Time is running out...

...for Paid Preparers. To prepare returns in 2016 you must renew your PTIN by December 31! The PTIN you used last tax season cannot be used again without renewal at a fee of $50. See page 2 (left column) for details.

...for YOU. In order to get your tax software by the beginning of the tax season, you must order soon. An order form for 2016 is included in this newsletter for mailing, but the best way to order is on-line. See page 2 (right column) for details.

...but not for Congress. After months of delay and negotiations, the House and Senate finally passed a tax bill that reinstates critical deductions and credits on the last 2 days of their session! The IRS can now complete unreleased forms and instructions and, hopefully, start the tax season on time. Details below.

HowardNews

by HowardSoft®

Professional software at personal prices.

Winter 2015

Tax Extenders ... just in time!

Deja vu. As has happened nearly every year for the past several years, more than 50 popular deductions and tax credits expired at the end of the last tax year. And, as in prior years, Congress waited until the end of the year to act. A so-called "tax extenders bill" that retroactively reinstates most of the expired deductions and credits was finally passed on the last day of Congress's session, December 18. Until the last minute, there was still concern that the job wouldn't get done before the session ended because negotiations for the tax extenders bill were tied to the omnibus spending bill and the two parties were far apart on many issues. But, in the end, both bills passed by wide margins. The House separately passed each bill by a 3-to-1 margin, and the Senate passed the two together by a 2-to-1 margin. In other words, the controversial bill passed easily with uncharacteristically bipartisan support.

Impact on tax year 2015 forms. A surprising wrinkle to the final bill is that not only were nearly all expired tax breaks renewed for 2015, but 22 of them were made permanent and the other 34 of them were renewed for at least 2 years. As a result, there will be no need for an extenders bill next year, and the one two years from now will be much less critical than the current one. In addition, because all breaks were renewed retroactively to the beginning of 2015, there will be little obvious change in the final forms for tax year 2015. (As we wrote this newsletter on December 18, the IRS had still not released Form 1040 and Schedule A, along with several other importants forms and instructions, and their advance drafts made liberal use of the word "Reserved" on lines of the forms relating to expired breaks. But now the IRS can complete their work for the 2016 filing season.) Highlights of credits and deductions saved or enhanced by the negotiated bill follow:

For Paid Preparers...

Mandatory registration renewal

It's mandatory. Although IRS requirements for mandatory competency testing and continuing education have been stalled by the courts, IRS requirements for annual registration remain in full force. All paid preparers are still required to annually register with the IRS before they can prepare any returns for pay. The IRS enforces this requirement by linking registration to the renewal of your Preparer Tax ID Number (PTIN), which is valid only one year at a time. You must renew your PTIN every year, paying a fee to the IRS each time ($50 this year, down from $63 in recent years). The window for renewal (or first-time registration) is mid- October to the end of the year before the filing season to which it applies. That means that you must act now if you don't yet have a current PTIN to use when you sign Form 1040 for clients in the upcoming tax season.

The renewal or application process. You can register by sending a completed Form W-12 to the IRS, but it can take 4 to 6 weeks to get your PTIN this way. Instead, we recommend that you apply on-line at www.irs.gov/ptin, which will generally get you registered and issued a PTIN within 15 minutes:

Create an on-line account. A PTIN account is separate from any other account you may have with the IRS. Just supply your name and e-mail address, choose a user ID and password, and you’re in.
Complete on-line application. You must fully identify yourself and your business, and supply minimal information from your last personal tax return. You’ll also have to identify any tax-related professional licensing you have (such as attorney, CPA, or enrolled agent licensing).
Pay the $50 fee. You can pay on-line by credit card or direct debit.
Receive your PTIN. For most applicants the PTIN will appear on-screen after receiving confirmation from your credit card issuer or bank.

