Wednesday, January 20, 2016

8 tax moves to make at the start of 2016

FROM MARKETWATCH.COM

For the first time this decade, we’re starting a year with tax laws that will remain in place for one to three years — or longer. The Protecting Americans from Tax Hikes Act of 2015, passed in December 2015, has made certain key provisions permanent, extended some tax provisions through the end of 2016, and others through 2019. So taxpayers can do some tax planning without worrying about certain tax laws changing.

Throughout this year, we will give you more details about how to take advantage of the new laws. For now, let’s start with a handy-dandy January to-do list:

1) If you’re using your car for business, write down its odometer reading. If you didn’t do it on Jan. 1, no worries. Write down today’s reading and estimate how many miles you drove in the last week — for business and for personal. It’s early enough that a good guesstimate will work.


2) It’s time to submit a new W-4 form to your employer if your marital status, number of exemptions or other key personal details have changed. Let them know if you are married or single. And how many exemptions you want to claim. The IRS has a withholding calculator you can use.


3) Look at your tax return from last year and make a list of all the places from which you are expecting to receive documents — employers (W-2), customers (1099-MISC), merchant banking & Paypal (1099-K), investments (1099-INT and 1099-DIV), pension and IRA accounts (1099-R), sales or dispositions of real estate (1099S, 1099-A, 1099-COD, etc), mortgage lenders (1098), state payments and refunds (1099-G), and so forth. Make note of accounts that you closed out last year (or establishment names that were changed). Add the changed sources to your list.

4) If you had taxable winnings from casino gambling, you would have received a W-2G form from the venue right on the spot. It will not be coming in the mail. But the IRS has a copy — so remember to include that income. You will be able to deduct gambling losses only up to your winnings — as itemized deductions on Schedule A. Incidentally, the IRS issued a new procedure for slot machine players to use. Consider reading Revenue Procedure 2015-21. If you don’t understand it — take it to your tax professional.

5) Did you move last year? Your employers, banks, etc. might have the wrong address for you. Send them updates immediately — call them and fax or email the information so they get your correct address soonest. One of the most common complaints TaxMama.com gets is from people who didn’t receive their W-2s and 1099s — because they moved and forgot to notify the relevant issuers.

6) If you’re a business owner, you should be issuing Form 1099-MISC to anyone who provided services or paid rent — if they were not incorporated. If you don’t already have each vendor’s name, address and tax ID number (especially via a Form W-9), get on the ball and start collecting that information immediately. But beware: The vendors and freelancers who were not planning to pay taxes on their earnings will get really hostile when you ask for their tax ID numbers.

You need to send the 1099s to recipients by Jan. 31 – even though you may not have to file the forms with the IRS until March 31. The penalty just rose to $250 for each unfiled or incorrect 1099-MISC you issue. And many vendors, affiliates, and freelancers get antsy when the forms arrive late.

In fact, establish a policy for 2016. Before issuing a check to any freelancer or service provider, have them provide you with a signed Form W-9. It will save you a lot of trouble — and fights — next January.

7) Get proof of your — and your family members’ — health insurance coverage. Along with this, you will need to know the income of all members of the household in order to compute the health care credit or penalty. You’ll find new lines on your Form 1040. Line 61 deals with the tax/penalty for not having health care coverage. Line 69 is for the additional tax credit you can get from Form 8962 if your income dropped below your projection. In addition to household income, Form 8962 asks about your monthly health insurance payment, your monthly premium tax credits…and so much more. (You will want to read the instructions.) This is the most complicated form that the IRS has ever issued for individuals to fill out.

8) Did you officially change your name in 2015 because you got married or divorced -- or just didn’t like the one you had? While you may have updated that information on your credit cards and driver’s license and such, the IRS won’t have that information. Update your name on your Social Security record. Until you change the name on your SS card, use your previous name on your tax return. Don’t worry about the name on the W-2 or 1099 not matching this tax return.

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