Every year, somebody in Washington mentions that it might be a good idea to simplify the federal tax laws, and every year — oops! — this great idea falls through the cracks. And 2015 seemed like such a good opportunity.
Instead, we regret to …
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Instead, we regret to inform you, the tax code that you will apply to your 2015 tax return (if you haven’t already) is probably more complex than ever before, with changes in relation to foreign earned income, child tax credits, credits for qualified tuition, and even the rules surrounding those pesky Form 1099s. (If an individual provides services to a business on a contract basis during a calendar year, and receives at least $600, then that person must receive a Form 1099-MISC — and the IRS would like a copy, thank you very much.)
Congress put some of the changes into a new legislation with an appropriately complex title of “The Trade Preferences Extension Act.” It addresses a bunch of the items that we just mentioned, plus some others, such as an extension of a health coverage tax credit equal to 72.5 percent of the payments that you made if you are an “eligible trade adjustment assistance recipient.” Quite often, if you are one of these folks, then you already know it. If you are and you don’t, then this is another good reason to remind your representatives in Washington that it’s time to simplify things.
Another good thing to know: If you (as a taxpayer) exclude foreign earned income on your tax return, you become ineligible to claim the child tax credit.
Here’s another one: Did you claim the American Opportunity, Hope, or Lifetime Learning Education credit? Wait, that’s not even the complicated part. If you did claim it or if you take the deduction for qualified tuition and related expenses, you must have Form 1098-T from the qualified education facility (or, in plain English, “school”) prior to filing.
Finally, on the business side of things, there is a much bigger penalty if you fail to file appropriate Forms 1099 with the IRS and fail to furnish those forms to the provider of services. The previous penalty of $100 per form increased to $250 per form, and the maximum annual penalty is increased from $1.5 million to $3 million. Talk to your friendly IRS agent to negotiate a lower penalty on issues that you manage to correct within 30 days.
While you have the agent on the phone, feel free to ask about that tax-code-simplification thing. And if you get some kind of definite commitment, let us know.
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