Status of Federal Extender Tax Provisions that Expired at End of 2014

The federal extender tax provisions expired at the end of 2014. Although it appears that Congress will extend these provisions before the end of the year, it is still helpful to reiterate what these provisions are.

Below is a list of the most used of the expired tax provisions and how the Sec. 179 expense provisions would significantly change for Tax Year 2015 if they are extended.

Provisions that need to be extended by Congress to be applicable for Tax Year 2015:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917
• Itemized Deduction for Sales Tax
• 50% Bonus Depreciation
• Exclusion of gain from income for foreclosed home mortgage debt (Form 982)
• 15 year straight line depreciation allowed for qualified leasehold restaurant and retail improvements
• Tax-free distributions from IRAs for charitable purposes
• Nonbusiness energy property tax credit  on Form 5695
• Contributions of capital gain real property made for conservation purposes (50% limitation applies instead of 30% limitation)
• Qualified Real Property category for Sec. 179 expensing purposes

Also, the following limits are in effect for Tax Year 2015 unless Congress extends the expired Section 179 expense provisions:

• Maximum Section 179 Deduction amount: $25,000
• Maximum Cost before Section 179: $200,000

Congress has begun discussions on extending these tax provisions. However, an actual bill will probably not be voted on until sometime this fall. With everything else that Congress needs to take care of this fall, it appears that a bill extending these tax provisions will not be passed until December 2015. Check back here later for more information on what occurs with these provisions and what impact the lateness in the passage of any legislation may have on the start of the 2016 filing season.

For a complete listing of all the expired tax provisions that affect both individuals and businesses, see Things to Know for Current Tax Year section (under Provisions Extended for 2014) of the Tax Resource Center on the CrossLink website.

IRS Update: IRS to Give Greater Scrutiny to Compliance with IRA Rules

The IRS is about to begin a new initiative to go after taxpayers who make excess contributions to their Individual Retirement Arrangement (IRA) account or do not begin to withdraw funds from their traditional IRA account when they reach age 70.

Excess Contributions

Generally, an excess contribution is any amount made to a traditional IRA that exceeds $5,000 ($6,000 if 50 or older) per year. However, a taxpayer’s maximum IRA contribution may be less than this amount because a taxpayer cannot contribute more than their earned income. Click here to read more.

Required Withdrawals from Traditional IRA

Taxpayers with traditional IRAs must begin making withdrawals by April 1 of the year they reach 70. Failure to do so may result in a penalty of 50% on the required distribution.

According to the Treasury Inspector General for Tax Administration, there were approximately 255,000 taxpayers who failed to comply with the withdrawal requirements in 2006 and 2007 – costing the government approximately $174 million.

Click here to read the entire CrossLink Tax Update that includes further information on increased IRS scrutiny for IRA rules compliance.