Tax time! It’s that time of year again. Dr. Tom Hrubec, Chief Academic Officer at Urbana University, and Dr. Alan Rogers, Chair of the Accounting Program at Franklin University, have provided some insight and tax-time reminders. There is a great deal of speculation in the media today about expected tax reform efforts of the new administration in Washington. If history is any indication, tax reform legislation takes considerable time and always looks different in the end. Regardless of what happens in Washington this year, the rules for our 2016 returns will not be affected. Here is some general advice that hopefully will help as you file your 2016 tax return and look ahead to next year:
Documentation
Make sure you have all your documentation together before putting your return together (i.e., W-2’s, 1095, 1098’s, 1099’s, etc.). In this digital age we now live in, the Internal Revenue Service is very good about matching documents and forms. The 1099 form is probably the one most frequently left off a return. If you received independent contractor income, interest and dividends, a state income tax refund, unemployment compensation, withdrawals from a retirement account, or even a debt cancellation, you can expect to receive a 1099 from the organization and the amounts on the form need to be included on your tax return. If you are expecting a document and didn’t receive it by now, be sure to call the organization or at least estimate the amount as a last resort.
Children’s returns
If you have children working part time they sometimes get excited about filing their own returns and getting that refund check returning a large portion of those taxes they paid. If they are your dependent, you could end up losing a significant deduction if they file their own taxes and claim themselves as an exemption. Talk to your children! If they have already filed for 2016 you will have to amend their return before your return can be filed!
Affordable Care Act
The 2016 penalty for not having health insurance is $695 or 2.5 percent of income for individuals and $2,085 or 2.5 percent of income for families. There are a few exceptions allowed for families who fall below filing thresholds and unemployed individuals meeting certain criteria, but for the most part this applies to nearly everyone. And as a somber side note, insurers have increased rates and plans for 2017 anywhere from 10 to 60 percent, depending on the plan.
Tax professionals
We always suggest that taxpayers utilize a tax professional when filing their returns. We see it time and time again that even folks with the simplest returns can miss something important – and frequently something in their favor. The tax laws are continually changing and unless your hobby is hanging out in the IRS’s Electronic Reading Room, it is difficult to keep up. So let the professionals help you. Be careful here – some of the big names in tax return preparation like to use the word “free” a lot in their advertising – but then end up charging you additional fees for things like additional forms beyond the standard tax return or for electronic processing. To avoid any surprises, be sure to ask up front about the total preparation fee before you hand over all your documentation.
Timing
Finally, don’t wait until the last minute to file your return! Especially if you are expecting a refund. The worst thing you can do is to be rushing that weekend before the tax due date of Tuesday, April 18, 2017 and potentially missing something important. If you still haven’t identified a tax professional at that time, many are reluctant to pick up a new client right before this crucial deadline.
