2015 TAX UPDATES TaxSmarter.com
NEW TAX LAWS FOR 2015 Standard Deduction: $12,600 MFJ or QW (increase of $200) $9,250 - Head of Household (increase of $150) $6,300 - Single or MFS (increase of $100) Additional deduction for being 65 or older or blind: $1, 550 - Single or Head of Household (no change) $1,250 for Married taxpayers (increase of $50)
NEW TAX LAWS FOR 2015 Personal Exemption Amount Each exemption increased to $4,000 for 2015. Retirement Savings Contribution Credit Income Limits Increased Your MAGI must not be more than $30, 500 ($61,000 if MFJ, $45,750 if Head of Household). Maximum EIC credit $6,242 with three or more qualifying children $5, 548 with two qualifying children $3,359 with one qualifying child $503 with no qualifying child Earned Income Amount Increased To be eligible for a full or partial credit, the taxpayer must have earned income of at least $1 but less than: $47,747 ($53,267 if Married Filing Jointly) with three or more qualifying children $44,454 ($49,974 if Married Filing Jointly) with two qualifying children $39,131 ($44,651 if Married Filing Jointly) with one qualifying child $14,820 ($20,330 if Married Filing Jointly) with no qualifying child Investment Income Taxpayers whose investment income is more than $3,400 cannot claim the EiC.
NEW TAX LAWS FOR 2015 Standard Mileage Rate For 2015, the following rates are in effect 57.5 cents per mile for business miles driven 23 cents per mile driven for medical or moving purposes 14 cents per mile driven in service of charitable organizations (no change) Education Benefits American opportunity credit is reduced for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for a joint return). There is no change from 2014. Lifetime learning credit is reduced for taxpayers with modified adjusted gross income in excess of $55,000 ($110,000) for a joint return. Student loan Interest deduction begins to phase out for taxpayers with modified adjusted gross income in excess of $65,000 ($130,000 for joint returns) and is completely phased out for taxpayers with MAGI of $80,000 or more ($160,000 or more for joint returns). There is no change from 2014.
NEW TAX LAWS FOR 2015 Eligible Long-Term Care Premium Limits Increased For 2015, the maximum amount of qualified long-term care premiums includible as medical expenses has increased. Qualified long-term care premiums up to the amounts shown below can be included as medical expenses on Schedule A. $380: age 40 or under $710: age 41 to 50 $1,430: age 51 to 60 $3,800: age 61 to 70 $4,750: age 71 and over
NEW TAX LAWS FOR 2015 Foreign Earned Income Exclusion For 2015, the maximum foreign earned income exclusion increased to $100,800. The foreign housing exclusion is $44.19 per day or $16,128 for the year. Cancellation of Debt - Is It Taxable or Not? - Genrally, Yes If your forgiven debt is subject to taxation, you will usually receive a form 1099-C, Cancellation of Debt, from the lender, showing the amount of canceled debt. You ll file the 1099-C with your federal tax return, and the amount of canceled debt is added to your gross income. Health Savings Account (HSA) Deduction The annual contribution limits on deductions for HSAs increased for individuals with self-only coverage to $3,350 and to $6,650 for family coverage.
NEW TAX LAWS FOR 2015 Cancellation of Debt - EXCLUSIONS from Gross Income: PUB 4012, FORM 982 REQUIRED. Debt canceled in a Title 11 bankruptcy case Debt canceled during insolvency Cancellation of qualified farm indebtedness Cancellation of qualified real property business indebtedness Principal residence indebtedness under terms of the Mortgage Debt Relief Act (2007 through 2016). This can also apply to debt that is discharged in 2017 provided that there was a written agreement entered into in 2016. Extension of the Mortgage Debt Relief Act The Act initially covered a three-year period between 2007 and 2010, but was extended four times, to 2012, 2013, 2014 and then to 2016. This can also apply to debt that is discharged in 2017 provided that there was a written agreement entered into in 2016. Mortgage Debt Relief Act of 2007 Applying only to your principal residence, the Mortgage Debt Relief Act excluded as income any debt discharge up to $2 million. Provisions of the Act applied to most homeowners, and it included partial debt relief gained through mortgage restructuring as well as full foreclosure. Refinancing was also allowed, but only up to the amount of principal balance of the original mortgage. The Act also covered loans and subsequent debt forgiveness for amounts borrowed to substantially improve a principal residence. You cannot use provisions of the Act for other canceled debts, and the relieved debt must be secured by the principal residence property. The Act covered debt forgiven within the calendar years of 2007 to 2016. This can also apply to debt that is discharged in 2017 provided that there was a written agreement entered into in 2016.
