In December of 2015, I wrote about many tax provisions benefiting taxpayers for 2015 and beyond that had expired. Most CPAs were anticipating these to be retroactively approved by Congress. After much anticipation, Congress ended up extending and in many cases making the provisions permanent. Below is a summary of the main legislation:
On Tuesday, tax season officially began, and the IRS started accepting electronic returns, and processing paper returns. However, many of you may be waiting for your tax documents. The IRS urges taxpayers to wait until they have received all tax documents before filing. Here is a list of some common IRS forms you may be waiting for to file your return. I have included the due dates that are listed on the back of the tax documents. The form is considered on time if they have been mailed to the recipient on or before that date. Generally, many of these forms are required to be mailed by January 31st, but since this date falls on a weekend the due date is the next business day.
Check the IRS website under Current Forms & Publications Search to look at any additional tax forms that you have questions about.
Be sure to look out for any mention of possible amendments on any of these forms. It is common for brokerages to provide 1099 forms by the deadline, but then have a note on them that there may be changes that could cause an amended 1099.
If you are waiting on a K-1 from a separate entity, you may be waiting awhile longer. The date you receive this will depend on when the entity files their return. Be sure to check the due date of the entity’s return, and be aware of possible extensions.
Two years ago the Treasury Department implemented new Tangible Property Regulations through the passing of TD 9636. The new regulations contained a “Safe Harbor” election to expense any piece of tangible property purchased under $500. Many felt this was too low and increased the administrative burden on small businesses along with the IRS.
After receiving hundreds of comments from tax payers and professionals suggesting an increase to the “Safe Harbor” threshold amount, and the Treasury Department reviewing the goals of the new regulations, common sense prevailed and the Department agreed to increase the election amount to $2,500 per invoiced piece of tangible property. This election does not require you to expense all items under this threshold. You may choose any amount up to $2,500 that fits your business. Just make sure that your capitalization policy states your dollar threshold.
The effective date of the new safe harbor de minimis is for tax years beginning on or after January 1, 2016. Although, the IRS has allowed for those individuals and businesses that had a capitalization policy in place at the beginning of 2015 to use the $2,500 limit. IRS Notice 2015-82 states:
For taxable years beginning before January 1, 2016, the IRS will not raise upon examination the issue of whether a taxpayer without an AFS can utilize the de minimis safe harbor provided in 1.263(a)-1(f)(1)(ii) for an amount not to exceed $2,500 per invoice (or per item as substantiated by invoice) if the taxpayer otherwise satisfies the requirements of 1.263(a) – 1(f)(1)(ii). Moreover, if the taxpayer’s use of the de minimis safe harbor provided in 1.263(a) – 1(f)(1)(ii) is an issue under consideration in examination, appeals, or before the U.S. Tax Court in a taxable year that begins after December 31, 2011, and ends before January 1, 2016, the issue relates to the qualification under the safe harbor of an amount (or amounts) that does not exceed $2,500 per invoice (or per item as substantiated by invoice), and the taxpayer otherwise satisfies the requirements of 1.263(a) – 1(f)(1)(ii), then the IRS will not further pursue the issue. “
Taxpayers should review their capitalization policy for 2016 in order to implement the new safe harbor limit. If you have been using the new limit for the 2015 tax year or before, you should review IRS Notice 2015-82 to be sure that your business qualifies for audit protection.
It is never too early to start thinking about the upcoming tax season. The closer to the filing deadline it gets, the more pressure you will feel when getting your documents together and the possibility that something could be missed may increase. The other side of that is your tax preparer will get busier and busier as the tax deadline nears, which may prolong the time it takes for you to get your return completed. There is no harm in trying to get your return done before the deadline. You always have the option to wait to file the completed return until closer to the deadline.
Here are some tips to help you get ready for tax season, and avoid silly errors that could delay the filing process.
Will you prepare yourself, use computer software, or use a tax preparer?
Did you get married? Divorced? Have a child? Move?
This may include employment W-2s, 1099s, K-1s, mortgage interest statements, student loan interest forms, etc.
A good place to start with this is by looking at your prior year’s tax return and at the documents used to prepare this return. Then determine what has changed, i.e. new house, changed jobs, new investments, etc.