What’s New in Federal Tax Law 2016

Summary TaxSlayer! Filing deadline Otherwise, not many changes to Federal tax law Increases already in law Uncertain end-of-year changes 2 CO1 Instructor Workshop 2016

TaxSlayer! This presentation does not discuss TaxSlayer Scheduled for afternoon Federal tax law will be fully implemented in TaxSlayer IRS requirement Most tax law changes are implemented in software (but Counselors should still know about them) 3 CO1 Instructor Workshop 2016

Filing Deadline for TY2016 Washington, DC holiday (Emancipation Day) is Sunday, April 16, 2017 Observed Monday April 17, 2017 Tax Day is April 18, 2017 4 CO1 Instructor Workshop 2016

New IRA self-certification procedure For tp who fails to rollover IRA within 60 days. (Pub 4012, p. NEW-3) In- Out-of scope? 5 CO1 Instructor Workshop 2016

Some Refunds Delayed (IR-2016-152, Nov. 22, 2016) The IRS is required to hold refunds on tax returns claiming the EITC or the ACTC until mid-February. The IRS must hold the entire refund Even the portion not associated with the EITC and ACTC. 6 CO1 Instructor Workshop 2016

Changes to the ITIN Program All ITINs not used on a federal income tax return at least once in the last three consecutive tax years will expire at the end of the year A consequence of the 2015 PATH Act. All ITINs issued before 2013 will begin expiring this year, starting with those with middle digits of 78 and 79. All expired ITINs must be renewed before being used on a U.S. tax return. No action is needed by ITIN holders who don’t need to file a tax return in 2017. New documentation requirements when applying for or renewing an ITIN for certain dependents. Dependents without a date of U.S. entry on their passports from countries other than Mexico or Canada need to prove residency before an ITIN can be issued. 7 CO1 Instructor Workshop 2016

Standard Deduction (Changes are handled in software) For HH the standard deduction increases to $9,300 (+$50) No change for other filing statuses: Single: $6,300 MFJ: $12,600 MFS: $6,300 Low inflation rate kept standard deductions the same as 2015 levels 8 CO1 Instructor Workshop 2016

Personal Exemption (Changes are handled in software) New personal exemption amount: $4,050 (+$50) The exemption is subject to a phase-out that begins with AGI of $259,400 ($311,300 for MFJ) It phases out completely at $381,900 ($433,800 for MFJ) 9 CO1 Instructor Workshop 2016

Earned Income Credit (Changes are handled in software) Small increases in maximum EITC Phase-out thresholds higher: Filing Status No Children One Child Two Children Three or More Children S, HH, Widowed $14,880 $39,296 $44,648 $47,955 MFJ $20,430 $44,846 $50,198 $53,505 10 CO1 Instructor Workshop 2016

ACA Penalties (Changes are handled in software) Year Penalty per Adult* Percent of Income** Family Maximum 2014 $95 1% $285 2015 2% $975 2016 $695 2.5% $2085 * Penalty for children is half the penalty for adults. ** Percent of income above the filing threshold. 11 CO1 Instructor Workshop 2016

Residential Energy Credit The credit for 30 percent of the cost of certain energy-efficient equipment does not apply after 2016. Solar water heating equipment Photovoltaic or fuel cell equipment Geothermal heat pumps Wind turbines 12 CO1 Instructor Workshop 2016

Contributions to HSA The contribution limit for individual policies remains at $3,350 The maximum contribution for family policies will increases to $6,750 (+$100) Still have a catch-up contribution of $1,000 for those 55 or older 13 CO1 Instructor Workshop 2016

Medical Expense Deduction No change for taxes filed in 2017 Medical expenses must exceed 10% AGI For taxpayers over 65 the threshold is 7.5% AGI For taxes filed in 2018 the threshold is 10% for everyone 14 CO1 Instructor Workshop 2016

Other Changes (All changes handled in software) Tax brackets rise slightly (adjusted for inflation) Estate Tax Exemption increases Foreign Earned Income Exclusion increases AGI increases for MFJ filers to determine the reduction in the Lifetime Learning Credit Exemption from AMT is higher Limitation for itemized deductions begins at $259,400 ($311,300 MFJ) 15 CO1 Instructor Workshop 2016

What’s New: Wrap-up Questions? 16 CO1 Instructor Workshop 2016