Get Ready for Tax Day 2016 Right Now
Tax season officially begins January 19. Now is the time to make sure you have a folder handy for the forms you’ll need to have before you file, such as form W-2 from your employer and a 1099 from banks and other payers. For many people, it is not a year to procrastinate, even though you will get a few extra days to pay Uncle Sam. Here are the changes you need to know now for tax day 2016, according to the IRS:
Higher Obamacare Penalty
Do not scroll past this if you are currently uninsured. If you end 2015 without healthcare coverage, you will have to pay a penalty under the Affordable Care Act. How much? Triple the penalties of 2014. You will have to pay the higher of the following amounts if you are not insured on your own or through your employer:
- Between 2% of your annual income and a maximum cost of the national average premium to buy a Bronze Plan from the federal exchange.
- $695 per adult and $347.50 per child under 18. The maximum penalty in this formula is $2,085 per family.
Mandatory Healthcare Paperwork
Are you insured through your employer? In 2016, it will have to fill out paperwork, IRS forms 1095-B or 1095-C, to show coverage rates for its employees. This is related to the increase in tax penalties for people who lack healthcare coverage.
New Filing Extensions
Some individuals who need extensions will have a few more options. If you have income from a business partnership, you have been granted a new six-month extension. If you are handling trust or estate matters in your family, you have a new 5-1/2 month extension. Ask a tax advisor about more business-related changes in the law.
Deductions and income thresholds are poised to change again. While the figures are not yet set, it’s estimated that the seventh tax bracket established by the American Taxpayer relief Act of 2012 will impose a tax rate of 39.6% for unmarried individuals at $415,050, married filing separately at $233,457, and married filing jointly at $466,950.
Investment Income Surcharge
Are you expecting capital gains? Single filers earning more than $200,000 and joint filers with an income over $250,000 will pay a 3.8 percent Medicare surcharge tax on investment income. This effectively increases the rate on capital gains to 23.8 percent.
Extra Time to File
If there’s any good news on the tax horizon, it’s that you will have three extra days to file your taxes. This year, Emancipation Day, a holiday in the District of Columbia, falls on Friday, April 15. That makes the tax return deadline April 18. Individuals in Massachusetts and Maine get one more day to file in order to accommodate Patriots Day.
Changes for 2016 mean you need to pay attention to the details. For some, it’s a good idea to shop around for advice from an accountant or enrolled agent. Compare prices and decide whether it’s worth doing your own taxes with software or hiring a tax preparer. Whatever you do, don’t procrastinate.