System Upgrade Coming Soon for MassTaxConnect

Currently, MassTaxConnect is available for business tax types only. Beginning on December 5, many new tax types will be added including: individual income, fiduciary, partnership, and estate taxes.

To prepare for the addition of more tax types, a system upgrade has been scheduled. During the upgrade MassTaxConnect will have limited functionality from November 29 until December 2. You will be able to make payments and submit requests in the system, but they will not be processed until Tuesday, December 6. In posting the activity to your account, DOR will use the date you actually made the request or payment in the system.

MassTaxConnect will be unavailable Saturday, December 3 and Sunday, December 4. The system will be back online on December 5, 2016 at 9:00 a.m. for all taxpayers.

Thank you for your patience during this transition period.

Happy Thanksgiving from MA/RI NATP!

RI Division of Taxation Computer system changeover successfully completed

Taxes, fees now maintained and accessed on single, agency-wide system

PROVIDENCE, R.I. – The Rhode Island Division of Taxation has successfully implemented the
third phase of its changeover to a new agency-wide computer system.

During this phase of the changeover, which began November 7, services were limited.
However, the changeover was completed yesterday and, as a result, the Division resumed all
services in full this morning. All services are now in full operation.

Before the overall computer conversion project began, the more than 50 tax types and fees
administered by the Division were kept in a variety of places, including Access databases,
computer spreadsheets, and a mainframe computer which uses 1970s-era COBOL language.

With the third phase of the project now complete, Division of Taxation personnel now maintain
and access substantially all tax types and fees on a single, agency-wide computer system,
known as an integrated tax system.

“We appreciate the patience of taxpayers, tax professionals, and many other Division
stakeholders as this latest annual phase of the project was implemented,” said Acting Tax
Administrator Neena S. Savage. “My thanks, as well, to all Division of Taxation employees for
their team work on this important project. I also appreciate the work performed by Revenue
Solutions Inc. (RSI), our technology partner in this venture,” she said.

“We are moving to a new system that will eventually save everyone time and give taxpayers and
tax professionals more tools and improved online access,” Savage said. “To get to that point,
we must change over the old system to the new system. But to keep disruption to a minimum,
we are doing the changeover gradually, in stages over time,” she said.

The first phase of the changeover was completed in July 2014. The second phase was
completed in November 2015. The third phase took place from November 7, 2016, through
November 14, 2016. In each phase, multiple tax types were migrated over to the new computer
system. This month’s migration, for example, included the corporate income tax, sales and use tax, and withholding. Future plans include migrating estate tax records over to the new system;
moving the revenue accounting system onto the new system; and constructing a taxpayer
portal, which would, among other things, let taxpayers log in and manage their accounts, grant
online access to tax professionals, make payments, and check balances.

Massachusetts Senior Circuit Breaker Credit Limitations Updated for 2016

The MA Senior Circuit Breaker Credit eligibility requirements have been updated for 2016.  See MA TIR 16-8 (10/4/2016).  The maximum credit amount of $1,070 has NOT changed.  The maximum assessed value of the principal residence has increased by $27,000 to $720,000.  (It’s expensive to live in MA, as we know).

The maximum income thresholds for 2016 are:  Single - $57,000; head of household - $71,000; married filing jointly - $86,000.

MassTaxConnect to Include Estate Tax in December

Massachusetts DOR is looking forward to expanding MassTaxConnect – the Commonwealth’s new, state-of-the-art electronic tax system – to include estate and several other taxes on December 5, 2016.

Estate tax compliance can be completed electronically through MassTaxConnect.

What will you be able to do through MassTaxConnect as of December 5, 2016?

• File returns (including amended)
• File for extension
• Make payments
• Dispute penalties or audit assessments
• Request expedited lien releases
• Assign account access electronically
• Print copies of returns
• View pending returns
• View notices from DOR

Estate tax form changes

There are estate tax form changes in the works that will be effective as of December 5, 2016. For more information, see Estate Tax Forms and Schedules.

