Tax Updates for Preparing 2015 Individual Tax Returns and Planning for 2016

John J. FureyFebruary 18, 2016


Deadlines for 2015 Tax Returns

  • Monday, April 18, 2016 is the deadline for filing your federal, state and local tax returns because Friday, April 15, 2016 is Emancipation Day and a holiday in Washington, D.C.
  • If you live in Maine or Massachusetts, your deadline for filing is Tuesday, April 19, 2016 because April 18, 2016 is Patriots Day and a holiday in those states.

New Information Forms for Health Coverage

  • If you or a member of your family had health coverage in 2015, the provider of that coverage was required to send a Form 1095-A, 1095-B, or 1095-C to you by January 31, 2016.
  • The Forms should list the individuals in the family who were enrolled in the coverage and show the months of coverage for each covered individual.
  • The Forms can be used to complete line 61 of the Form 1040.
  • The Health Exchange Marketplace issues Form 1095-A. An insurance company that provided coverage issues Form 1095-B. A large employer that provided coverage to its employees through employer plans issues Form 1095-C.

Protecting Americans from Tax Hikes (PATH) Act of 2015

  • For the past several years taxpayers usually had to wait until the end of the calendar year to find out if Congress voted to extend about 50 tax provisions that expired at the end of the previous calendar year. These provisions were referred to as the “Tax Extenders.”
  • At the end of 2015 Congress passed the PATH Act and on December 18, 2015 the President signed the Act into law. The PATH Act made a number of the Tax Extenders permanent provisions of the Internal Revenue Code. The remaining Tax Extenders that were not made permanent were passed with various expiration dates.
  • Here are brief explanations of some of the permanent rules that apply to individual taxpayers. These rules were made retroactive to January 1, 2015.

Tax rules that the PATH Act made permanent

  • The American Opportunity Tax Credit of up to $2,500 for tuition and course-related books, supplies and equipment for undergraduate and graduate study. This credit phases out between $80,000 and $90,000 (single) and $160,000 and $180,000 (married) of Adjusted Gross Income (AGI)
  • The $250 deduction for the cost of school supplies incurred by elementary and secondary school teachers. Beginning in 2016 this amount will be indexed for inflation and can be used for professional development expenses. You do not need to itemize deductions on Schedule A to take this deduction.
  • The ability to deduct sales tax on Schedule A instead of deducting state and local income taxes. This deduction is valuable if you live in a state with no state income taxes (AK, FL, NV, SD, TX, WA and WY) or if a substantial amount of your income is not subject to state and local income taxes. You may either deduct the actual amount of sales tax paid during the year or an amount prescribed by the IRS based on your income.
  • The ability to make a nontaxable Qualified Charitable Distribution (QCD) to an eligible charitable organization of up to $100,000 directly out of your Individual Retirement Account (IRA), if you are over 70 ½. This distribution can qualify as your Required Minimum Distribution (RMD) from your IRA for the year. If you use the distribution as your RMD, it will lower your AGI, reducing the negative effect of phase outs based on AGI. It may also prevent your income from being taxed in a higher tax bracket. Making the QDC permanent allows seniors to have more certainty in planning IRA distributions.
  • Expands the definition of what qualifies as a tax-free distribution from an education 529 Plan to include computer equipment and technology. Treats the refund of tuition paid from a 529 Plan as a qualified expense if the amount is contributed back into the 529 Plan within 60 days of the refund.
  • Allows 529 ABLE accounts (tax-preferred savings account for disabled individuals) to be established in any of the various states that offer 529 ABLE programs similar to 529 education accounts. Previously 529 ABLE accounts had to be located in the state in which the beneficiary resides. This change allows you to set up an account that meets your needs in areas such as investment options, fees and account limits.
  • Allows a rollover of amounts from an employer-sponsored retirement plan (e.g., 410 (k) plan) to a SIMPLE IRA, provided the SIMPLE IRA has existed for at least two years. A SIMPLE IRA is a convenient alternative for small employers that don’t want to deal with the reporting requirements and fiduciary complexities that come with qualified retirement plans.

If you have any questions about any of these items, please do not hesitate to call our office (610-651-2777).  We are happy to help.


Section-By-Section Summary of the Proposed “Protecting Americans From Tax Hikes Act of 2015”