NEW TAX LAWS FOR 2015 IRA Contributions (figures can be changed if high income tax payer) Traditional IRA contribution limit $5,500 Additional contribution if age 50 or older $1,000 Deduction phase-out for active plan participant S/HOH : $61,000-$71,000 MFJ, if one participant is covered Participant spouse $98,000-$118,000 Non-participant spouse $183,000-$193,000 MFS $0-$10,000
NEW TAX LAWS FOR 2015 One-Per-Year Limit on IRA Rollovers Beginning in 2015, you can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs you own The limit will apply by aggregating all of an individual s IRAs, including SEP and SIMPLE IRAs, effectively treating them as one IRA for purposes of the limit. Trustee-to-trustee transfers between IRAs are not limited Rollovers from traditional to Roth IRAs ("conversions") are not limited
NEW TAX LAWS FOR 2015 Deduction Amount and Modified AGI Limit for Traditional IRA Contributions Increased For 2015, the maximum IRA deduction will remain at $5,500 ($6,500 1f age 50 or older). For taxpayers who are covered by a retirement plan at work, the deduction for contributions to a traditional IRA is reduced (phased out) if the modified AGI is: More than $98,000 but less than $118,000 for a married couple filing a joint return or a qualifying widow(er) if both spouses are covered by a retirement plan, More than $61,000 but less than $71,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $183,000 and $193,000. The AGI phase-out range for taxpayers making contributions to a Roth IRA is: $183,000 to $193,000 for married couples filing jointly $116,000 to $131,000 for singles and heads of household $0 to $10,000 for a married individual filing a separate return
NEW TAX LAWS FOR 2015 Employee contribution limits to employer plans 401(k), 403(b) 457 plans = $18,000 Salary-reduction SEP = $18,000 SIMPLE IRA, Simple 401k = $12,500 Additional contribution if age 50 or older => $6,000
NEW TAX LAWS FOR 2015 Education: American Opportunity credit limit-per student = $2,500. Phase-out: M FJ = $160,000 - $180,000 S, HOH, QW = $80,000 - $90,000 Lifetime Learning credit limit-per taxpayer = $2,000. Phaseout: MFJ: $111,000 - $131,000 S, HOH, QW = $55,000 - $65,000 Student loan interest deduction limit = $2,500. Phase-out: MFJ = $130,000 - $160,000 S, HOH, QW = $65,000 - $80,000
NEW TAX LAWS FOR 2015 Identity Protection Personal Identification Numbers (IP PINs) IP PINs will be required, beginning with the 2016 filing season, for all taxpayers whose Social Security numbers are on a return if an IP PIN was assigned to them. An IP PIN is a six-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security numbers on fraudulent federal income tax returns. The IRS announced that, for those with an IP PIN requirement, the IP PIN must be included, regardless of whether the SSN is entered for a primary, spouse, or dependent/qualifying individual, on the following returns: Form 1040, Form 2441 (Child and Dependent Care Expenses), and Schedule EIC (Earned Income Credit). If the IP PIN is not included in any of the required fields, the return will be rejected. The IRS issues these IP PINs annually. The notices dated January 4, 2016 contained the valid IP PIN.
NEW TAX LAWS FOR 2015 Identity Protection IRS is asking to gather driver s license or state ID information to help the IRS and state revenue agencies combat identity theft and fraudulent return filing. The IRS (and most states) will not reject a return if this information is not included, but the presence of the identity authentication information will assist the agencies in processing returns. At some point, more agencies may start requiring identity authentication under certain circumstances.
