Person Huff CPA Group Offers Advice On Upcoming Tax Changes
NEW ORLEANS – The Person Huff CPA Group, with offices in New Orleans, Metairie, Slidell and Chalmette, report there have been several important tax developments that have occurred in the past three months that may affect area families, investments and livelihoods.
To take advantage of favorable developments and to minimize the impact of those that are unfavorable, the Person Huff CPA Group said to first look at tax changes related to the Transportation Act.
On July 31, 2015, President Obama signed into law the "Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" (the Transportation Act), which extended the Highway Trust Fund and included a number of important tax changes.
The Person Huff CPA Group reports the most important tax changes in the Transportation Act are those that adjust tax-filing deadlines for partnerships and C corporations. Specifically, for tax years beginning after Dec. 31, 2015:
They said partnerships and S corporations must file their returns by the 15th day of the third month after the end of the tax year. Thus, entities using a calendar year will have to file by March 15 of the following year, and the filing deadline for partnerships will be accelerated by one month but the filing deadline for S corporations will stay the same.
They said C corporations must file by the 15th day of the fourth month after the end of the tax year. Thus, C corporations using a calendar year must file by April 15 of the following year, and the filing deadline for C corporations will be deferred for one month. Under a special rule for C corporations with fiscal years ending on June 30, the change won't apply until tax years beginning after December 31, 2025.
Due dates for extensions have been adjusted as well, they said, effective generally for returns for tax years beginning after December 31, 2015.
They said the new law creates the following exceptions to the 6-month extension that generally applies to corporations:
1 – For any return for a tax year of a C corporation, which ends on December 31 and begins before January 1, 2026, the automatic extension period is 5 months.
2 – For any tax year of a C corporation, which ends on June 30 and begins before January 1, 2026, the automatic extension period is 7 months. And, the maximum extension for the returns of partnerships filing Form 1065 will be a 6-month period (ending on September 15 for calendar year taxpayers) (not 5 months).
The Person Huff CPA Group notes there have also been recent changes to “Per Diem” business travel reimbursement rates.
They report an employer may pay a per-diem amount to an employee on business-travel status instead of reimbursing actual substantiated expenses for away-from-home lodging, meal and incidental expenses, but if the rate paid doesn’t exceed IRS-approved maximums, and the employee provides simplified substantiation, the reimbursement isn’t subject to income or payroll-tax withholding and isn’t reported on the employee’s Form W-2.
In general, they said, the IRS-approved per-diem maximum is the GSA per-diem rate paid by the federal government to its workers on travel status. This rate varies from locality to locality. Instead of using actual per-diems, employers may use a simplified “high-low” per-diem, under which there is one uniform per-diem rate for all “high-cost” areas within the continental U.S. and another per-diem rate for all other areas within continental U.S. The IRS released the “high-low” simplified per-diem rates for post-September 30, 2015, travel. The high-cost area per-diem increases $16 to $275, and the low-cost area per-diem increases $13 to $185.
The home mortgage interest deduction doubled for unmarried co-owners, the Person Huff CPA Group said.
The Ninth Circuit Court of Appeals, reversing a Tax Court decision, concluded that the tax law's limits on the amount of debt eligible for the home mortgage interest deduction ($1 million of mortgage "acquisition" debt and $100,000 of home equity debt) are applied on a per-individual basis, and not a per-residence basis as the IRS has long maintained.
They said this means for the unmarried co-owners in the case, their collective limit for the home mortgage interest deduction doubled from a maximum of $1.1 million to a maximum of $2.2 million acquisition and home equity debt.
Whether this holding will hold up in jurisdictions other than the Ninth Circuit (California and other western states, including Hawaii), and whether it will apply to joint ownership situations for vacation homes, for example, remains to be tested, they said.
Last, the Person Huff CPA Group said Bloomberg is predicting a lower effective tax rate in 2016 because of a drop in the consumer price index (CPI).
The CPI measures the cost of goods and services. When the CPI doesn’t change much, they said, it tends to signal that interest rates will stay put. For 2016, Bloomberg is projecting that the personal exemption amount will be $4,050, up from $4,000 in 2015. For high-income taxpayers, the personal exemption deduction is phased out. They are also projecting the federal estate tax exclusion will edge up slightly but the gift tax will remain unchanged.
The Person Huff CPA Group said this news is important because inflation adjustments are now routinely included in new tax legislation which can be confusing for taxpayers.