McAtee & Associates, CPAS
Back on the PATH Act trail with more details for you to consider ….
Protecting Americans from Tax Hikes (PATH) Act
(Part 3)
Nonextender Provisions in the PATH Act
In addition to the tax extenders enacted by the PATH Act that we highlighted in June the new law makes the following additional tax code changes:
- Code Sec. 529 plans. The PATH Act permanently expands the definition of qualified higher education expenses in Code Sec. 529(e)(3)(A) to include expenses for the purchase of any computer technology or equipment. The act also modifies the 529 account rules to treat any distribution from a 529 account as coming only from that account, even if the individual making the distribution operates more than one account. The new law also treats a refund of tuition paid with amounts distributed from a 529 account as a qualified expense if the amounts are recontributed to as 529 account within 60 days.
- Achieving a better Life Experience (ABLE) accounts. The PATH act amends Code Sec. 529(A)(b)(1) to provide that ABLE accounts may be established in any state. Prior to the change, the law provided that ABLE accounts could only be established in the state of residence of the ABLE account owner.
- Savings Incentive Match Plan for Employees (SIMPLE) IRAs. Under the PATH Act, qualified individuals may generally roll over amounts from an employer-sponsored retirement plan to a SIMPLE IRA if the plan has existed for at least two years.
- Retirement Distributions. The PATH Act provides an exception to the 10% penalty on withdrawals from retirement accounts before age 50 for public safety officers, including nuclear materials couriers. U.S. Capitol Police Supreme Court Police and diplomatic security special agents [Code Sec. 72(t)(19)(B)(ii)].
- Exclusion for work college program payments. For amounts received for tax years beginning after December 18, 2015, the PATH Act exempts from gross income any payments from certain work-learning-service programs that are operated by a work college [(Code Sec. 1119(c)(2)(C)].
- Requirement for issuance of individual Taxpayer Identification Numbers (ITINs). The PATH Act provides that the IRS may issue ITINs if the applicant provides the required documentation either by mail or in person to an IRS employee or a community-based certified acceptance agent. Individuals who were issued ITINs before 2013 are required to renew their ITINs on a staggered schedule between 2017 and 2020. An ITIN will expire if an individual fails to file a tax return for three consecutive years.
- Information returns. The PATH Act requires that certain information returns relating to employee wage information and nonemployee compensation be filed by January 31st, generally the same date as the due date for employee and payee statements and are no longer eligible for the extended filing date for electronically filed returns. In addition, no credit or refund for an overpayment for a tax year will be made to a taxpayer before the 15th day of the second month following the close of that tax year, if the taxpayer claimed the EIC or additional child tax credit on the return. The PATH Act also includes a safe harbor for de minimis errors on information returns, payee statements and withholding.
- Increase in preparer willful or reckless conduct penalty. Effective for tax returns prepared for tax years ending after December 18, 2015, the PATH Act increases the penalty imposed on tax returns preparers for willful or reckless conduct from 50% to 75% [Code Sec. 6694(b)(1)(B].
Tax Provisions included in the FAST Act
Passport. Under the FAST Act, if the IRS certifies that an individual has a seriously delinquent tax debt, the State Department may deny, revoke or limit that individual’s U.S. passport. For purposes of the FAST Act, a seriously delinquent tax debt is an unpaid federal tax liability which has been assessed, greater than $50,000 (adjusted for inflation after 2016), and for which a federal levy has been made or a notice of a federal tax lien has been filed (and administrative rights under Code Sec. 6320 have been exhausted or have lapsed)(Code Sec. 7345).
Tax Collection. The FAST Act directs the IRS to contract with one or more private agencies for the collection of outstanding inactive tax receivables (Code Sec. 6306). For purposes of the FAST Act, an inactive tax receivable is a case that the IRS has removed from its active inventory because of a lack of resources or inability to locate the taxpayer, a case where more than one-third of the applicable limitations period has elapsed and the case has not been assigned to an IRS employee, or a case where more than 365 days have passed without interaction between the IRS and the taxpayer.
Form 5500. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 provided for an automatic 3½-month extension for the due date for filing Form 5500, Annual Returns/Reports of Employee Benefit Plan. The FAST Act repeals this extension, effective for tax years beginning after December 31, 2015. Therefore, the 2½-month extension period that existed previously is effectively restored.
If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.
ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
