IT’S TAX TIME AGAIN
REVISED AND UPDATED AS OF FEBRUARY 1, 2017
The 2017 tax filing season opened on Monday, January 23rd when the IRS began processing returns. This article discusses key changes and new developments. One major issue that will continue to effect people is the fact that taxes and health insurance are joined together for those purchasing coverage through the federal exchange. Your tax refund (or balance due) is directly effected by whether or not you had qualifying health coverage. The Affordable Care Act remains in full force and effect.
Penalties for Not Having Health Coverage
The penalty for not having qualifying coverage continues to escalate. If you did not have qualifying coverage in 2016 the penalty is the HIGHER of 2.5% of household income or $695 per adult ($347.50 per child under age 18.)
The 2017 penalty is the same as 2016. However, it appears likely that the Affordable Care Act will be deleted or substantially modified.
Health care coverage (and the penalty) is determined on a monthly basis.
There are 18 exemptions from the requirement to have qualifying health insurance coverage – see page 3 of the instructions to IRS Form 8965.
Income Tax Reporting of Health Insurance Coverage
Qualifying coverage is reported to the IRS on forms 1095-A (for coverage through the federal exchange), 1095-B (for coverage through a small employer) and 1095-C (for coverage through a large employer with 50 or more full-time employees). A copy of these forms is required to be mailed to you no later than January 31, 2017, and is needed in order to prepare an accurate tax return.
The Due Date this Year is Tuesday, April 18th
Because of a holiday in the District of Columbia on Monday, April 17th the legal due date for filing tax returns will be Tuesday, April 18th.
Increased Security and Verification Procedures
Tax return fraud is rampant and is victimizing hundreds of thousands of people nationwide. Fraudsters steal social security numbers, names and addresses and then use this information to file fraudulent tax returns claiming large refunds. Subsequently, the legitimate taxpayer files a return and then receives a notice from the IRS that two tax returns have been filed for the same year.
In 2015, the IRS, state tax agencies and members of the tax preparation industry joined together to create stronger security protocols. Your Form W-2, for example, may contain a verification code which must be data-entered into whatever tax program is being used to prepare and e- file your return.
See IRS Publication 4524 for further information. Also see my free article:
Tax preparers are now required to verify the identity of clients who choose to e-file their returns.
Some Refunds Will Be Delayed Until February 15th
Tax returns that claim the Earned Income Credit or the Additional Child Tax Credit may be filed now, but the IRS will not process them until February 15th and refunds will not be issued until the week of February 27th. Returns that do not claim these credits are unaffected by this change.
The purpose of this delay is to give the IRS more time to detect and prevent fraud.
You Now Need an Appointment to Visit Your Local IRS Office
Taxpayers are now required to call the IRS in advance to schedule an appointment to visit their local IRS office. The phone number to schedule an appointment is: 1-844-545-5640.
Identity Protection Pin Codes Are Renewed Annually
Taxpayers victimized by tax fraud can obtain an Identity Protection Pin from the IRS by filing Form 14039. This pin is an additional means of authenticating a tax return. Note that pin codes are re-issued each year. You can’t re-use last year’s pin code to file this year’s return. The IRS mailed out 2016 pin codes in December 2016. If you didn’t receive your new pin code call the IRS at 1-800-829-1040.
Foreclosure Tax Relief Still Applies Through 2016
People who lost their homes to foreclosure might be at risk of getting a big bill from the IRS if it wasn’t for this important tax relief provision. In general, if a creditor cancels your debt you will have taxable income equal to the amount of debt forgiven. This income is called cancellation of debt income.
The Path Act extended through December 31, 2016 the exclusion of income from foreclosures and short sales of a primary residence. See IRS Form 982 and Publication 4681.
Standard Mileage Rates
Some people don’t use the Actual Method for vehicle expenses. Instead, they use the simpler Mileage Method and just multiply their business miles by the applicable IRS rate. You can use the mileage method for up to four vehicles.
If you have more then four business vehicles you are required to use the Actual Method. For each vehicle you must choose a method at the time of acquisition and stick with it until you dispose of the vehicle.
For 2016 the rate for business miles was 54 cents (19 cents/mile for medical and moving activities and 14 cents/mile if you drove for a charity).
The IRS recently announced the following 2017 mileage rates:
Business: 53.5 cents/mile
Medical and moving: 17 cents/mile
Charity: 14 cents/mile
What Records Should You Give Your Accountant?
I specifically answered this question in this free article:
Always remember that the very best answer for you is to pay the legal minimum tax: not one cent more.
National Headquarters of the Internal Revenue Service, Washington DC.
The inscription at the top of this building says:
Taxes are what we pay for a civilized society
2016 is the 104th year of the income tax in the United States, following ratification on February 3, 1913 of the 16th Amendment to the Constitution. See here for the very first U.S. income tax return for the year 1913:
People who disregard paperwork are condemned to be punished by it.
Certified Public Accountant Master of Business Administration
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