New Tax Season Starts Tuesday, January 19, 2016 and Will End April 18, 2016
By Rafique S.M. Ahmed
Los Angeles, CA
The Protecting Americans from Tax Hikes Act of 2015 crossed the hurdle in both the House and the Senate and was signed into law by President Obama on December 18, 2015 approving a $1.1 trillion spending measure which will not only extend a number of important tax provisions, but will also make several of them permanent.
Some of the provisions made permanent include business research and development, small business expenses, individual deductions for state and local sales taxes, and financing rules for multinational corporations. The legislation also ends a 40-year-old ban on crude oil exports and is intended to create more jobs, more opportunity, and more economic growth.
The new tax season will commence on January 19, 2016. The Internal Revenue Service will begin processing electronically submitted individual returns that day. Manually prepared returns mailed to the IRS will not be processed prior to January 19. The IRS is expecting to process more than 150 million individual returns in 2016 with 80% filed electronically. The filing deadline to submit 2015 tax returns was extended to April 18, 2016 from April 15 mainly due to Washington DC celebrating Emancipation Day on April 15, 2016.
"We look forward to opening the 2016 tax season on time," IRS Commissioner John Koskinen recently announced. "Our employees have been working hard throughout this year to make this happen timely and would appreciate the help from the nation's tax professionals and the software community to helping taxpayers during the filing season."
The following deductions, credits and other tax provisions were made permanent in the above legislation:
- The Research & Development credit
- Increased expensing limitations and treatment of certain real property as Section 179 property
- The exclusion of 100% of gain on certain small business stock
- Reduction in S corporation recognition period for built-in gains tax
- The enhanced Child Tax Credit
- The enhanced American Opportunity Tax Credit
- The enhanced Earned Income Tax Credit
- The deduction for certain expenses of elementary and secondary school teachers
- Parity for exclusion from income for employer-provided mass transit and parking benefits
- The deduction of state and local general sales taxes
- The special rule for contributions of capital gain real property made for conservation purposes
- Tax-free distributions from individual retirement plans for charitable purposes
- The charitable deduction for distribution of food inventory
- The tax treatment of certain payments to controlling exempt organizations
- Basis adjustment to stock of S corporations making charitable contributions of property
- The employer wage credit for employees who are active duty members of the uniformed services; 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements and qualified retail improvements
- The treatment of certain dividends of regulated investment companies
- The Subpart F exception for active financing income
- The minimum low-income housing tax credit rates for non-federally subsidized buildings
- The military housing allowance exclusion for determining whether a tenent in certain counties is low-income, and
- Regulated investment company qualified investment entity treatment under the Foreign Investment in Real Property Tax Act.
The following provisions were extended and modified through 2019:
- Bonus depreciation at 50 percent for 2015-2017 and phased down to 40 percent in 2018 and 30 percent in 2019.
- The Work Opportunity Tax Credit, modified and enhanced for employers who hire long-term unemployed individuals (unemployed for 27 weeks or more) to 40 percent of the first $6,000 of wages.
- The New Markets Tax Credit, providing $3.5-billion allocation each year through 2019, the carryover period for the credit has also been extended to 2024.
The following Tax provisions are revived and extended through 2016:
- Modification of the exclusion of mortgage debt discharge.
- Mortgage insurance premiums trated as qualified residence interest.
- The above-the-line deduction for qualified tuition and related expenses, and
- Over a dozen incentives for energy production and conservation.
The following are the other significant changes in the tax landscape of 2015 which may affect your tax returns:
- The Affordable Care Act or popularly known as Obamacare will continue to bring in new surprises to both taxpayers and tax preparers since the ACA is being implemented in phases.
- Foreign earned income exclusion for 2015 increased to $100,800.
- Personal and Dependent Exemption amount increased to $4,000 and is subject to phase-out if income exceeds specified amounts.
- Social Security Tax will be computed at 6.2% up to a maximum wage limit of $118,500.
- Standard mileage rate for business use of vehicle increased to 57.5 cents per mile. No change in rate for charitable use. However, the rate for medical care and move of residence reduced to 0.23 cents per mile.
( Rafique S.M. Ahmed is a professional Tax Accountant. He has been providing accounting and tax services in California for more than thirty-five years. He is also an Authorized IRS Electronic Filing Provider. His office, Automated Tax & Financial Services, is located at 1109 Via Verde, San Dimas, California 91773. Rafique Ahmed can be reached at (909)599-1412or (909)599-1414)