The following information regarding Federal & State changes is effective January 1, 2016. For the 2016 calendar year, these changes include the following:
Tax Return Due Dates Changes
1.Due date of filing W-2s and 1099s changed to January 31 to prevent fraud. For W-2s if an extension is necessary, a Form 8809 only one 30 days to file.
2.Due date of partnerships (LLCs & LLPs) changed from April 15 to March 15. Changed place with C corporations.
3.Due date of C corporations changed from March 15 to April 15.
4.Some refunds delayed until at least Feb 15 to prevent fraud.
5.The due date for FBARs will move from June 30 to April 15. FBAR filers will now also get a six-month extension, just as they do for a tax return. The extension dates for trust returns are also changing.
6.“Trust returns are still going to be due in April, but they’re going to be extended, instead of September 15, they’ll be extended to September 30, so that allows those trusts to receive partnership K-1s September 15 and to be able to give them a couple of weeks to file. Then when they file the K-1s that flow into 1040s, there’s a couple of weeks before 1040s have to file. It’s still pretty compressed, but it requires the K-1 flow—on extension in particular.
Consumer Alerts on Tax Scams
Please note that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Note that the IRS will never:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail you a bill if you owe any taxes.
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Ask for credit or debit card numbers over the phone.
- Examples of recent scams include:
- Fake IRS tax bills related to the Affordable Care Act. Generally, the scam involves a fraudulent version of CP2000 notices for tax year 2015.
- Telephone scammers targeting students and parents during the back-to-school season and demanding payments for non-existent taxes, such as the “federal student tax.
- “Robo-calls” where scammers leave urgent callback requests through the phone telling taxpayers to call back to settle their “tax bill.” In the latest trend, IRS impersonators demand payments on iTunes and other gift cards.
For more information on tax scams, please see Tax Scams/Consumer Alerts. For more information on phishing scams, please see Suspicious e-Mails and Identity Theft.
ALERT: Phone Scams Continue to be a Serious Threat
In 2017, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged
IR-2016-139, Oct. 25, 2016
The Internal Revenue Service today announced the tax year 2017 annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules, and other tax changes.
- The tax items for tax year 2017 of greatest interest to most taxpayers include the following dollar amounts:
- The standard deduction for married filing jointly rises to $12,700 for tax year 2017, up $100 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $6,350 in 2017, up from $6,300 in 2016, and for heads of households, the standard deduction will be $9,350 for tax year 2017, up from $9,300 for tax year 2016.
- The personal exemption for tax year 2017 remains as it was for 2016: $4,050. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly.)
- For tax year 2017, the 39.6 percent tax rate affects single taxpayers whose income exceeds $418,400 ($470,700 for married taxpayers filing jointly), up from $415,050 and $466,950, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for tax year 2017 are described in the revenue procedure.
- The limitation for itemized deductions to be claimed on tax year 2017 returns of individuals begins with incomes of $287,650 or more ($313,800 for married couples filing jointly).
- The Alternative Minimum Tax exemption amount for tax year 2017 is $54,300 and begins to phase out at $120,700 ($84,500, for married couples filing jointly for whom the exemption begins to phase out at $160,900). The 2016 exemption amount was $53,900 ($83,800 for married couples filing jointly). For tax year 2017, the 28 percent tax rate applies to taxpayers with taxable incomes above $187,800 ($93,900 for married individuals filing separately).
- The tax year 2017 maximum Earned Income Credit amount is $6,318 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,269 for tax year 2016. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2017, the monthly limitation for the qualified transportation fringe benefit is $255, as is the monthly limitation for qualified parking,
- For calendar year 2017, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is $695.
- For tax year 2017 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250 but not more than $3,350; these amounts remain unchanged from 2016. For self-only coverage the maximum out of pocket expense amount is $4,500, up $50 from 2016. For tax year 2017 participants with family coverage, the floor for the annual deductible is $4,500; up from $4,450 in 2016, however the deductible cannot be more than $6,750, up $50 from the limit for tax year 2016. For family
- Coverage, the out of pocket expense limit is $8,250 for tax year 2017, an increase of $100 from tax year 2016.
- For tax year 2017, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $112,000, up from $111,000 for tax year 2016.
- For tax year 2017, the foreign earned income exclusion is $102,100, up from $101,300 for tax year 2016.
