film/tv production expensing Various energy credits 34

16 PL and Certain Motion Picture Project Employers New IRC 3512 Overturns Cencast, 729 F3d 1352 (Fed Cir 2013) to treat the motion picture project employer of a motion picture project worker as the sole payor of the wages even if for different projects. Thus, all pay subject to single OASDI and FUTA wage base even if worker is common law employee of multiple clients but paid by same third party. Effective for pay made after 12/31/15. See definitions at ACA No medical device excise tax for 2016 and Appropriations bill Delay Cadillac tax ( 4980I) to 2020 (rather than 2018) Make Cadillac tax deductible. Suspend annual fee on health ins providers for

17 PATH documents See links in Supplement. See Tax A slides for Chapter 1&2 Watch for IRS guidance such as on parity for parking and transit for Inflation and Other Adjustments 39

18 Inflation Adjustments for 2016 New per P.L (12/19/14) Inflation adjustments for certain penalties under 6651, 6652(c), 6695, 5598, 6699, 6721 and Example 6695 penalties: Rev Procs and Estate tax exemption Annual gift exclusion $5,450,000 $5,430,000 $14,000 $14,000 41

19 New Mileage Rates for 2016 Business 54 (57.5 in 2015) Medical and Moving 19 (23 in 2015) Charitable 14 (same as 2015; statutory) IR (12/17/15); Notice Details on use Rev. Proc Retirement Plan Limitations IR (10/21/15) and Notice (10/30/15) Some amounts unchanged from 2015 IRA contributor w/o employer plan, married to covered individual Deduction phased out if couple s income between $184,000 and $194,000 Up from $183,000 and $193,000. AGI phase-out range for Roth IRA is $184,000 to $194,000 for MFJ Up from $183,000 to $193,000. Elective contribution) limit for 401(k), 403(b), most 457 plans, and federal Thrift Savings Plan remains same - $18,000. Catch-up contribution for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and government s Thrift Savings Plan remains same at $6,000. Limit on annual contributions to IRA is unchanged at $5,500. Additional catch-up contribution limit for individuals aged 50 or older required to stay at $1,

20 Realities 44 Aging IRS Workforce Per Commissioner Koskinen (March 2015): Only 650 of IRS s 87,000 employees were born in 1990 or later. Only about 2,000 IRS employees are age 30 or younger. 45

21 IRS Exam Rates Low FY2015, IRS audited about 1.2 million individuals. 1.1% fewer than for prior year 22.3% fewer than in FY2010 Result - drop in audit collections Commissioner Koskinen speech to AICPA National Tax Conference, 11/3/ Will states increase audits? Already looking for non-filing businesses (looking for nexus). 47

22 Reminders (from past laws) 48

23 Old Law Reminder (2006) April 30, 2016 Deadline To Adopt Restated Pre- Approved Defined Contribution Plans Employers using pre-approved retirement plan documents must get updated version of 401(k), profit-sharing and other DC plans. Applies to pre-approved plans bought from third party providers. Relates to Pension Protection Act of 2006 (PPA). See IRS website (link in supplement) for more Due Diligence Reminders Watch for them throughout today s presentation. Such as: Getting ready for new due dates Tangible Property Regulations Elections Particularly de minimis safe harbor expensing 1.263(a)-1(f) $2,500 starting for 2016! Partial Disposition Elections 51

24 Due Diligence Reminders More: New method for accrual basis taxpayers Proper worker classification Getting ready for upcoming partnership audit changes May involve modifying partnership agreements 52 Data Security Reminders Help client protect records / reduce ID theft. Relevant to records and information of Individuals Businesses Return preparers! Helpful items from IRS: Guide to identity theft Pub 4524 (1 page) Pub 4557, Protecting Taxpayer Data (for businesses) Federal Trade Commission lots of helpful info 53

25 Watch for IRS guidance on 2015 law changes. See if client Defined Contribution model plans need modification by 4/30/16. Continue to become familiar with TPR including making annual elections (as appropriate), identifying book-tax differences, ensuring (a) adjustments properly reflected in asset and depreciation records. Start thinking about how upcoming due date change affects your office procedures and clients. Review list of 2015 regulations see