Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Feb 19

    Like Bama’s win over Clemson – you expected it to happen, but they waited until the last minute to make it happen – Congress has once again extended the “extenders”- a varied assortment of more than 50 individual and business tax deductions, tax credits, and other tax saving laws which have been on the books for years, but which technically are temporary because they have a specific end date. This package of tax breaks has repeatedly been temporarily extended for short periods of time (e.g., one or two years), which is why they are referred to as “extenders.”

    Most of the tax breaks expired at the end of 2014. Now, in legislation passed just before the Congressional Christmas break, the extenders have been revived and extended once again, but this time Congress has taken a new tack. Instead of just rolling the package of provisions over for a year or two, it actually made some of the provisions permanent and extended the remaining provisions for either two or five years, while making significant modifications to several of the provisions.

    Key tax breaks for individuals that were made permanent by the new law include:

    • Tax credits for low to middle income earners that were originally enacted as part of the 2009 stimulus package and were slated to expire at the end of 2017: (1) the American Opportunity Tax Credit, which provides up to $2,500 in partially refundable tax credits for post secondary education, (2) eased rules for qualifying for the refundable child credit, and (3) various earned income tax credit (EITC) changes;
    • the $250 above-the-line deduction for teachers and other school professionals for expenses paid or incurred for books, certain supplies, equipment, and supplementary material used by the educator in the classroom; also modified, beginning in 2016, to index the $250 to inflation and include professional development expenses;
    • parity for the exclusions for employer-provided mass transit and parking benefits;
    • the option to take an itemized deduction for state and local general sales taxes instead of the itemized deduction permitted for state and local income taxes;
    • increased contribution limits and carry forward period for contributions of appreciated real property (including partial interests in real property) for conservation purposes; the new law also extends the enhanced deduction for certain farmers and ranchers; and,
    • the provision that permits tax-free distributions to charity from an individual retirement account (IRA) of up to $100,000 per taxpayer per tax year, by taxpayers age 70 ½ or older.

    Key tax breaks for individuals that were extended by the new law include:

    • the exclusion of up to $2 million ($1 million if married filing separately) of discharged principal residence indebtedness from gross income; extended through 2016; the new law also modifies the exclusion to apply to qualified principal residence indebtedness that is discharged in 2017, if the discharge is pursuant to a binding written agreement entered into in 2016;
    • the credit for energy-efficient improvements to principal residence extended through 2016;
    • the deduction for mortgage insurance premiums deductible as qualified residence interest; extended through 2016; and
    • the $4,000 above the line deduction for qualified tuition and related expenses; extended through 2016.

    Key tax breaks affecting businesses that were extended by the new law include:

    • The Work Opportunity Tax Credit was extended through 2019; the new law also modifies the credit beginning in 2016 to apply to employers who hire qualified long-term unemployed individuals (i.e., those who have been unemployed for 27 weeks or more) and increases the credit with respect to such long-term unemployed individuals to 50% of the first $6,000 of wages;
    • 15 year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements were made permanent;
    • 50% bonus depreciation was extended for property placed in service during 2015 through 2019; the 50% rate is phased down to 40% for property placed in service during 2018 and 30% for property placed in service during 2019;
    • previously increased first-year depreciation cap on trucks and vans not weighing over 6,000 lbs. has been extended through 2017; the increased first year depreciation is lowered for 2018 and 2019 and disappears in 2020; and
    • increase in Section 179 elective business expensing (up to $500,000 annual write-off of eligible business property costs that is phased out as those cost exceed $2 million for the year) is made permanent; also made permanent is the allowance of expensing for computer software and qualified real property.

    Caution: This article contains a general overview of selected tax provisions contained in the PATH Act and does not address all tax provisions contained in the Act. Tax law is constantly changing due to new legislation, cases, regulations, and IRS rulings. Please contact us if you’re interested in a tax topic that is not discussed in this article.

  • Feb 5

    Have you ever thought: “What should I do if my 1099 is wrong?” Well, here are four steps to take if you are issued an incorrect Form 1099.

    1. Contact the issuer as soon as possible. Once you contact the issuer, explain to them that the 1099 was issued for the wrong amount. You should be able to prove to the issuer the correct amount that should have been reported. Then, ask the issuer to reissue the 1099 with the correct amount. Hopefully you can catch the issuer before they file the 1099s with the IRS. If so, the issuer can easily reissue the 1099 with no problem.
    2. Another great item to get as proof is a letter from the issuing company that states the original 1099 was issued in error, the original 1099 has been destroyed, and a new, corrected 1099, in the stated corrected amount, has been issued. This letter of proof could come in handy if the company did not take the proper steps in correcting the 1099 with the IRS.
    3. If the company has already issued your 1099 and sent it to the IRS, the company will need to issue a “corrected” 1099. The box on the top of the 1099 should be marked as “corrected.” If the original 1099 was previously sent to the IRS, make sure the “corrected” box is checked on your new 1099. If it is not marked “corrected,” the IRS will think you were issued two 1099s from the same company and add them together.
    4. What happens if the company will not correct the original erroneous 1099? You will need to address this on your return. You will need to report the amount reported on the 1099 you received on your return, and then explain the overstatement of the 1099 in a footnote or statement.

    Most importantly always pay attention when you receive a 1099 to make sure you were issued a correct 1099. It is easier to address the issue of an erroneous 1099 earlier than later.