15 Items that Have Changed the Way We File Taxes

What Changes Affect My Filing Taxes in 2017 (Part II)

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So, Monday, I started this 4000+ word piece on the changes that affect the tax laws and how filings are to be done this coming tax season.  So, you will understand how (and why) to file your business or personal taxes.  But, always paying the lowest amount of money required by law.  Let’s continue!

15 Items that Have Changed the Way We File Taxes


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Source: WalletHub

Heirs and Estates
While still in the wrong venue, the Highway Bill did fix a big problem. Folks (or entities) that inherit assets from an estate are now required to use the basis of an asset as it was filed in the 706 form (Decedent’s Estate Tax Return) for their own calculations. (Just so you know, the rules stipulate that estates can value items as per the date of death or- by alternate choice- 9 months after that date. Too many “cheaters” would use a different basis than was filed with the IRS for the property they inherited, thereby cheating the tax authorities with alternative valuations.) To keep this rule in place, executors are now required to stipulate (i.e., file for 8971 and Schedule A of the 706) said value to all heirs and to the IRS. Which means anyone who inherits property- and thought they didn’t need to file Form 706 because the value of the estate was below the threshold for Estate Tax- better reconsider. Because the heirs may be hit with a penalty for using the wrong basis for that inherited asset when they dispose of same.

Form 706 (Decedent's Estate)

Why? Because if a 706 form is never filed, the basis of all assets inherited is now defined as ZERO!!!!!

It gets worse. Because, even if one filed Form 706,  if an asset were omitted (by accident), the basis of that property is now determined to also be ZERO. (Unless the statute of limitations is still open, when an Amended 706 can be filed to correct this omission.)

Another kicker. If the 706 form is filed LATE, the basis of all assets that should have been included on that form are also set at ZERO. Some tax advisors feel this one little provision could be challenged in court. But, we should all be prudent and file all those 706 Estate Tax returns in a timely fashion.

(Filing a 706 when the estate value is below the filing threshold is called a Protective 706 Filing; it has been our practice to do so for years. And, we strenuously examine the assets often to the consternation of the heirs- to ensure that all the non-worthless assets are included in the submission. You know, we don’t want to “forget” that 36 diamond tennis bracelet your grandma promised you would inherit when you she passed away.)

Oh, yeah. Another really big kicker for this little item. Under IRC 6501, the IRS has three years to catch cheaters who misstate certain items (like income taxes [except for continuing fraud], employment taxes, excise taxes, and for this provision- estate taxes and the results therefrom). No more does this apply to Form 706. Now, if an asset from an estate is misstated so that it can affect more than 25% of the gross income on a tax return, there will be a SIX year statute of limitations.

Changes to the Tax Code

Mileage Rates
Not surprisingly, the mileage rates for 2016 are lower than they were last year. Business mileage is now deductible at 54 cents a mile; driving for reasons that are medical or moving are only worth 19 cents each. When we drive to help a charity, the mileage allowance drops to 14 cents a mile.

As is normally true, we have no clue (as of this posting) what the mileage rates will be for calendar year 2017.  But, today is 14 December, after the post first appeared.  And, we now have the 2017 mileage rates.  They dropped, not surprisingly, since the price of fuel is still at modern lows.

For business miles, the deduction rate is 53.5 center per mile.  (This is only a half-penny drop).  Medical or moving mileage rates took a 2 cent hit, dropping to 17 cents a mile.  The mileage allowance for charity is static at 14 cents a mile.

 

Real Estate
The PATH ACT made permanent the ability of taxpayers to contribute real property to qualified conservation charities.

 

We’ll continue with Part III tomorrow!

 

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