NEW TAX LAWS FOR 2015 Extenders What if the IRA distribution is used for charitable purposes? Nontaxable distribution Directly made by the trustee of the IRA to an organization Taxpayer must be at least age 70 1/2 The maximum annual exclusion is $100,000. Excess of the $100,000 exclusion limit is included in income as any other distribution.
NEW TAX LAWS FOR 2015 Extenders How do I handle educator expenses? If the taxpayer is an eligible educator, deduct up to $250. What are qualified tuition and fees expenses? Tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Beginning in tax year 2016, the deduction for qualified tuition and related expenses will not be allowed unless the taxpayer receives a statement (Form 1098-T) from the educational institution. Deduct upto $4,000 What are residential energy credits? Qualified energy efficient improvements for their main home may be allowed nonrefundable tax credits upto $500. There are two types. Residential energy efficient property credit (Form 5695, Residential Energy Credits, Part I) Nonbusiness energy property credit (Form 5695, Part II)
NEW TAX LAWS FOR 2015 Extenders State and local general sales taxes Qualified mortgage insurance premiums Cancellation of Debit Qualified principal Resident Use Publication 4731-A, Part I for taxpayers with Form 1099-A for a foreclosure or abandonment of their principal residence. Use Publication 4731-A, Part II for taxpayers with Form 1099-C, and/or Forms 1099-A and 1099-C resulting from cancellation of debt on a home mortgage loan. Refer Pub 4012 and form 982 for Form 1099-c
AFFORDABLE CARE ACT The ACA requires individuals to have qualifying health care coverage (called minimum essential coverage, or MEC) for each month of the year, qualify for a coverage exemption, or make a shared responsibility payment (SRP) when filing their federal income tax returns. MEC 1095-A 1095-B 1095-C Health coverage exemptions Shared Responsibility Payment: The income percentage is 1 percent for 2014 2 percent for 2015 2.5 percent for years after 2015 Or, Flat dollar amount, $325 per adult. Whichever is greater. Premium Tax Credit (PTC) If eligible, obtain a health insurance at the Marketplace. It helps paying premiums and out-of-pocket costs. The premium tax credit (PTC) is available through the Marketplace and helps eligible taxpayers pay for coverage.
ACA Who must have health care coverage? In general, all U.S. taxpayers must have one including dependents. If not, taxpayers will generally owe an SRP(Shared Responsible Payment) Senior citizens must also have health care coverage or qualify for a coverage exemption for each month in the year. Both Medicare Part A and Medicare Part C (also known as Medicare Advantage) are minimum essential coverage. All non-u.s. citizens who are in the U.S. long enough during a calendar year to qualify as resident aliens for federal income tax purposes. All bona fide residents of U.S. territories are treated as having MEC and are not required to take any action to comply with the individual shared responsibility provision other than to indicate their status on their federal income tax returns.
ACA Affordable Care Act - Forms 1095-A, 1095-B, and 1095-C 1095-B & 1095-C ARE NOT REQUIRED. Health Care coverage information can be received in various ways: 1095-A, Health Insurance Marketplace Statement (Issued by the Health Insurance Marketplace) 1095-B, Health Coverage (Includes coverage such as Medicare Part A) 1095-C, Employer-Provided Health Insurance Offer and Coverage (Including offers of coverage for members of the tax family) Taxpayers who obtained insurance through the Health Insurance Marketplace will receive Form 1095-A that provides information about the amount of advanced premium tax credit (APTC) that was paid during the year to the taxpayer s health plan in order to reduce their monthly premium. This information was also reported to the IRS. The APTC paid on the taxpayer's behalf during the year was based on the 2015 income estimated during sign up for Marketplace coverage. Taxpayer's should receive Form 1095-A in the mail in late January to early February and it will also be available in their online healthcare.gov accounts (if the taxpayer has one). If the taxpayer believes the Form 1095-A is incorrect, such as coverage start and end dates and the number of people in their household, they should contact the Marketplace Call Center. The deadline for the Marketplace to provide Form 1095-A is February 1, 2016. The deadline for insurers, other coverage providers and certain employers to provide Forms 1095-B and 1095-C has been extended to March 31, 2016. If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form. However, it is not necessary to wait for Forms 1095-B or 1095-C in order to file. Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required. Like last year, taxpayers can prepare and file their returns using other information about their health insurance. You should not attach any of these forms to your tax return.
