Each year brings a new opportunity for progress and ways to increase income for small business owners. New tax laws appear annually and often present challenges to customary profitable legal ways of doing business. Staying informed of all of these changes requires the assistance of an experienced and knowledgeable tax professional.
- Detailed Reporting of Employee Healthcare Coverage
The Affordable Care Act required that applicable large employers (ALEs) provide detailed information on health care coverage offered to their full-time employees in 2015. ALEs will need to file a 1094-C (a transmittal) and 1095-C (the employee form) with the Internal Revenue Service in 2016 for the 2015 tax year. Additionally, the 1095-C must be furnished to the employee. The due date to file and furnish are identical to W-2/W-3 forms. In 2016, the health-care law expands to include businesses that have 51 to 99 prior-year employees.
The health care law also requires business owners to keep track of a myriad of divergent data, including: hours employees’ work, benefits offered to individual employees and the number of full-time equivalent employees. Employers must report this information to the Internal Revenue Service and to their employees. Non-complying businesses may be liable for a penalty of $2,000 per employee after the first 30.
- Business-Friendly Tax Extender Legislation.
Another tax year brings another opportunity for business owners to wait for Congress to act on tax extender legislation. It is not uncommon for the president to sign such legislation in December just weeks, or even days, before the end of the year. The one-year extension of more than 50 tax-related credits and deductions precipitated small business owners preparing to take advantage yet again of the $500,000 Section 179 deduction and 50 percent bonus depreciation, which would have expired without the extender legislation.
Some advantages of the extender legislation? The bonus depreciation allowed businesses to deduct half the cost of new capital purchases in the first year. Section 179 allowed a business to deduct the cost of a small capital purchase immediately, instead of writing it off over time.
- Marriage Equality
In June of 2015, the U.S. Supreme Court ruled that every state must recognize same-sex marriages. This means that small businesses must revise state income tax withholding for affected employees as well as possibly requiring changes in employee benefits.
- Earlier W-2 and Annual Reconciliation Deadlines for Employers.
The states (Eleven states and D.C.) expect this change will curb tax refund fraud, as historically taxpayers quickly wanting refunds have them issued before tax returns and third-party information such as W-2 data is correlated. Employers in these states must now file both Annual Reconciliations and W-2s by January 31. Most states and the federal government have deadlines at the end of February or the end of March but many are contemplating similar changes.
- Online Sales Tax Changes
The ability of states to levy tax on online purchases made by state residents is still a prominent issue in 2016. Currently, states may only collect tax for such online purchases when the seller has a sufficient physical presence in the state. However, there are two notable pieces of federal legislation, the Marketplace Fairness Act (MFA) and the Remote Transaction Parity Act (RTPA), which are bills that propose empowering the states to levy tax on online sales regardless of physical presence.
- Business Identity Theft
Like its consumer counterpart, business identity theft has increased steadily over the past few years. This growth is expected to continue as criminals realize that there is typically more to steal from a business than an individual. The IRS estimates that it will issue over ten billion dollars in fraudulent tax refunds based on falsely-obtained Employer Identification Numbers (EIN).
Sadly, business owners are usually unaware that their identity has been appropriated until receipt of a letter or notice from the IRS or other government agency. Business owners must then not only cope with financial loss, but also the expenditure of valuable time and resources to resolve any consequent tax and financial issues.
As a business owner, knowing what’s ahead as to changes in the tax laws is essential to prepare for a new business and tax year. It is therefore important to consult with an experienced and knowledgeable tax attorney to determine the impact and ramifications of all 2016 tax changes, call THE TAX EXPERTS AT THE Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
