Happy New Year! It’s been a whirlwind these past few months – and with all of the potential tax changes weighing in the balance, you may be wondering what information you need to know. For your convenience, we’ve put together some highlights of what has happened on the tax front, and a sneak preview of what we might expect in the coming year.
- Trump’s tax plan. While we are still several weeks away from inauguration day, President-Elect Donald Trump has revealed some of his plans to reform the country’s tax code. Primary among them is simplifying taxes by creating just three tax brackets (down from the current seven), at 12 percent, 25 percent, and 33 percent (down from a top rate of 39.6 percent). No details have been made available on the income levels to which each bracket will apply. The President-Elect has proposed eliminating the federal Estate and Gift Tax, and doing away with the Alternative Minimum Tax (AMT) for both individuals and businesses. He would tax carried interest as ordinary income.
- Business tax changes. Trump has also stated his intention to reduce the corporate tax rate from 35 percent to 15 percent. He would also allow “pass through” income in partnerships, sole proprietorships and S corporations to be taxed at 15 percent, rather than being taxed at the individual shareholder’s rate. However, once the profits are distributed a second tax would be imposed on the individual’s income. In exchange for the lower corporate tax rate Trump would eliminate most corporate tax credits, with some exceptions (such as the R&D credit and childcare credit). He would double the Section 179 expensing cap to $1 million per year, and allow manufacturing companies to immediately deduct all new investments in the business.
- ACA changes. Perhaps the most visible and contentious campaign promises made by President-Elect Trump is the repeal of the Affordable Care Act (ACA), more commonly referred to as “Obamacare.” Aside from the impact on the people who rely on the new health insurance exchanges for coverage, repeal of the ACA would eliminate a huge burden of monitoring and reporting by businesses that came along with the Act. In addition, repeal of the ACA would also mean the repeal of the 3.8 percent net investment income (NII) tax that was one of the Act’s added provisions. The medical device tax that is part of the ACA would also likely be eliminated.
- Overtime rules overturned. The Department of Labor’s (DOL) new overtime rules that more than doubled the salary threshold to determine who is eligible for overtime pay, were blocked by a federal court in Texas. The rules were scheduled to go into effect on December 1, 2016. The new regulation, which was set to go into effect on December 1, would have adjusted the “white collar exemption” that allows employers to avoid paying overtime to salaried administrative or professional workers who make more than $23,660 per year. The new threshold annual salary would have been adjusted to $47,500, which would adjust every three years. The DOL is now considering its legal options, but it could fall to the new Trump administration or Congress to amend or discard the new overtime rules.
- CURES and HRAs. The 21st Century Cures Act creates an opportunity for small business owners to offer Health Reimbursement Accounts (HRAs) to their employees without incurring penalties. Under the Affordable Care Act (ACA) the IRS reclassified HRAs as “employer payment plans,” which triggered an excise tax of $100 per day, per employee, up to $36,500 a year. The Cures Act eliminates those penalties.
- Cybersecurity woes. The pace and breadth of Internet and phone based identity crimes grew even further in 2016. The IRS and state tax authorities developed a “Taxes. Security. Together.” Program to alert taxpayers to potential scams. But it remains up to every taxpayer to remain vigilant to guard against “phishing” and other attempts to steal personal data with the intent of fraudulent tax returns.
With all these changes (and potential changes) taking place, it is almost comforting to know that some things remain the same. For example, here are your important tax deadlines for 2017.
- January 23, 2017 – Earliest date on which the IRS will accept e-filed tax returns.
- January 31, 2017 – Deadline for mailing Forms W-2 and 1099 (with some exceptions), as well as documents involving bank interest and retirement account distributions.
- February 15, 2017 – Deadline for mailing Form 1099-B, which documents sales of stocks, bonds, or mutual funds through a brokerage account, as well as Form 1099-S for real estate transaction and some Form 1099-MISCs.
- February 28, ,2017 – Filing deadline for Form 1095-C, an ACA notification for applicable large employers.
- March 2, 2017 – Deadline for filing IRS Form 1095-B (extended from January 31), an ACA notification for applicable large employers.
- March 15, 2017 – Filing deadline for Partnerships and S-Corporations (Partnership deadline was previously April 15).
- April 18, 2017 – Tax filing deadline. This is a few days later than the traditional filing day because April 15 falls on a Saturday and the following Monday is an official holiday in Washington, DC (Emancipation Day). So, enjoy the extra 72 hours!
- April 18, 2017 – Deadline for requesting a tax extension.
- October 16, 2017 – Deadline for filing a tax extension.
- April 18, 2020 – Deadline for filing an amended 2016 tax return (three years after the original filing deadline).
As always, if you have any questions about these or other tax-related issues, please contact the Gray, Gray & Gray Tax Department at (718) 407-0300. We wish you a healthy, happy and prosperous New Year!