Minimum Essential Coverage (MEC) Determine what is minimum essential coverage (MEC) Specified government-sponsored programs (e.g., Medicare Part A, Medicare Advantage, most Medicaid programs, CHIP, most TRICARE programs, and comprehensive health care coverage of veterans) Employer-sponsored coverage under a group health plan Individual health coverage (e.g., health insurance purchased through the Marketplace or directly from an insurance company) Grandfathered health plans (in general, certain plans that existed before the ACA and have not changed since the ACA was passed) Other plans or programs that the Department of Health and Human Services, in coordination with the Treasury, recognizes as MEC for the purposes of the ACA How do Iknow if taxpayers have MEC? Taxpayers may receive Forms 1095-A, 1095-B, or 1095-C from the Marketplace, their insurance provider, or employer.
EXEMPTION The following is a list of exemptions: Unaffordable coverage The amount the taxpayer would have paid for the lowest cost employer-sponsored coverage available, or for coverage through the Marketplace is more than 8.05% of the taxpayer s household income for the year in 2015. Short coverage gap The taxpayer went without coverage for less than three consecutive months during the year. Household income below the return filing threshold The taxpayer s household income is below the taxpayer s minimum threshold for filing a tax return. Certain noncitizens The taxpayer was neither a U.S. citizen, U.S. national, nor an alien lawfully present in the U.S.
EXEMPTION The following is a list of exemptions: General hardship - Taxpayers experienced hardships that prevented them from obtaining coverage. Members of federally-recognized Indian tribes The taxpayer was a member of a federally-recognized Indian tribe. Incarceration The taxpayer was in a jail, prison, or similar penal institution or correctional facility after the disposition of charges. Members of certain religious sects The taxpayer was a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and social security.
EXEMPTION How to report a coverage exemption: Taxpayers will receive an exemption certification number (ECN) from the market place. Report ECN in Part I (Marketplace-Granted Coverage Exemptions for Individuals) of Form 8965, column c. Income is too low. Part II of Form 8965 to claim. All other coverage exemptions Part III of Form 8965. Use a separate line for each individual and exemption type claimed on the return.
SHARED RESPONSIBILITY PAYMENT Determine if taxpayers qualify for a health care coverage exemption If a taxpayer (or any of their dependents) doesn t have MEC and doesn t qualify for a coverage exemption, they will need to make an SRP when filing their tax return. For 2015, the SRP amount is: The greater of(monthly basis): 2 percent of the household income that is above the tax return filing threshold for the taxpayer s filing or The family s flat dollar amount, which is $325 per adult and $162.5 per child (under age 18), limited to a family maximum of $975
SHARED RESPONSIBILITY PAYMENT Example - ACA Single individual with $40,000 income: Jim, an unmarried 30-year-old with no dependents, did not have MEC for any month during 2015 and does not qualify for a coverage exemption. For 2015, Jim's household income was $40,000 and his filing threshold is $10,300.The monthly national average bronze plan premium for an individual is$207. To determine his monthly payment amount using the income formula, subtract $10,300 (filing threshold) from $40,000 (2015 household income).the result is $29,700. 2%of $29,700 equals $594. Jim's flat dollar amount is $325. Because $594 is greater than $325, Jim's monthly penalty amount for each month is $49.50, or 1/12 of the $594 amount. For Jim, the sum of all monthly penalty amounts is $594. Jim s SRP in 2015 is $594
How to Report MEC How to report minimum coverage on the tax return Taxpayers who had MEC for each month of their tax year will indicate this on their 2015 tax return by checking a box on their Form 1040, 1040A or 1040EZ.