The MassTaxConnect page is regularly updated with new information and includes Frequently Asked Questions, covering a range of topics, and How to Tutorials, describing the features of the new system.

New 529 Plan Contribution Deduction Approved for MA Taxpayers Effective for Tax Year 2017

William Delaney, EA
Westwood, MA

The devil is really in the details on this one.  As part of H Bill 4569, An Act Relative to Job Creation and Workforce Development (123 pages in length), an income tax provision was tucked into Sections 64 through 66 and Section 138 of the Act.  Essentially, it has amended Chapter 62, Section 3A(a)(19) of the MA tax statute to allow a deduction from MA Part A income for “…the purchase of an interest in, or the amount contributed in the taxable year to an account in, a prepaid tuition program or college savings program established by the commonwealth or an instrumentality or authority of the commonwealth (emphasis added),…”  According to the web site www.savingforcollege, the eligible funds are U Fund College Investment Plan and U Plan, both managed by Fidelity.

There is a deduction recapture provision if a distribution is NOT used to pay qualified higher education expenses (as defined in the federal Code), or for a reason other than the beneficiaries death, disability or receipt of a scholarship.

The deduction per year shall not exceed $1,000 for a single person or a married person filing separately, or $2,000 for married filing jointly.   Furthermore, the deduction is limited to taxable years beginning on or after January 1, 2017 through the tax year beginning on January 1, 2021.

2017 IRA and Pension Plan Limitations Announced

The 2017 IRA and pension plan limitations have been announced.  Below are some of the more
common amounts for 2017.

The defined benefit plan limitation remains at $215,000 ($210,000 for 2016).

The defined contribution plan maximum remains at $54,000 ($53,000 for 2016).

The annual compensation limit for most employer contributions remains at $270,000 ($265,000 for 2016).

The Retirement Savers Credit is completely phased out at:  MFJ = $62,000, HH = 46,500, and all others = $31,000 (up from $61,500, $46,125, and $30,750 respectively for 2016).

A year of service for SEP coverage remains at $600.

The maximum elective deferral for §401(k), §403(b), §457, and SARSEPs remains at $18,000.  The catchup contribution limit for those aged 50 or older as of the end of the year remains at $6,000.

The maximum elective deferral to SIMPLE plans remains at $12,500.  The catch-up maximum remains at $3,000.

The maximum contribution to IRAs remains at $5,500.  The catch-up for IRAs is not subject to annual indexing and remains at $1,000.

The modified AGI phase-out ranges for 2017 are:
$62,000-$72,000 (up from $61,000-$71,000); MFJ = $99,000-$119,000 (up from $98,000-$118,000); and MFJ when the taxpayer is not covered but the spouse is = $186,000-$196,000 (up from $184,000-$194,000).

Roth IRA AGI phase-out limits increase to $118,000-$133,000 (up from $117,000-$132,000 applicable for 2016).  For MFJ these amounts are $186,000-$196,000 (up from $184,000-$194,000 applicable for 2016).

The definition of highly compensation for purposes of section 414(q)(1)(B) is $120,000 (same as 2016).

The IRS News Release also has the other pension related indexed amounts such as key employee, top heavy, and “control employee” limits.

A copy of Notice 2016-62 can be found at www.irs.gov/pub/ by clicking on irs-drop and then clicking on n-2016-62.


This text has been shared with you courtesy of:  David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (920-496-9111).

2017 Federal Income Tax Rates, Etc

Most of the inflation adjusted amounts are indexed based on inflation factors as of August 31st each year.  Various tax reference sources, such as CCH and RIA, make projections based on these factors.

We have chosen to wait until the official numbers have been released.  Here are the official 2017 amounts.

Revenue Procedure 2016-55 contains most of the inflation adjusted amounts for 2017.  A copy of the Rev. Proc. can be found at www.irs.gov/pub/ by clicking on irs‑drop and clicking on rp-2016-55.

