Income Tax Changes Affecting 2016 Tax Returns

Although Benjamin Franklin’s famous statement that “nothing can be said to be certain, except death and taxes” may still be true, his remark definitely does not refer to any of the specifics involved with filing and paying income taxes. In fact, Barbara Weltman, an editor for J.K. Lasser’s Income Tax 2017, recently reminded taxpayers that they should not assume that “what (they) relied on last year is necessarily the same.” Although there are no major changes to the tax filing parameters for 2016 tax returns, there are certain changes to tax penalties, mileage rates, tax exemptions, tax credits and tax brackets that tax filers should be aware of.

The following are some of the changes that affect the filing of 2016 tax returns:

Change in Tax Filing Deadline

Tax Day for 2107 is Tuesday, April 18th. This delay is due to the fact that the normal April 15th filing deadline falls on a Saturday followed by Emancipation Day on Monday.

Increase in Health Insurance Penalty

The 2016 penalty for not having health insurance is $695 per adult and $349.50 per child, with a maximum household penalty of $2085. These tax penalties are up over 100% from those tax penalties imposed in 2015.

Millage Rate Decrease

Taxpayers are allowed to deduct expenses involved with the use of their personal vehicle for certain specific purposes that include medical, charitable causes, moving and business. This tax break can be calculated in one of two ways, either by using the actual costs involved with operating the vehicle to service these various proposes or by using the mileage rate specified by the IRS. The mileage rate for 2016 tax returns has decreased form 57.5 cents per mile to 54 cents per mile for business and from 23 cents per mile to 19 cents per mile for medical and moving related use. It remains unchanged at 14 cents per mile when the vehicle is used for charitable reasons.

Tax Bracket Changes

The income limit for single taxpayers subjected to the maximum tax rate of 39.6% has been raised from $413,200 to $425,050 and from $464,850 to $466,950 for married couples filing jointly. The income limits for all other tax brackets have also been increased slightly.

Higher Personal Exemption

The personal exemption has increased from $4000 to $4050 for single taxpayers with adjusted gross incomes below $259,400 ($311,300 for married couple filing jointly). The income level at which this exemption fades out completely has also been increased.

Possible Refund Delay

Tax refunds will be delayed for taxpayers who are claiming either the Additional Child Tax Credit or the Earned Income Tax Credit. According to the provisions of the Protecting Americans from Tax Hikes (PATH) Legislation that was passed in 2015, refunds associated with tax returns claiming either of these two tax breaks must be held until February 15th in order to give the IRS time to match tax return information with forms W-2 and 1099-MISC submitted by employers.

Passport Revocation for Owing Back Taxes

Beginning this year, the State Department will have the right to revoke the passport of any taxpayer who has a back tax balance in excess of $50,000. This law was passed as an add-on provision of the Fixing America’s Surface Transportation (FAST) Act of 2015.

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