REPORTING ACA Where is coverage reported? Taxpayers who had MEC all year Checking the box in the Other Taxes section form 1040. Form 8965 Claim a coverage exemption Calculate Shared responsible payment Form 8962 Pub 974 The premium tax credit is calculated Advance payment is reconciled Taxpayers will receive Form 1095-A from the Marketplace, which will contain the information necessary to complete Form 8962.
PREMIUM TAX CREDIT Determine who is eligible for the premium tax credit Taxpayers who purchased their insurance through the Marketplace may eligible for the premium tax credit. Income is at least 100% but not more than 400% of the federal poverty line The premium tax credit is a new federal tax credit to help eligible taxpayers pay for health insurance. When enrolling in health coverage through the Marketplace, eligible taxpayers choose to have some or all of the benefit of the credit paid in advance to their insurance company (advance credit payments) or to get all of the benefit of the credit on their federal tax return. Those who choose to have advance credit payments made must file a federal tax return even if they have gross income that is below the income tax filing threshold
PREMIUM TAX CREDIT FORM 8962 Determine if taxpayers qualify for a hea contribution amount of $2,312 (househ
PREMIUM TAX CREDIT- 1095-A Determine what documentations needed to prepare premium tax credit. Market place will send out 1095-A to all enrollees by Jan 31, 2016 Taxpayers who have a Form 1095-A showing changes in monthly amounts must do a monthly calculation to determine their premium tax credit The premium tax credit is a refundable tax credit.
PREMIUM TAX CREDIT Calculate the premium tax credit The premium tax credit is the sum of the credit amount for each month. The monthly premium for the taxpayer s applicable second lowest cost silver plan (SLCSP) minus the taxpayer s monthly contribution amount. Have some or all of the estimated credit paid in advance to the insurance company to lower what is paid out-of-pocket for monthly premiums during 2015; or Wait to get all the benefit of the credit when they file their 2015 tax return
REPORTING ACA Unusual Situation Part IV on Form 8962 What if taxpayers have a shared policy purchased through the Marketplace? (Example, Divorced during the year) If a taxpayer is enrolled, or has a family member who is enrolled, in a policy with a person not in the taxpayer's tax family (a shared policy), the taxpayer may have to allocate the items on Form 1095-A (the enrollment premiums, the premium for the applicable SLCSP, and the advance credit payments) with another taxpayer (a shared policy allocation). The following taxpayers may have to do a shared policy allocation: Taxpayers who got divorced or legally separated during the tax year A taxpayer who claims a personal exemption deduction for an individual enrolled in a policy by another taxpayer A taxpayer who enrolls an individual in a policy, but another taxpayer claims a personal exemption deduction for the individual A taxpayer who files a separate return from his or her spouse
REPORTING ACA Unusual Situation Part V on Form 8962 What if taxpayers get married during the year? If taxpayers got married during the tax year and one or both spouses received APTC payments for the year, the spouses may be eligible to use an alternative calculation to determine their excess advance credit payments. The alternative calculation can be used to reduce excess APTC, but not to increase net PTC. See the instructions for Form 8962 for eligibility. If eligible, taxpayers will complete Form 8962, Part V, Alternative Calculation of Year of Marriage.
SUMMARY In general, all U.S. taxpayers must have an insurance, MEC for each month unless exempted. Only taxpayers who purchase MEC through the Marketplace are allowed a premium tax credit. Eligible taxpayers may choose to get the benefit of advance credit payments or wait to get a premium tax credit. The premium tax credit is calculated and the advance payment is reconciled on Form 8962. Taxpayers will receive Form 1095-A from the Marketplace, which will contain the information necessary to complete Form 8962. Taxpayers who have MEC all year will indicate this on Form 1040 by checking the box in the Other Taxes section. The premium tax credit is claimed in the Payments section of Form 1040. Any excess advance premium tax credit that must be repaid is entered in the Tax and Credits section of the Form 1040. Coverage exemptions are claimed on Form 8965. Any SRP is entered on Form 1040, line 61 in the Other Taxes section. Taxpayers should use the Shared Responsibility Payment Worksheet in the instructions to Form 8965 to figure the amount of the SRP due