Tax Season Is Here - What You Need To Know

Tax season starts January 23 and there are a few changes that come with it in 2017, including an adjustment to the final day you can file for 2016.

Delays abound

Normally, you have to file your taxes by April 15—it has become an unofficial holiday. But this year, the Internal Revenue Services has extended that to April 18.

This is because April 15 falls on a Saturday this year, which would normally push the final filing date to Monday. Due to Emancipation Day being observed in Washington, D.C., on April 17, tax-paying Americans are getting one extra day if they feel the need to procrastinate. Be sure to consult with your tax advisor and have everything sent by April 18.

Furthermore, in an effort to combat fraud, filers who claim a child tax credit, earned income credit or education credits should expect their returns to undergo additional scrutiny that could delay the processing of their returns and refunds. KMVT suggested the earliest a refund would be returned is by February 27.

Increases in deductions and deductibles for 2017

Health care coverage deductible limits are increasing ever so slightly by $50 for self-employed people, according to WKYC. This includes:

• Max limit for out-of-pocket expenses for self-only coverage : $4,550.
• Family coverage minimum and max limit: $4,550 and $6,800, respectively.
• Out-of-pocket expenses for family coverage: $8,350 ($100 increase).

Also, seniors looking to itemize deductions for medical expenses will see a change next year. The standard deduction claim requires health care costs to exceed 10 percent of adjusted gross income. A loophole allowed seniors to lower the threshold to 7.5 percent, but that’s being done away with for years after 2016.

Changes this tax season from Donald Trump

President Donald Trump made a number of promises on his campaign trail, and should he choose to enact his tax plan in 2017, it could actually affect your 2016 filing efforts. The changes can be made retroactively, and those who aren’t paying attention may miss out on some big changes.

David Prokupek, chief executive officer of Jackson Hewitt Tax Services, reviewed Trump’s proposal and estimated the standard deduction would double for most people, according to New Jersey Biz. This deduction is given when the filer doesn’t itemize anything. Prokupek pointed to joint-filing married couples, who would see their’s increase from $12,700 to $30,000.

Similarly, those making between $9,000 and $37,000 would see their tax rate fall from 15 percent to 12 percent, and people filing between $91,000 and $112,000 would also see a 3 percent decrease, from 28 percent to a 25 percent tax rate.

While it remains to be seen what comes of these changes, Prokupek is a believer that they’ll have a positive effect on taxpayers and the economy. Of course, there’s always two sides of a coin, and it’s especially important to recognize both when it comes to tax law.

For instance, while the standard tax deductions are being raised, this in turn means the public can expect personal exemptions to be eliminated. Furthermore, Trump has said he wants to remove the head of household filing status, which would imply that single parents would lose significant tax breaks as they would have to file as single instead. Ultimately, those who are near the top of their tax bracket as they currently stand could see themselves moving up to a higher bracket because of the proposed changes.

These are some of the most important things to keep your eye on as we venture into tax filing season, but other revisions to tax brackets and breaks are on the docket as well, albeit in a minor fashion. If you feel any of these changes may affect your filings adversely, feel free to contact us so we can help you get prepared for the tax season ahead.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Amy M. Van Fossen, at 201-806-3364.