While everyone has been out holiday shopping, or following the current presidential race, last week Congress passed a bill. And not just any bill, but a big one, a major piece of legislation that once again averts a government shutdown. H.R. 2029, Consolidated Appropriations Act, 2016 (the Omnibus Spending Bill), was enacted Friday, December 18th 2015, just before all Congressional members left for the year. Within the bill were many amendments, but here at Sovos we are generally concerned with one section because of its tax information reporting implications; Protecting Americans from Tax Hikes Act of 2015 (PATH Act); also referred to as the Extenders Act. PATH is a compilation of extensions of various deductions/exclusions that were not permanent in the IRS code. This act has now made some of those tax breaks permanent, extended the expiration date on others, postponed various rules that were to take effect and also made a few other changes. After wading through this enormous bill and the relevant acts for you, here are some of the tax-related highlights: ACA Related Changes
- Division Q, SEC. 174: MORATORIUM ON MEDICAL DEVICE EXCISE TAX.
- “The tax…shall not apply to sales during the period beginning on January 1, 2016, and ending on December 31, 2017.’’
- Effective Date.- The amendment…shall apply to sales after December 31, 2015.
- This tax was originally supposed to provide revenue to fund ACA, but that gap may be closed from the newly increased penalties for ACA reporting noncompliance. Sovos is also updating our sales and use tax engines appropriately for this exemption.
- Division P, Sec 101: Delay of excise tax on high cost employer-sponsored health coverage.
- Delay of the ‘Cadillac’ health plan tax.This update will affect ACA reporting for employers offering this type of coverage.
- Division P, Sec 201: Moratorium on annual fee on health insurance providers.
- This change will also affect information employers need to submit to comply with their mandatory ACA reporting requirements.
Tax Reporting Related Changes
- Division Q, Sec 151: EXTENSION AND MODIFICATION OF EXCLUSION FROM GROSS INCOME OF DISCHARGE OF QUALIFIED PRINCIPAL RESIDENCE INDEBTEDNESS.
- Extends for two years the exclusion from income from the cancellation of mortgage debt. Allows the discharge of debt on the principal residences to be excluded from income. E.g. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure.
- Division Q, Sec 152: EXTENSION OF MORTGAGE INSURANCE PREMIUMS TREATED AS QUALIFIED RESIDENCE INTEREST.
- Extends this provision through Dec. 31, 2016, covering Tax Years 2015 and 2016.
- Division Q, Sec 201: MODIFICATION OF FILING DATES OF RETURNS AND STATEMENTS RELATING TO EMPLOYEE WAGE INFORMATION AND NONEMPLOYEE COMPENSATION TO IMPROVE COMPLIANCE.
- Modifies the due dates for certain forms; W-2, Wage and Tax Statement, W-3, Transmittal of Wage and Tax Statements, and any returns or statements to report nonemployee compensation (1099-MISC). (emphasis added) The new due dates are Jan. 31 of the year following the calendar year to which the return relates.
- The current due date for filing these forms with the IRS is Feb. 28 for paper copies and March 31 for e-filed copies.
- Effective date for these changes “shall apply to returns and statements relating to calendar years beginning after the date of the enactment of this Act.” This means returns for Tax Year 2016 are affected.
- Division Q, Sec 202 SAFE HARBOR FOR DE MINIMIS ERRORS ON INFORMATION RETURNS AND PAYEE STATEMENTS.
- Establishes a safe harbor from penalties for failure to file correct information statements and from failure to furnish correct payee statements (a provision advocated for by the AICPA). Under the safe harbor, if an error is $100 or less ($25 in the case of errors involving tax withholding) the issuer is not required to file a corrected return and no penalty will be imposed. The recipient, however, can elect to have a corrected return issued. This provision applies to returns and statements required to be filed after Dec. 31, 2016.
One thing that was not addressed, though, in this comprehensive Omnibus Spending Bill, is how to help Puerto Rico with its debt crisis. Hearings about this problem should start in January and Paul Ryan, the new Speaker of the House, gave the relevant committee until March to come up with a plan that addresses this ongoing problem. Sovos Helps Your Business Systems Stay Up to Date At Sovos, we closely monitor these changes and our solutions make the necessary timely updates to your relevant business systems so you can stay compliant, even when important changes like this come out at the last minute. We also encourage you to sign up for our blog and check back to see what movement is made with respect to these issues and others as we continue to monitor the legislative landscape for relevant, business critical updates.