Tax Rates - Ceilings

Single
10% bracket tops at $9,325
15% tops at $37,950
25% tops at $91,900
28% tops at $191,650
33% tops at $416,700
35% tops at $418,400
39.6% applies to anything over $418,400

MFJ
10% bracket tops at $18,650
15% tops at $75,900
25% tops at $153,100
28% tops at $233,350
33% tops at $416,750
35% tops at $470,700
39.6% applies to anything over $470,700

Head of Household
10% bracket tops at $13,350
15% tops at $50,800
25% tops at $131,200
28% tops at $212,500
33% tops at $416,700
35% tops at $444,550
39.6% applies to anything over $444,550

MFS
10% bracket tops at $9,325
15% tops at $37,950
25% tops at $76,550
28% tops at $116,675
33% tops at $208,350
35% tops at $235,350
39.6% applies to anything over $235,350

Estates & Trusts
15% bracket tops at $2,550
25% tops at $6,000
28% at $9,150
33% at $12,500
39.6% applies to anything over $12,500

- Exemption amount is $4,050.

- Standard deduction amounts are:  MFJ-$12,700, Single & MFS-$6,350, HH-$9,350, Additional amounts for aged/blind-$1,550 for unmarried and $1,250 for married status.

- Exemption and itemized deduction phase-outs begin for MFJ/QW at $313,800, HH at $287,650, S at $261,500, and MFS at $156,900.

- Kiddie Tax
Standard Deduction is $1,050, the next $1,050 is taxed at child’s rate, and the excess is taxed at parent’s rate.  AMT Exemption amount is the child’s earned income plus $7,400.

- AMT – The exemption amounts are:
MFJ/QW = $84,500
S/HH = $54,300
MFS = $42,250
Estates/trusts = $24,100

The excess taxable income level (where the 28% AMT rate applies) is:
MFJ/QW/S/HH = $187,800
MFS = $93,900

- Adoption Credit - $13,570 is the maximum for the credit or assistance amounts.  The phase out starts at $203,540 and is completely phased out at $243,540.

- Child Tax Credit – refundable portion uses an income base of $3,000.

- Education Credits.  The phase-out for the American Opportunity Credit starts at $80,000 ($160,000 for MFJ).  The phase-out for the Lifetime Learning Credit $56,000 ($112,000 for MFJ)

- EIC maximum AGI/earned income for MFJ is $45,207 for one child, $50,597 for two children, $53,930 for three or more children, and $20,600 for no children.  The EIC maximum AGI/earned income for other taxpayers is $39,617 for one child, $45,007 for two children, $48,340 for three or more children, and $15,010 for no children.  Excessive investment income level for EIC is $3,450.

- Transportation Fringe maximum exclusion for monthly parking is $255/month as well as for commuter highway vehicle and transit passes.

- Savings Bonds for Education phase out level starts at $117,250 for MFJ and $78,150 for other filing statuses.  This is completely phased out at $147,250 for MFJ and $93,150 for other filing statuses.

- §179 election maximum is $510,000, with a phase-out starting at $2,030,000.

- Foreign Earned Income exclusion is $102,100.

- Long-term care premiums are limited to:
Age
40 or less-------$410
>40, but not >50------$770
>50, but not >60------$1,530
>60, but not >70------$4,090
>70------$5,110

- Long-term care contract benefit amount is $360 per day.

- Student loan interest maximum is $2,500, with a phase out starting at $65,000 ($135,000 for MFJ).  This is completely phased out at $80,000 ($165,000 for MFJ)

- Annual gift tax exclusion remains at $14,000, while the limit on gifts to noncitizen spouses is at $149,000.

- Exclusion amount for Estate/Gift tax is $5,490,000.

- Attorney Fee Awards are limited to $200 per hour.

- MSA
Self-only coverage annual deductible is not less than $2,250 nor more than $3,350, with out-of-pocket limits not in excess of $4,500.

Family coverage annual deductible is not less than $4,500 nor more than $6,750, with out-of-pocket limits not in excess of $8,250.

- Educator Deduction – The maximum above-the-line deduction for qualified educators remains at $250.

- Cafeteria Plan – The dollar limitation for §125 health FSAs increases to $2,600.