- Estates of decedents who die during 2017 have a basic exclusion amount of $5,490,000, up from a total of $5,450,000 for estates of decedents who died in 2016.
- The IRS still expects to issue most refunds in less than 21 days, though IRS will hold refunds for EITC and ACTC-related tax returns filed early in 2017 until Feb. 15 and then begin issuing them.
IRS Announces 2017 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2017
IR-2016-141, Oct. 27, 2016
- WASHINGTON — The Internal Revenue Service today announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017.
- The IRS today issued technical guidance detailing these items in Notice 2016-62.
- Highlights of changes for 2017
- The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the saver’s credit all increased for 2017.
- Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor their spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2017:
- For single taxpayers covered by a workplace retirement plan, the phase-out range is $62,000 to $72,000, up from $61,000 to $71,000.
- For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $99,000 to $119,000, up from $98,000 to $118,000.
- For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $186,000 and $196,000, up from $184,000 and $194,000.
- For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The income phase-out range for taxpayers making contributions to a Roth IRA is $118,000 to $133,000 for singles and heads of household, up from $117,000 to $132,000. For married couples filing jointly, the income phase-out range is $186,000 to $196,000, up from $184,000 to $194,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
- The income limit for the saver’s credit (also known as the retirement savings contributions credit) for low- and moderate-income workers is $62,000 for married couples filing jointly, up from $61,500; $46,500 for heads of household, up from $46,125; and $31,000 for singles and married individuals filing separately, up from $30,750.
- Highlights of limitations that remain unchanged from 2016
- The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
- The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
- The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
Detailed description of adjusted and unchanged limitations
Section 415 of the Internal Revenue Code (Code) provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost-of-living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made following adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2017, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000. For a participant who separated from service before January 1, 2017, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant’s compensation limitation, as adjusted through 2016, by 1.0112.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and
- Information on filing a delinquent Form 114 can be found at Delinquent FBAR Submission Procedures. See the Comparison of filing requirements for further information
The above information is for the educational and general informational purposes only. These are not tax or legal advises. For any specific matters you have to consult with your legal, and financial advisor. Or M.H.Garelick Business Management Inc.
REMINDER: REPORT CERTAIN FOREIGN BANK AND FINANCIAL ACCOUNTS TO TREASURY BY APRIL 15
Third-party reporting: Foreign financial institutions may provide to the IRS third-party information reporting about financial accounts, including the identity and certain financial information associated with the account, which they maintain offshore on behalf of U.S. individual account holders.
Application to domestic entities: The IRS issued regulations that require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the total asset value exceeds the appropriate reporting threshold. This reporting requirement applies to tax years beginning after December 31, 2015.
1.The due date for FBARs will move from June 30 to April 15. FBAR filers will now also get a six-month extension, just as they do for a tax return. The extension dates for trust returns are also changing.
- Foreign Account Tax Compliance Act
- The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.
FATCA Information for Individuals
FATCA Current Alerts and Other News
- U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets
- Use Form 8938 to report these assets
- Attach Form 8938 to the annual income tax return (usually Form 1040)
- Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938
- If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year
- The threshold is higher for individuals who live outside the United States
- Thresholds are different for married and single taxpayers
- Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.
- Penalties apply for failure to file accurately
Alert: The reporting requirement for Form 8938 is separate from the reporting requirement for the FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”) (formerly TD F 90-22.1). An individual may have to file both forms and separate penalties may apply for failure to file each form
Still looking for more answers? View the frequently-asked-questions (FAQs) for Form 8938 for information on real estate, foreign assets held in U.S.-based financial accounts, foreign pensions, valuing certain assets and more.
Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification). Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.
The IRS anticipates issuing regulations that will require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the assets exceeds the appropriate reporting threshold. Until the IRS issues such regulations, only individuals must file Form 8938. For more information about domestic entity filing, see Notice 2013-10.
Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act, generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.
Information for U.S. Taxpayers on the Requirements of Form 8938, Statement of Specified Foreign Financial Assets
Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS, generally using Form 8938, Statement of Specified Foreign Financial Assets. The Form 8938 must be attached to the taxpayer’s annual tax return.
Uncertain whether you have to file? Generally, aggregate value of these assets must exceed $50,000, but in some cases, the threshold may be higher.
You may also have to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts(FBAR). This comparison table will help you figure out whether you also need to file the FBAR.