Periodic Report on New Tax Developments

TAX ALERT

PERIODIC REPORT ON NEW TAX DEVELOPMENTS

December 2016 Published by Sabel & Oplinger, CPA, PC (631) 283-2370

The Tax Alert is a periodic publication from the firm for clients, friends and business associates. We will bring to your attention new developments in taxation, focusing on individual, estate and gift taxes.

The Tax Alert is a publication by Sabel & Oplinger, CPA, PC, for the use of its clients, their advisors and other friends. The technical information is necessarily brief and no final conclusions on these topics should be drawn without further review and consultation.

Year End Opportunities and Reminders:

Regardless of an anticipated overhaul of the tax structure in 2017, there are some 2016 tax planning opportunities that you may be able to take advantage of before the end of the year:

Review your capital gains for the year, and determine if you can offset any gains by weeding out some poorly performing stocks at a loss. This is also a good time of year to touch base with your investment advisor.

Take a look at your personal tax situation to see if it’s beneficial to defer income into 2017, and/or accelerate deductible expenses into 2016.
Make charitable contributions before the end of the year. A receipt is required for all cash donations and all noncash contributions (such as clothing, furniture, and household goods). An acknowledgment letter from the charity is required for all donations of $250 or more.
Max out your retirement contributions. If you are self-employed and do not have a retirement plan, this would be a good time to contact your tax advisor to discuss your options.
Contribute to a Section 529 Tuition Savings Plan for your children or grandchildren.

If you are subject to required minimum distributions from retirement accounts, please be sure to take them before the end of the year.

If you are planning to make annual gifts to utilize your 2016 gift tax exclusion, you should make the gifts before the year end.

Marketplace Health Insurance – Important Dates to Remember:

December 15, 2016 is the last day to enroll in or change plans for coverage to start on January 1, 2017.
January 31, 2017 is the last day to enroll in or change a 2017 health plan (to start after January 1, 2017), unless you qualify for a Special Enrollment Period.

Foreign Bank and Investment Account Reporting (FBAR and FATCA)

All U.S. taxpayers are required to report their foreign income on their U.S. tax returns. They are also required to disclose any foreign bank and financial accounts they may own or have signature authority over.

The U.S. now has agreements with more than 100 countries requiring that their financial institutions report accounts held by U.S. taxpayers to the IRS, so this has become a very hot topic.

If you have any foreign bank accounts, financial accounts, or certain other foreign assets (or signature authority over any such accounts), there are strict reporting requirements that must be adhered to. There are also reporting requirements for owning or investing in a Controlled Foreign Corporation (CFC).

The penalties for not reporting are steep, and can include criminal charges. For example, failing to file Form 8938 can carry a penalty of $10,000 or more. These penalties can far exceed the value of a foreign account.

What should you do if you haven’t been reporting your foreign assets? At the present time, there are voluntary disclosure programs which can help. However, if the IRS finds out about your account before you’ve disclosed it, you most likely will not be eligible for the voluntary disclosure programs.

If you have any questions, please contact your tax advisor.

New Filing Deadlines in 2017

There are new filing due dates for tax returns for partnerships, corporations, estates and trusts, the FinCEN 114 (foreign reporting), exempt organizations, and information returns (such as 1099’s and W-2’s).

Here are the new deadlines for calendar year filers:

Information Returns (W-2’s and 1099-MISC) – due to governmentand recipients by January 31st

All other 1099’s due to IRS by February 28th (March 31st if filed electronically)

Partnerships – due March 15th with an extension available to September 15th
S-Corporations – due March 15th with an extension available to September 15th
Fiduciary Returns – due April 15th with an extension available to September 30th
C-Corporations – due April 15th with an extension available to September 15th
Exempt Organizations – due May 15th with an extension available to November 15th– New extension will be a single 6-month extension, eliminating the 90-day extension.
FinCEN 114 – due April 15th with an extension available to October 15th

There are additional changes to deadlines for fiscal year organizations. For these deadlines, please see our website at

Social Security Facts for 2017

The self-employment tax rate remains 15.3% (12.4% FICA plus 2.9% Medicare). The .9% Medicare surtax also remains in place for self-employment income in excess of $200,000 for single taxpayers or $250,000 for married taxpayers filing jointly.

The wage base has increased from $118,500 in 2016 to $127,200 in 2017.

Standard Mileage Rates

2016 2017

Business Use .54 .535

Charitable Use .14 .14

Medical & Moving .19 .17

Section 179 and Bonus Depreciation

The Section 179 deduction limit is $500,000. The current phaseout begins when qualifying purchases of equipment exceed $2 million, and the deduction is completely phased out when the purchases exceed $2.5 million.

