Changes This Tax Filing Season
What You Need to Know Before You File
Tax filing season is underway. Every year, the Internal Revenue Service (IRS) tweaks its rules slightly to adjust for new legislation and changing standards. This year is no different, so here are a few changes you should be aware of before you file your return for the 2016 tax year.
Three Extra Days to File
If you typically put off filing your taxes until the last minute, this April you have a few extra days to procrastinate. The tax filing deadline is April 18, 2017. The usual April 15 deadline falls on a Saturday this year, which would normally make the filing deadline the following Monday. However, April 17 is Emancipation Day, a Washington D.C. holiday, so the deadline moves to April 18. Taxpayers requesting an extension will have until October 16, 2017 to file.
Refunds Could be Delayed
If you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC), you’ll have to wait until at least February 15 to see your refund. That’s thanks to a law change requiring the IRS to hold refunds claiming EITC and ACTC credits. The change is designed to give the IRS more time to detect fraud and your entire refund is affected – not just the portion associated with the EITC and ACTC.
The quickest way to get your refund in your pocket is to file electronically and choose direct deposit. If February 15 comes and goes and you still haven’t seen your refund, visit IRS.gov/Refunds and click on Where’s My Refund?
Revised Mileage Rates
Standard mileage rates for business travel in a car, van, pickup or panel truck have dropped since 2015. For tax year 2016, the rate is 54 cents per mile (down from 57.5) and the drop continues into tax year 2017 at 53.5 cents per mile. Mileage rates for medical or moving purposes have also declined from 23 cents per mile in 2015 to 19 cents per mile in 2016 and 17 cents in 2017. Rates for mileage driven in the service of charitable organizations remains unchanged at 14 cents per mile.
Renew Individual Taxpayer Identification Number
Individual Taxpayer Identification Numbers (ITINs) are used by taxpayers who are not eligible for a Social Security number – for example, the spouse or dependent of a U.S. citizen or a nonresident alien. All ITINs not used on a federal tax return in the last three years expired on January 1, 2017 along with ITINs with middle digits of either 78 or 79.
It can take up to 11 weeks to process an ITIN renewal application, so it’s critical to renew expired numbers as soon as possible to avoid return delays or loss of benefits.
New Deadline for Reporting Foreign Accounts
In the past, the deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) was June 30 and no extensions were available. The new deadline is the same as the deadline for a federal income tax return. This means that Form 114 must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017 and the extension deadline is October 16, 2017.
Missed Rollover Deadline
It’s now easier to get a waiver on the 60-day limit on rolling over your IRA or 401(k) tax free. New rollover standards went into effect August 24, 2016 allowing a taxpayer who fails to properly complete a tax-free rollover of a distribution from a retirement plan the ability to use a new self-certification procedure.
If you miss the 60-day window, the IRS will now let you self-certify that you qualify for one or more of 11 mitigating circumstances. Death of a family member, illness, misplaced distribution check, incarceration and severe home damage are examples of situations that will allow you to obtain a waiver from the IRS. Further details, including a sample self-certification letter, can be found at IRS.gov under Revenue Procedure 2016-47.
Winning an Olympic medal is every athlete’s dream. Along with Olympic glory, the medals come with a cash bonus from the U.S. Olympic Committee - $25,000 for each gold medal, $15,000 for each silver and $10,000 for bronze. Until now, Olympians paid taxes on that money and on the value of the medal. However, the days of the “victory tax” are over for most athletes. Starting in 2016, if an Olympian’s adjusted gross income (AGI) is $1 million or less, the value of their medals and amount of their prize money is not taxable.
The same new standards also apply to Paralympic champions. Winnings for Paralympians, though, are considerably less than for Olympians - $5,000 for gold, $3,000 for silver and $2,000 for bronze. Regardless, all athletes currently training for South Korea in 2018 and Tokyo in 2020 will certainly welcome this new tax break.
For clarification on any of these tax changes for tax year 2016, please contact your Herbein tax professional.
For additional information please contact us at email@example.com.