January 4, 2016
This letter is to advise you of (1) the recently-passed Protecting Americans from Tax Hikes Act of 2015 (PATH Act); (2) extended due dates for certain 2015 health insurance informational returns; (3) the new Hawaii General Excise and Use tax lockbox system, and (4) the increase in the de minimis safe harbor limit for taxpayers without applicable financial statements from $500 to $2,500.
PATH Act of 2015
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The PATH Act makes permanent several popular tax provisions, including the research tax credit, enhanced Sec. 179 expensing, and the American Opportunity Tax Credit. It also extends certain tax breaks, including bonus depreciation for five years, and extends other favorable provisions for two years. While the PATH Act contains over one hundred changes, we have summarized some of the key provisions below.
Extenders for Individuals
- Election to claim state and local general sales tax in lieu of deducting state and local income taxes (permanent);
- American Opportunity Tax Credit (permanent);
- Reduced earned income threshold amount ($3,000) for the additional Child Tax Credit (permanent);
- Increase ($5,000) in Earned Income Credit phaseout amount for joint filers, and increased 45% Earned Income Credit percentage for taxpayers with three or more qualifying children (permanent);
- Above-the-line deduction for teachers’ classroom expenses up to $250 (indexed for inflation), which now also includes “professional development expenses” (permanent);
- Tax-free distributions from an IRA to a charity for those age 70 ½ or older (permanent);
- Above-the-line deduction for qualified tuition and fees for post-secondary education (through 2016);
- $2 million exclusion from income of canceled qualified personal residence indebtedness (through 2016); and
- Mortgage insurance premium treated as deductible mortgage interest subject to the AGI phase-out (through 2016).
Extenders for Business
- Sec. 179 expensing limit set at $500,000 with a $2 million investment limit before phase-out (both amounts indexed for inflation beginning in 2016) (permanent);
- Research tax credit is made permanent, and the alternative simplified credit is increased from 14% to 20% (permanent);
- Exclusion of gain on the sale of qualified small business stock held for more than five years by a non-corporate taxpayer (permanent);
- Five-year recognition period for S corporation built-in gains tax (permanent);
- 15-year straight-line cost recovery for qualified leasehold improvements, restaurant property, and retail improvements (permanent);
- Bonus depreciation extended through 2019 subject to phase-down as follows:
- 50% from 2015 - 2017;
- 40% in 2018; and
- 30% in 2019;
- Work opportunity tax credit (through 2019); and
- Allocation of $3.5 billion of new market tax credits for each year from 2015 through 2019.
- Sec. 25C residential energy property credit for certain energy-efficient improvements to the taxpayer’s main home (through 2016);
- Production tax credit for wind energy extended through 2019 subject to phase-down.
- Energy-efficient commercial building deduction (through 2016).
Affordable Care Act
- Two-year delay of the ACA excise tax on high-dollar health care plans, known as “Cadillac” plans (excise tax will apply beginning in 2020); and
- Two-year moratorium on the ACA excise tax on qualified medical devices (excise tax will apply beginning in 2018).
Extended Due Dates for 2015 Health Insurance Informational Reporting
On December 28, 2015, the IRS issued Notice 2016-4 to extend the filing deadlines for the 2015 health insurance coverage informational returns as follows:
- Due date for furnishing 2015 Forms 1095-B and 1095-C to individuals is extended from February 1, 2016 to March 31, 2016;
- Due date filing 2015 Forms 1094-B, 1095-B, 1094-C, and 1095-C with the IRS is extended from :
- February 29, 2016 to May 31, 2016, if paper-filing; and
- March 31, 2016 to June 30, 2016, if filing electronically.
Hawaii General Excise Tax (GET) & Use Tax Lockbox Payment System
In effort to expedite the processing of GET payments and returns, the Hawaii Department of Taxation has implemented a new lockbox payment system. Under the new lockbox system, GET paper returns should continue to be mailed to the usual address (P.O. Box 1425, Honolulu, HI 96806-1425), but the GET payments, along with payment vouchers (Form VP-1), should be mailed to a new lockbox address (P.O. Box 1730, Honolulu, HI 96806-1730). This new process is designed to ensure quicker processing of GET payments, and allow the Department to more efficiently respond to taxpayer inquiries and resolve problems. For more information on the new lockbox system, please click here.
Increase in De Minimis Safe Harbor Limit for Taxpayers Without Applicable Financial Statements
On November 24, 2015, the IRS issued Notice 2015-82 to increase the de minimis safe harbor threshold for taxpayers without applicable financial statements (AFS) from $500 to $2,500 per invoice (or item as substantiated by the invoice). The increased threshold amount is effective for tax years beginning after 2015. The notice, however, states that for tax years beginning before January 1, 2016, the IRS will not examine the issue of whether a taxpayer without an AFS qualifies for the de minimis safe harbor with respect to an amount that does not exceed $2,500 per invoice (or item as substantiated by the invoice) provided that the taxpayer otherwise satisfies the de minimis safe harbor requirements.
The above is a very simplified explanation of the PATH Act, the extended deadlines for the health insurance informational reporting, the new Hawaii GET lockbox system, and the increase in the de minimis safe harbor limit. If you have questions, please contact us at (808) 524-2255.
N&K CPAs, INC.