50% Bonus Depreciation is in place throughout 2017. It phases down to 40% in 2018, and 30% in 2019.

Per Diem Travel Rates Beginning October 1, 2016

High-low substantiation method - $282 per day ($68 for meals) for high-cost localities, and $189 per day ($57 for meals) for other localities.
Incidental expenses - $5 per day.
Transportation industry – meals and incidental expenses - $63 per day in the continental U.S. and $68 per day outside the continental U.S.

ESTATE AND GIFT TAX UPDATES:

Federal Estate Tax Update

For 2016, the Federal Estate Tax exclusion was increased to $5,450,000, with a maximum tax rate of 40%. The exclusion increases to $5,490,000 in 2017.

There is permanent portability between spouses. This means that any unused exemption of the first spouse to die can be transferred to the surviving spouse. To take advantage of this, an Estate Tax Return must be filed timely.

New York State Estate Tax Update

New York State has reformed its Estate Tax laws so that the NYS Estate Tax Exclusion will eventually be the same as the Federal Exclusion amount.

The exclusion has been raised to $4,187,500 for taxpayers dying on or after April 1, 2016 and before April 1, 2017. It is set to increase over the next few years until it reaches the Federal level on January 1, 2019. For taxpayers dying on or after April 1, 2017 and on or before December 31, 2018, the exclusion is $5,250,000.

New York has several catches, however:

First, gifts (not including the $14,000 annual exclusion) that are made by the decedent within 3 years of the date of death are added back to the Estate. (Gifts made before April 1, 2014 are excluded.)
There is no portability between spouses for New York State Estate Tax purposes.
Next, when an estate exceeds the current exclusion amount, the exclusion is rapidly phased out. For estates that exceed the exclusion by 5% or more, there is no exclusion allowed and the entire estate is subject to New York State Estate Tax.

We still encourage our clients to take advantage of the many planning opportunities that are available:

Gifting may still be a good option for those in good health who expect to outlive the 3 year add-back period.
Coordination of planning by couples is crucial.
Credit Shelter Trusts can be used to preserve the Estate Tax exclusion of the first spouse to die.

Gift Tax Exclusion

The Federal annual exclusion remains $14,000 per donee for 2017. Married couples can split gifts in order to gift $28,000 to one donee.

The lifetime exclusion equals the Estate Tax exclusion. (Any part of the Estate Tax exclusion that is used for gifting decreases the amount available for the estate.)

There is no New York State Gift Tax. However, gifts made within 3 years of death may currently be included in a decedent’s estate for New York.

CLEANING OUT YOUR OLD PERSONAL FILES? HERE ARE SOME GUIDELINES FOR WHAT YOU SHOULD KEEP:

Keep your tax returns and supporting documents for a minimum of 4 years.
Keep records showing the purchase price of your home and any improvements made for at least 4 years after the home is sold.
Keep records showing the purchase price of stocks and bonds, as well as reinvested dividends, for at least 4 years after they are sold.
Keep records showing the stepped-up basis of inherited property until 4 years after it is sold.
Keep records showing loans and mortgages you have paid off indefinitely.

Each year, Social Security sends out an annual statement to workers 60 and older. You should check the information on the statement to your old tax returns before discarding them.

CHECKUP SUGGESTIONS FOR THE NEW YEAR:

Your Will and Health Care Proxy should be reviewed if they have not been updated within the last 3 years. You should also consider a Living Will to specify your medical wishes.
Check that your Estate and Gift planning is up to date. There have been numerous changes over the past few years, and it is important to have your planning reviewed periodically.
Check that your IRA’s and retirement plans have proper beneficiary designations.
Review your homeowner’s insurance for any changes that should be made to your coverage.
Consider Long Term Care Insurance.

We have a Family Documents Checklist, which can be used to record information in case of emergency. You can list the location of your documents, and the names and telephone numbers of important contacts, such as your attorney, accountant, and insurance company. This form should be completed and kept in a safe place. A family member or other responsible person should knowwhere this is kept in case of emergency. If you would like a copy, please visit our website. (See below.)
If you have not already done so, contact your investment advisor to review your investment strategies for the new year.
Review your pension deductions to make sure that you are making the maximum desired contributions. If you do not have a pension plan, make your IRA contributionearly to start accumulating tax-deferred income as soon as possible.

If you will reach age 70 ½ this year, be sure to set up required minimum distributions from your pension and/or IRA.
This is a good time to help out a charity. Consider donating appreciated stock for an added tax benefit.
If you had any substantial changes in your 2016 income or deductions, be sure to contact your tax advisor for tax planning.

WEBSITE

Please be sure to visit our website at Along with information about our firm, you will find links to our newsletters, payroll calculators and commonly used tax forms. 2011