Fleming Financial Services

Expert tax preparation and financial help for individuals and businesses

2016 Tax Law Notes

Filing Date Startup

January 23, 2017

Filing Deadlines

January 31, 2017 – all W-2s and 1099s must be distributed

March 15, 2017 – Calendar Year Business Tax Returns due

April 18, 2017 – Personal Tax Returns due

October 16, 2017 – Extended Personal Tax Returns due

Delayed Release of Tax Refunds for Certain Types of Refunds

Refunds will not be processed until after February 15, 2017 for Tax Returns with the following types of refunds:

  • Earned Income Tax Credit
  • Child Tax Credit
  • American Opportunity Tax Credit

The IRS cautions that the refunds with these types of Tax Credits may not be received until the week of February 27. 2017.

The IRS is delaying these types of refunds in an attempt to give them time to match the W-2s that are required to be filed by January 31, 2017 with the income shown on the tax returns. The IRS feels this will decrease the amount of tax fraud and identity theft.

Permanent Extensions of Certain Tax Credits

Congress has made permanent certain Tax Credits that were renewable in the past. These credits include:

  • Deduction for State and Local Taxes
  • The Hope Scholarship/American Opportunity Act Tax Credit
  • The Teacher Expense Deduction
  • Qualified Teacher Expense Deduction

Affordable Health Care Act

There were no changes in 2016, changes we have seen in the past few years are:

  • Additional .9% Hospital Insurance Medicare Tax
  • 3.8% Hospital Insurance Medicare Tax on Net Investment Income
    • This affects the following tax filers
      • Singles – Incomes greater than $200,000
      • Married Filing Jointly – Incomes greater than $250,000
      • Married Filing Separately – Incomes greater than $125,000

For 2016 you should receive one of these new forms:

  • Health Coverage Exemptions – for those taxpayers who
    • receive a Healthcare Marketplace Exemption
    • are claiming a coverage exemption
  • IRS Form 1095-A – for those taxpayers who
    • Were covered with a plan through the Health Insurance Marketplace
      • Taxpayers may receive a tax credit or owe more tax
  • IRS Form 1095-B – for Taxpayers who are self-employed or employed by a small corporation
  • IRS Form 1095-C – for Taxpayers who are employed by a large corporation

Identity Theft

This continues to be a major problem and IRS suggests:

  • If you think you are a victim of Identity Theft
    • Report it at www.ftc.gov and
    • Contact your Tax Preparer
  • If you become a victim of Identity Theft, contact one of the three major credit bureaus and put a “fr

    This continues to be a major problem and IRS suggests:

    • If you think you are a victim of Identity Theft
      • Report it at www.ftc.gov and
      • Contact your Tax Preparer
    • If you become a victim of Identity Theft, contact one of the three major credit bureaus and put a “fraud alert” on your credit account
    • Respond immediately to any IRS Notice
    • Complete IRS Form 14039, Identity Theft Affidavit
    • File your tax return and pay any taxes due
      • Normally you would have to file a paper return rather than E-File

And remember,

  • The IRS does not call you unless they have sent you a Notice in the mail
  • The IRS does not initiate contact with taxpayers by email to request personal or financial information (this includes any type of electronic communication, such as text messages and social media channels)
  • Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking

Medical Expense Deduction

If you can itemize deductions, the Medical Expense Deduction increased from 7.5% to 10% of your Adjusted Gross Income starting in 2013. So you will need more expense in order to itemize medical expenses. This change is in effect for tax filers age 64 and younger.

Energy Credits

Energy Credits are still available but very limited. If you want to claim energy credits, I may need copies of any tax returns that you have taken the Energy Credits in the past.

Earned Income Child Tax Credit

The IRS is watching this credit very carefully and have increased the amount of due diligence required of the tax preparers.  Some documentation may be required to prove that the child has been under the care of the taxpayer(s) taking the credit, such as medical or school records.

Charitable Giving With Your IRA Distributions

Individuals age 70 ½ or older can continue to be able to exclude from gross income their Required Minimum Distributions up to $100,000 of Qualified Charitable Distributions. This law is now permanent.

State of Michigan Changes

Most of you saw the effect of the changes that the State of Michigan had made for 2012. It will continue to affect your 2016 tax return in the following areas:

  • tax rate for 2016 is 4.25%
  • reduction in tax credits for most charitable donations
  • some Pension and IRA distributions will be taxable, dependent upon your age
  • the calculation of the Homestead Property Tax has changed
    • if your “Total Household Resources” is greater than $50,000 you will not receive any Homestead Property Tax Credit
    • there are “phase-outs” with “Total Household Resources” below that amount
  • removal of the Child Tax Credit and the Senior Citizen Exemption

First Time Homebuyers Pay Back Continues

If you took advantage of the First Time Homebuyers credit in 2008, you have to continue the fifteen year pay back in 2016.  Those that fall into this category had to purchase their homes during 2008.

Mileage Rates

The standard mileage rates for 2016 were:

  • Business – 54 cents per mile
  • Medical and Move Related – 19 cents per mile
  • Charitable – 14 cents per mile

Property Taxes Paid on Your Home

The property taxes paid on your home in 2016 are deductible in most cases if you are able to itemize your deductions.  There are different calculations dependent upon whether you are filing Federal or State Tax Returns:

  • Federal
    • If you itemize your deductions, the full amount paid in 2016 is deductible
  • State
    • May be eligible for Homestead Property Taxes for the amount assessed (whether paid or not) in 2016

Charitable Giving

The IRS continues to review closely Charitable Giving. Please provide me with the following documentation:

  • Cash or Check – statement from Charity showing any gift over $250
  • Other Giving, in addition to a receipt from the organization, include the following:
    • listing of what was given and/or pictures of what you gave
    • the condition of given items
    • value of the given items

Foreign Financial Accounts Reporting

Anyone with foreign financial accounts or foreign trusts that exceed $10,000 in value is required to complete the IRS form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts).

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