3 Steps to Responsible Year-End Tax Planning

Legislators have introduced few new tax developments specific to the banking industry in the past year. Banks end 2015 contending with a handful of ongoing legislative issues that impact critical decisions. Of those, the timing and extension of the tax extenders package is perhaps the most pressing. A failure or delay by Congress to pass this legislation means uncertainty for community banks as well as for the businesses and families they serve.

We are still waiting to see how and when lawmakers will act on tax extenders for 2015. The provisions included in the legislation would:

Uncertainty about the impact of these measures could threaten investment and growth within communities. Despite these unknowns, your organization cannot wait to address a few key 2015 tax preparations. 

Prepare for Information Reporting W-2s, 1098s, and 1099s

Gather and confirm the accuracy of all addresses, SSNs, and EINs before year-end to ensure you can complete mandatory reporting and avoid significant penalties. For 2015 information returns filed in 2016, the penalties have increased for failing to file or for incorrectly filing returns with the IRS or to a payee. For example, for each form that is not filed with the IRS or not furnished to the payee, the penalty has been raised to $250 per form ($100 under prior law). Because these returns are filed in duplicate to the IRS and payee, if one is incorrect it is likely both are incorrect, doubling your penalty.

Know your ACA Requirements

The Affordable Care Act (ACA) significantly impacted the compliance burden of employers. Be sure you can answer the following questions:

Large employers are required to provide minimum essential coverage that is affordable and provides minimum value. ALEs generally are defined under the ACA as companies with at least 50 full-time or full-time equivalent (FTE) employees. Employers with 50-99 full-time employees may qualify for an exemption from the minimum essential coverage mandate for 2015 if they meet certain requirements. They remain subject to the information reporting requirements Forms 1095-B and 1095-C, which are new for 2015. Penalties for non-compliance can be crippling, so plan now for how you will meet your specific responsibilities.

Consider State and Local Tax Obligations

States are increasingly aggressive about taxing banks and other businesses that are active in a state but lack a physical presence, triggering nexus. State and local governments have the right to impose unique filing and payment responsibilities with income, sales, and property taxes even if you operate in the state on a limited basis. Continual monitoring is key, especially as you grow and expand your operations.

Knowing what tax planning tasks are most important to your organization, and how to engage them is vital to preserving the bottom line and sustainability of your bank. Stay informed about the federal tax legislation outlook and know which strategies you should consider before year-end.

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