On June 29, President Obama signed into law two major trade bills: (1) the Trade Preference Extension (TPE) Act of 2015 and (2) the Trade Priorities and Accountability Act (TPAA) of 2015.

Pertinent tax provisions are as follows:

  • Effective for tax years that begin after June 29, 2015, the TPE Act requires that, as a condition of receiving the credits or the deduction, a taxpayer receive a Form 1098-T that contains all of the information required by that form. Higher education institutions must provide a return to IRS and a statement to the student, that indicate, among other things, the amount paid by or billed to the student for qualified tuition and expenses for the tax year and that include the student’s taxpayer information number (TIN). Form 1098-T (Tuition Statement) is used for this purpose.

Somerset Note: Be sure to get the Form 1098-T from the University and keep in with your records for the three years statute of your tax return in case of IRS examination. Without it, credits/deductions will be disallowed.

  • Effective with respect to returns and statements required to be filed after Dec. 31, 2015, the TPE Act increases these penalties. For example, when an unintentional delinquency occurs but is corrected no more than 30 days after the return due date, the Act increases the per-return penalty from $30 to $50 and the maximum penalty for any calendar year, for a “small” taxpayer, from $75,000 to $175,000.

Somerset Note: It is now more important than ever to make sure you file your information returns on a timely basis to prevent higher penalty assessments. The maximum per return penalty has been increased by 66.67% and the maximum over-all penalty for all returns not timely filed has more than doubled.

  • The TPE Act provides that, in the case of a corporation with assets of at least $1 billion (determined as of the end of the previous tax year), the amount of any required installment of corporate estimated tax otherwise due in July, Aug. or Sept. 2020 is increased by 8% of that amount. The amount of the next required installment after an increased installment must be appropriately reduced to reflect the amount of the increase. Thus, the amount of the next installment after the increase is reduced to 92% of the amount otherwise due.

Somerset Note: The required annual estimated payments are not increased, just accelerated. Plus, corporations with a fiscal year that begins July 1 will not be affected by the above rule because they do not have any estimated tax payments due in July, Aug. or Sept.

  • The TPAA allows federal safety workers (e.g., federal law enforcement officers, customs and border protection officers, firefighters and air traffic controllers) to make penalty-free withdrawals funds from their governmental retirement accounts at age 50 instead of age 55.

For more information on how these major trade bills may affect you, contact your Somerset advisor today.