Tax Reform Update: Senate Finance Committee Working Groups Issue Reports
On July 9, the bipartisan Senate Finance Committee tax reform working groups released reports outlining proposed tax changes. The list of proposed changes is quite extensive; however, the following are some items that will impact the average taxpayer:
- Making permanent the tax provision that allows an individual age 70.5 or older to make a direct transfer of money of up to $100,000 from his or her IRA account to a qualified charity. That provision expired on December 31, 2014.
- Combining all of the education credits and higher education tuition deduction into one permanent single higher education credit to be called the American Opportunity Credit.
- Accelerating the due date for filing partnership returns so that it precedes the filing due dates for individual and corporate investors.
- Accelerating the due dates for most informational returns.
- Combating ID theft by allowing the use of truncated SSNs on W-2 forms.
- Permitting employers to utilize multiple employer plans (MEPs).
- Expanding the existing saver's credit by making it refundable and setting the amount of the credit to 50% of eligible contributions up to a specified dollar amount and not exceeding a certain AGI levels. The recommended eligible contribution amount is $500 initially and increases to $1,500 over 10 years.
- Allowing a percentage of otherwise taxable lifetime annuity payments received by an individual from an IRA or any type of defined contribution plan to be excluded from gross income.
- Expanding Start-up Credit by increasing the maximum credit to the lesser of (1) $250 multiplied by the number of participants who are not highly compensated employees, or (2) $5,000, while retaining the current minimum credit of $500.
- Permitting part-time workers to participate in employer pension plans.
Don't forget that all of these are proposals and do not apply unless both houses of Congress enact them and the President signs off on them.