With the holidays taking up our time and money, the last thing any of us wants to do is think about taxes! But, doing a bit ahead of time will make things go more smoothly for yourself and your tax professional. Here’s an overview of the most important items for your personal and business taxes in 2016:
2016 Personal Tax Return Wrap Up
With the holiday season in full swing, that means the end of 2016 is just around the corner. Now is the time to make some last minute tax planning decisions.
‘Tis the season to be giving:
- If you itemize your deductions then make sure you get receipts for your donations. Any donation of $250 or more must have a written receipt from the charity. Your cancelled check, credit card statement or Paypal statement are insufficient.
- If you donate through a crowdfunding source (i.e. Indygogo, GoFundMe, Kickstarter – to name a few) make sure that it is to a certified charity. There are a lot of well meaning people who set up these fundraisers but they are not necessarily tax deductible. If it is not being sponsored by an official 501c(3) then it is a gift, not a tax deductible donation.
Tax Payment Timing:
- If you make estimated payments to the state and need more deduction for 2016, make the 4th quarter estimate on or before December 31, 2016 to get the deduction on the 2016 return. State taxes are deductible on the Schedule A as an itemized deduction. Federal payments are not tax deductible so go ahead and wait until January 15, 2017 to make that one.
- New for 2016, for the early filers who are eligible for the Earned Income Tax Credit (EITC) or the refundable Child Tax Credit you will have to wait until February 15th to receive your refund regardless of how early you file.
- For those who did not have health insurance in 2016 the penalty goes up for 2016. The penalty will be the GREATER of 2.5% of Adjusted Gross Income or $695. This is for each uncovered member of the household.
2016 Business Tax Return Wrap Up
For the cash basis business owners out there, now is the time to get your equipment purchased and prepay expenses before the December 31st deadline.
The Section 179 deduction, which allows you to write off the entire purchase of equipment instead of depreciating it over 5 or 7 years, is still in effect for 2016 with a limit of $500,000 (limitations on SUVs of $25,000 and total investment limit of $2,010,000).
The Bonus Depreciation is also still in effect for 2016. Bonus depreciation is for new equipment placed in service (Sec 179 can be new OR used) and is another way to take more expense in the year of purchase. With Bonus Depreciation you can claim 50% of the purchase price PLUS the depreciation on the balance for that year. It’s just another useful tool to help minimize your tax situation.
NEW FOR 2016 – Deadlines for filing W2s and 1099MISCs have been moved up by a month.
With the passing of the PATH (Protecting America from Tax Hikes) Act in December of 2015, the new requirement for filing the W3/W2s and 1096/1099s to the Social Security Administration and the Internal Revenue Service respectively has been moved from February 28th to JANUARY 31, 2017. There are no extensions for this new filing deadline except in very extreme circumstances. This applies to e-filed and mailed forms. The deadline to have the documents in the mail to employees and subcontractors still remains the same, January 31, 2017.
What that means to you: If you have your forms prepared by a professional they are going to be swamped with work much earlier than usual. Make sure you get your information in early AND ACCURATELY. Please have names, address and tax ID numbers complete and correct for W2s and 1099MISCs. The earlier you can get your information in and the more organized you are will make your professional very happy!
NEW TAX RETURN DEADLINES – Partnership, S-Corporations and Corporation. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed when the income tax returns for calendar year businesses are filed for the 2016 tax year. The new due dates are:
- Partnership (1065): March 15, 1017 (previously April 15th )
- S-Corporation (1120S): March 15, 2017 (no change)
- Corporation (1120): April 15, 2017 (previously March 15th)