General Articles

In December, a new state law went into effect which could qualify individuals who have recently sold their home for a state transfer tax refund.

How may you qualify?

1. If you sold your home in the last four years, and
2. If your state equalized value (SEV) at the time of the sale was lower or equal to the SEV when you purchased the home.

If an individual qualifies, then he or she does not have to pay the state transfer tax and may be eligible for a refund if the transfer tax was paid upon sale. Form 2796 (Application for State Real Estate Transfer Tax Refund) must be completed.

The IRS recently made an announcement of an error on their December 2015 Identity Protection PIN letters (IP PIN).

The letters stated that the IP PIN was for the 2014 tax year, when they are actually for the 2015 tax year.

An IP PIN is a unique 6-digit number assigned to taxpayers that have experienced identity theft. They help the IRS verify a taxpayer’s identity and prevent someone from filing a fraudulent return under another person’s Social Security number. For identity theft victims, a tax return will be rejected if it is missing or contains an incorrect IP PIN.

The IRS emphasized that taxpayers and preparers should still use the IP PIN numbers when filing 2015 returns despite the wrong date on the letter.

To read the announcement by the IRS click here. For more information on identity theft and IP PINs, please contact Brian McFarren at (231) 726-5815.

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Simon Bowers, in a recent article published in The Guardian, discusses a report from the Organization for Economic Co-operation and Development (OECD) which states that foreign individuals are increasingly being faced with the burden of international taxes. This is because governments have been forced to be less dependent on taxing corporate profits.   These tax hikes are coming in the form of higher social security contributions, value added taxes, and income taxes.

For example, the OECD reports that the average corporation tax receipts were 2.8% of the GDP compared to 2007 when the percentage was 3.6%. Given the same time frame, social security contributions went up from 8.5% to 9.2%, value added taxes went up from 6.5% to 6.8%, and income taxes went up from 8.8% to 8.9% of the GDP.

To read the full referenced article click here. For more information on this topic, please contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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In early 2015, the Internal Revenue Service issued Rev. Proc. 2015-20, which allowed small businesses to adopt the final tangible property regulations using simplified procedures. In a recent article published in The Tax Advisor, authors David L. Strong, Jane Rohrs, and Susan Grais discuss the options that small businesses have in relation to the tangible property regulations.

What defines a small business?

A taxpayer qualifies for the small business exception if it has one or more separate and distinct trades or businesses that have:

1. Assets totaling less than 10 million on the first day of the 2014 tax year, or
2. Average gross receipts of 10 million or less for the prior three tax years.

The Small Business Exception of Rev. Proc. 2015-20

The small business exception of Rev. Proc. 2015-20 allows small businesses to adopt the final tangible property regulation using simplified procedures without filing Form 3115 Application for Change in Accounting Method. Small businesses that adopt this exception:

1. Do not need to compute Sec. 481(a) adjustment, but
2. Do not receive audit protection for years prior to 2014.

It important for small businesses to understand the advantages and disadvantages of adopting the small business exception. To read the full referenced article click here. For assistance in how this Revenue Procedure affects your business, please contact Patrick Mutchler at (616) 608-8540 or pmutchler@brickleydelong.com.

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Many of our blog posts discuss tax fraud and identity theft in relation to individuals. It is important to recognize the significance and frequency of tax ID theft that can happen with businesses as well.

Jennifer Primrose and Amanda Ward, in an article published in the Journal of Accountancy, list warning signs of identity theft, actions to be taken if fraud occurs, and preventative measures that businesses can take to avoid fraud.

Warning signs can include notices from the IRS regarding an already filed return or unknown employees, and recent activity on closed accounts or transcripts.

If you suspect business tax fraud, it is important to respond to the IRS notices right away. In addition, report the fraud to the police as well as the Federal Trade Commission. Any accounts with fraudulent activity should be closed.

Some of the preventative measures a business can take include:

• Protecting Social Security numbers – only give out numbers if needed, truncate whenever possible, and keep the numbers in a safe place,
• Using safety precautions in the workplace such as, shredding documents with private information, using anti-virus software on computers, and changing your passwords frequently,
• Monitoring your credit report periodically.

While the IRS continues its efforts to combat tax fraud, technological advancements make it easier for hackers to access businesses and individuals information. To read the full referenced article, please click here. For more information on business tax fraud and protecting your business, contact Brian McFarren at (231) 726-5815 or bmcfarren@brickleydelong.com.

Learn more about our business taxation services here.

The House passed the Protecting Americans from Tax Hikes Act of 2015  (Path Act) just before recessing for the Holidays. To read about the Path Act, please view the attached PDF from CCH.

CCH Coverage of 2015 PATH Act

In a recent Accounting Today article, Scott Robins, Emily Horvat, and David Magarian provide guidance on international tax risks for small businesses, S corporations, and partnerships, including matters related to:

1. The creation of Permanent Establishment aboard such as:

• Filing annual foreign income tax returns
• Paying foreign income taxes
• Being subject to so subpoena powers of foreign tax authorities

2. Choice of Entity as a branch, partnership, or corporation
3. Foreign earnings subject to tax
4. Transfer pricing
5. Other considerations such as withholding taxes, thin capitalization, value-added taxes, and state income taxes

The deadline for applicable large employers (ALE), or employers who have 50 or more full-time equivalent (FTE) employees, to file the new health care information return is approaching.

As quoted in an article from The Tax Advisor, most employers affected by the new regulation will have to file reports under Sec. 6056. This allows the IRS to know whether or not an employer is offering minimum coverage to its full-time employees. Employers must track month-by-month an employee’s coverage and employment status.

For an ALE to comply with Sec. 6056, they must file:

• Form 1095-C Employer-Provided Health Insurance Offer and Coverage for each full-time employee, and
• Form 1094-C Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns.

These forms must be filed on or before February 29, 2016, (or March 31, 2016 if filed electronically).

To read the full referenced article, click here. For more information or assistance on the employer health care information reporting, please contact Martin Simescu at (616) 608-8520 or msimescu@brickleydelong.com.

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The Internal Revenue Service recently announced the 2016 optional standard mileage rates, which features lower amounts than 2015.

Starting January 1, 2016 the rates will be:

• 54 cents per mile for business miles driven. This is a decrease from 2015 (57.5 cents per mile).
• 19 cents per mile for medical or moving purposes. This is a decrease from 2015 (23 cents per mile).
• 14 cents per mile driven in service of charitable organizations. This is a fixed rate by Congress.

The rate for business miles driven is based on fixed and variable costs of operating a vehicle. For example, variable costs include gas, oil and maintenance, and fixed costs include insurance, depreciation, and registration fees. The medical/moving rate is based only on variable costs (gas and oil).

The lower mileage rate reflects the decrease in gas prices nationwide.

It should also be noted that taxpayers may use the actual costs of using their vehicle instead of the standard mileage rate.

For the full announcement, click here. For more information on the 2016 standard mileage rates, please contact Brian McFarren at (231) 726-5815 or bmcfarren@brickleydelong.com.

Learn about our business and individual tax services.