Sunday, March 20, 2016

5 Changes You Must Know About Before Filing Your Taxes This Year


FROM http://money.usnews.com/
As you prepare this year's tax return, you might wonder if anything has changed since you did last year's return.
For most people, the answer is no, aside from a few small changes in numbers. But Congress did make a couple of notable changes last year, including making permanent some tax breaks that had been extended year to year.
"We've had 50 major tax law changes in the last 13 years," says Jeff Schnepper, a tax attorney in Cherry Hill, New Jersey, and the author of "How to Pay Zero Taxes 2016: Your Guide to Every Tax Break the IRS Allows." "Our tax code is a disaster. It's thousands of words dancing without rhythm."
One difference this year is the deadline: Federal tax returns this year are due April 18 because Washington, D.C., celebrates Emancipation Day and the holiday falls on April 15 this year. That gives taxpayers across the country three extra days to file their taxes.
Even if the tax law hasn't changed significantly since you filed your last return, you still may find yourself facing a completely different tax situation because your life has changed. Marriage, divorce, death, the birth of a child, buying and selling a house, an inheritance, big medical expenses, foreclosure, buying or selling a business – all those life events can significantly affect what you need to report on your return and what you pay (or don't pay) in taxes.
"Every time you have a lifestyle change, you're going to have some effect on the tax code," Schnepper says.
If your life has gotten more complicated, it may be time to find professional help.
"My advice to anybody is to always get a tax professional," says Steven Goldburd, a partner at Goldburd McCone tax law firm in New York. "There are ways to do it yourself. Doing it yourself will not always get you the best outcome." If your life changes, you may be eligible for deductions and creditsyou weren't before, or you may not realize you need to send additional information. Mistakes can cost you money and also make you more vulnerable to an audit.
He advises asking friends, family and colleagues for referrals. "Make sure you have someone that seems trustworthy," Goldburd says. "If it's too good to be true, it probably is. … You've got to be careful with that person preparing tax returns out of his bodega."
This time of year, it may be hard to find an accountant with time to talk to you, but you can file for an extension and then seek help, including advice for next year's tax planning, after April 18. If you think you'll owe taxes, you are required to pay on time, even if you get an extension. Anyone can get an extension and delay filing a tax return until Oct. 15, when they might be in a better position to receive the tax guidance needed to prepare a suitable return. You'll have to make a rough estimate of what you owe based on last year's return and how much you have paid so far, either in quarterly estimated taxes or via payroll deduction.
"People fail to take the deductions they're entitled to," Schnepper says. "There's almost nothing that in the appropriate situation can't be deducted if structured correctly."
One piece of advice that has not changed: "The most important thing in terms of taxes is substantiation," Schnepper says. "Any time you don't have a record ... you're throwing away money. Get the receipt."
Here are five changes to be aware of when you're working on this year's tax return:
Deadline to file is April 18. This year's tax return deadline is Monday, April 18, because April 15 is Emancipation Day in Washington, D.C. If you live in Maine or Massachusetts, states that celebrate Patriots Day, the deadline to file is Tuesday, April 19. If you can't file on time, ask for an extension, which will give you six more months to send in your return.
The penalty for not having health insurance has risen. If you did not have health insurance in 2015, you may have to pay a tax penalty of 2 percent of your household income, or $325 per adult and $162.50 per child, up to a maximum of $975 per family. That's up from $95 per adult and $47.50 per child, with a maximum of $285, for 2014. However, there is a long list of exemptions from the penalty, including not being able to afford insurance. If you got insurance through the Affordable Care Act exchange and under or overestimated your income, you could either owe additional money or receive a tax credit. The IRS has extensive guidance on the ACA and your taxes.
Some key numbers have changed – slightly. The personal exemption for 2015 has risen from $3,950 to $4,000. That's the amount deducted from taxable income for each person on the return. The Alternative Minimum Tax exemption was increased to $53,600 ($83,400 for married couples filing jointly), from $52,800 and $82,100. The AMT is designed to make sure everyone pays at least some tax and requires a complex set of calculations once your income goes above the exemption threshold. You can see more of those changes here. The mileage rate for 2015 returns is 57.5 cents for business miles (up from 56 cents in 2015), 23 cents for medical or moving mileage (down half a cent from 2014) and 14 cents per mile for charitable work.
Some temporary tax breaks have become permanent. Every year, Congress waits until the end of the year to take up what are known as tax extenders – or tax breaks that expire. This makes it hard to plan. This year, several of those tax breaks were made permanent, including the ability for taxpayers over 70 1/2 to donate IRA funds up to $100,000 without paying taxes, the deduction of sales taxes for taxpayers in states that do not have a state income tax and the $250 above-the-line deduction for teachers who buy their own supplies, which will rise with inflation. The enhanced Child Tax Credit, American Opportunity Tax Credit, and Earned Income Tax Credit were made permanent.
The tax break for cancellation of debt on a primary residence was extended. Normally, if a creditor forgives debt you owe, that is considered income and you owe taxes. But after the foreclosure crisis, Congress created a tax break for homeowners who did short sales on underwater homes and had balances forgiven. The tax break, which applies only to primary residences, was extended through 2016.