- Small Business Health Insurance Credit – The dollar amount for purposes of limiting this credit is $26,200.

- Penalty for failure to file a Partnership or S corporation return is $200 per month per Schedule K-1.

- Penalty for failure to file correct Forms 1099 is $260.

- Nanny Tax – The wage threshold for FICA is $2,000.


This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111).

Rhode Island DOT Computer System Changeover Starts on November 7

Office will stay open, services will be limited, during conversion period

PROVIDENCE, R.I. – The third phase of the Rhode Island Division of Taxation’s
changeover to a new agency-wide computer system will start on November 7, 2016,
and continue through November 14, 2016.

During the computer conversion period, the Division will remain open to the public, but a
number of services will not be available. Taxpayers and tax professionals should
therefore plan ahead. All services will resume in full on November 15, 2016.

The following at-a-glance calendar shows when this phase of the conversion begins,
when it ends, and the intervening period – including two regularly scheduled holidays.

• Nov. 7 Monday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 8 Tuesday Holiday: Closed (Election Day)
• Nov 9 Wednesday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 10 Thursday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 11 Friday Holiday: Closed (Veterans Day)
• Nov. 14 Monday Open: Limited service 8:30 a.m. to 3:30 p.m.
• Nov 15 Tuesday Open: Full service resumes 8:30 a.m. to 3:30 p.m.

Some services temporarily unavailable

The Division of Taxation, at One Capitol Hill in Providence, will remain open during
normal business hours while the computer system conversion occurs, and many
services will continue to be available. For example, the agency’s website and email
system will remain fully functional, payments will be received, and electronically filed tax
returns will be received and acknowledged.

However, a number of services will not be available during the conversion, mainly
because the old computer systems and the new system will be tied up with the
changeover. For example, during the changeover period, the Division will be unable to
issue letters of good standing, unable to release license and registration blocks, and
unable to check on a taxpayer’s account balance.

Taxpayers and tax practitioners should plan ahead. For example, if someone is blocked
from renewing a driver’s license, professional license, or motor vehicle registration
because that person owes back taxes, that person should pay the tax debt before
November 7. The Tax Division is in the process of mailing a letter to each person who is
subject to a license or registration block, urging them to resolve their tax matter prior to
November 7. (To make arrangements to pay tax debt before November 7, call the
Division of Taxation at (401) 574-8941 from 8:30 a.m. to 3:30 p.m. business days.

Impact on services

The following table shows some of the services that will continue to be available, and
some that will not be available, during the changeover period.

Division of Taxation services for computer conversion period Nov. 7 through Nov. 14

Services available:

• Office remains open, sections remain open
• Phones, emails answered (for general information only, not account‐specific)
• Letters and other deliveries received by Division
• Payments received by Division (credit card, debit card, ACH debit, ACH credit, checks) 
• Employer Tax section (includes state unemployment insurance, TDI)
• E‐filed tax returns received, acknowledged
• Paper‐filed tax returns received 
• Requests for forms, instructions accepted
• General questions answered   
• Website, including online services, open
• Audits and examinations continue
• Division accepting new business registrations (but not issuing permits or licenses)
• Hearings held, legal papers received   

Services not available:

• Issuing letters of good standing
• Releasing license blocks
• Releasing registration blocks
• Releasing Collections liens and levies
• Checking on taxpayer account status, history
• Answering taxpayer‐specific inquiries
• Issuing liquor license certificate of good standing

The Division is moving to a new, agency-wide computer system that will eventually save
everyone time and give taxpayers and tax practitioners more tools and improved online
access. To get to that point, the Division must change over the old system to the new
system. But to keep disruption to a minimum, the Division is doing the changeover
gradually, in stages over time.

The changeover process that starts on November 7 will last four business days. It
involves converting the corporate income tax, sales and use tax, and certain other tax
types to the new, agency-wide computer system.

When the process is completed, Division staff will be able to access corporate income
tax, sales and use tax, and certain other records via the new computer system. The
entire Division of Taxation will resume full, normal services for the public starting
Tuesday, November 15, 2016.