Tax Year 2016 – What’s new?

The IRS will begin accepting individual electronic and paper tax returns on January 23, 2017. If you file electronically, refunds will be electronically deposited to your bank account in 10 to 12 days from the date of processing. The deadline for filing individual tax returns (Form 1040) is April 18, 2017.

The standard mileage rate deduction for the cost of operating your vehicle for business purposes is 54 cents per mile. In addition to mileage, you may deduct the cost of tolls, parking, property taxes, and interest.

If you use your vehicle for medical purposes, you can deduct 19 cents per mile. The standard mileage rate for use of your vehicle for volunteer services for a charity is 14 cents per mile.

You can deduct the part of your medical and dental expenses that is  greater than 10% of your adjusted gross income. If you or your spouse is age 65 or older, you can deduct expenses that are greater than 7.5% of your adjusted gross income.

IRA and Retirement Account Contributions to Roth and Traditional IRA’s remain at $5,500. If you turned age 50 or older in 2016, you may contribute an additional $1,000. Contributions to 401(k), 403(b), or 457 retirement plans remain at $18,000. If you turned 50 or older in 2016, you may contribute an additional $6,000. Self-employment Pension Plan (SEP) contributions remain at $53,000 for 2016.

  • Please review your beneficiary designations. It is necessary for you to have named a primary beneficiary(ies) and contingent beneficiary(ies) for all of your IRA and retirement accounts.

The maximum Health Savings Account (HSA) contribution increased to $3,350 for individuals and $6,750 for family coverage. If you are age 55 or older, you can contribute an additonal $1,000. The deadline for contributing to your 2016 HSA is April 18, 2017.

Charitable deductions must be supported by documentation for every dollar you claim. For donations of more than $250, documentation must be obtained from the charity. If you are not sure of the value of your donation you can go to www.satruck.com or www.itsdeductible.com for the information. The IRS has been auditing tax returns that list non-cash contributions so be sure to have the appropriate documentation and valuation. Please note that there is no deduction for the value of the time you contribute to a charity.

You can obtain a record of your past tax returns (called “transcripts”) from the IRS. The website is www.irs.gov/Individuals/Get-Transcript.

In addition to any 1099 (employment income) and W-2 (wage statement), you will need the following documentation to file your individual (Form 1040) tax return:

  • Form 1095 / proof of health insurance:
    • Evidence that every member of your household reported on your tax return was covered by health insurance for 2016 and that the insurance meets the Minimum Essential Requirements of coverage. Evidence is Form 1095-A received from the insurance exchange or Form 1095-B or 1095-C received from your insurance carrier or employer. Your insurance carrier or employer is required to send Form 1095-B or 1095-C by March 2, 2017.
    • If you do not have the required insurance coverage you will need to get an Excemption Certificate Number (ECN).
  • Form 1098-T / Tuition and Fees deduction:
    • Generally, qualified expenses for education tax credits include tuition, books, supplies, computer for the enrollment or attendance at eligible post-secondary educational institutions (including colleges, universities, and trade schools). The expenses paid during the tax year must be for an academic period that begins in the same tax year or an academic period that begins in the first three months of the following tax year.
    • The following expenses do not qualify for the educaitonal tax credit:
      • Room and board, transportation, insurance, and medical expenses
      • Student fees unless required as a condition of enrollment or attendance
    • You will receive a 1098-T from the educational institution that shows the costs paid during the year. Often the information reported in the 1098-T is not accurate and the IRS has been auditing tax returns that report educational tax credits. You will  need to keep a copy of the transcript of the costs of the educational institution for verification.

Now, get to it . . .

 

This Blog is made available by me, an attorney licensed to practice law in the State of Connecticut. I am not a recruiter, hiring manager, or career agent. Nor am I an expert in any of the areas or issues related to job search activities. I am merely sharing my job search experiences with you. This Blog/Web Site is designed to provide accurate information on the subjects presented but should not be considered professional or legal advice.

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