Deduction from income of up to $250 of teachers' out-of-pocket expenses is made permanent and indexed with inflation after 2015.
Deduction from income of up to $4,000 of qualified college tuition and expenses is extended through 2016.
Tax-free IRA distributions of up to $100,000 to charities for taxpayers of age 70-1/2 or older is made pemanent.
Exclusion from gross income of forgiven mortgage loans is extended through 2016.
Itemized deduction of state and local sales taxes in lieu of state income taxes is made permanent.
Itemized deduction of mortgage insurance premiums in lieu of interest is extended through 2016.
$500,000 ceiling on section 179 depreciation (with phaseout starting at $2 million) is made permanent and indexed with inflation after 2015.
50% bonus depreciation on new property is extended through 2017 then phased out by 2020.
Credit for increasing research and development is made permanent and enhanced after 2015 by allowing it to offset the AMT (or payroll taxes for certain startups without income tax liability). This is easily the most costly tax break in the bill.
New markets credit is extended through 2019.
Work opportunity credit for wages paid to favored groups is extended through 2019, with the long-term unemployed added as a new targeted group after 2015.
Credits for energy production and conservation are extended through 2016. This includes fuel efficient vehicles and alternative energy sources.

Most of the other breaks in the bill clearly benefit only very narrow interests, including both permanent and temporary extensions. Among the special interests are film, TV, and live theater productions, motorsports arenas, miners, railroads, and race horses.

Unexpired breaks. In addition to the expired breaks, three breaks that had not expired but had temporary enhanced provisions were tacked onto the extenders bill. Enhancements for all three (child tax credit, earned income credit, and American opportunity credit) were made permanent.

Other topics in the bill. Like so many bills in Congress, legislators have taken advantage of the bill as a place to tack on other legislation. Added to garner votes from those who might not have otherwise voted for the bill, the additions range from restrictions intended to reduce fraud in popular credits like the child tax credit, American opportunity credit, and earned income credit, to a 2-year moratorium on the medical devices excise tax that helps fund Obamacare, and restrictions on enforcement by IRS agents.

Full compatibility: 64-bit and Windows 10

Tips for compatibility. Tax Preparer is fully compatible with 64-bit computers and Windows 10, and most customers will encounter no problems. However, you may have to update your drivers or settings. Common problems include:

Outdated printer driver. While updated drivers are built into newer versions of Windows for most recent printers, some printers may still have problems printing graphic tax forms. Therefore, if you have printing problems we recommend that you check the website of the manufacturer of your printer for the latest driver for your system. This is because 64-bit drivers are different from 32-bit drivers and drivers for Windows 8.1 and earlier are different from those for Windows 10.
Computer improperly configured for VBScript. Even though the version of Windows Script Host that has been built into Windows since 1998 is compatible with VBScript (used to start Tax Preparer), some computers are not properly configured to run VBScript programs. Therefore, if you have start-up problems you should read our Customer Service Memo CSTP1502 (available on-line in our Check for Updates website under Bulletins) for guidance. (Also see the next item if you updated an existing 32-bit computer to Windows 10.)
NTDVM improperly configured for 32-bit Windows 10. When Microsoft updates a 32-bit computer to Windows 10, it typically turns off the NTDVM feature that is required by Tax Preparer during start-up. Therefore, if you encounter a 16-bit or NTDVM error message during Tax Preparer start-up after updating to Windows 10, you should read our Customer Service Memo CSTP1503 (available on-line in our Check for Updates website under Bulletins) for guidance. (The problem exists only on 32-bit computers because the 64-bit version of Tax Preparer does not use NTDVM.)

Order on-line for speed and security

Secure on-line ordering. The fastest, most convenient, and safest way to order is to use our secure on-line Order Form, which you can access from howardsoft.com/order.htm, where you can also access information about system requirements, forms included at each level, and expected delivery schedule. You'll have the peace of mind of knowing that your order is complete and you are set for 2016. (You can mail the Order From to us instead with a check, money order, or credit card information.)