As tax filing season quickly approaches, we’d like to remind taxpayers there are several things they should do now to get ready for the upcoming deadlines.
For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2016 tax returns. For example, charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2016 count for the 2016 tax year, even if the bill isn’t paid until 2017. Checks to a charity count for 2016 if they are mailed by the last day of the year.
Taxpayers should also check their tax withholding before the end of the year as there are several new factors that could affect refunds in 2017. Taking a closer look at the taxes being withheld can help ensure the right amount is being taken out of your paycheck each period, either for tax refund purposes or to avoid an unexpected tax bill next year. You can use the IRS Withholding Calculator to estimate the amount you should have withheld and determine if you need to provide your employer with a new Form W-4.
Retirement Benefits & Contributions
Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2016, though a special rule allows those who reached 70 ½ in 2016 to wait until April 1, 2017 to receive them.
Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2016 IRA contributions until April 18, 2017. For 2016, the limit for a 401(k) is $18,000. For traditional and Roth IRAs, the limit is $6,500 if age 50 or older and up to $15,500 for a Simple IRA for age 50 or older.
Relocation and Name Changes
Taxpayers who have moved should tell the US Postal Service, their employers and the IRS. To notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions. For taxpayers who purchase health insurance through the Health Insurance Marketplace, they should also notify the Marketplace when they move out of the area covered by their current Marketplace plan.
For name changes due to marriage or divorce, notify the Social Security Administration (SSA) so the new name will match IRS and SSA records. Also, notify the SSA if a dependent’s name changed in 2016. A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund.
Taxpayer Identification Number
Effective Jan. 1, 2017, any Individual Taxpayer Identification Number (ITIN) not used at least once on a tax return in the past three years will no longer be valid for use on a return. In addition, an ITIN with middle digits 78 or 79 will also expire on Jan. 1. Those with expiring ITINs who need to file a return in 2017 must renew their ITIN. Affected ITIN holders can avoid delays by starting the renewal process now.
Taxpayers should allow seven weeks from Jan. 1, 2017, or the mailing date of the Form W-7, whichever is later, for the IRS to notify them of their ITIN application status - nine to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas. Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits.
If you have questions about any of this information or what you can do to prepare for tax season, please don’t hesitate to CONTACT US. We’re here to help!