5 Tax Law Changes for 2016 You Need to KnowWhen filing your 2016 tax return, you should account for these new tax laws that affect tax-filing deadlines, thresholds and penalties.

2016 tax return

The 2016 tax law changes are just around the corner, and to avoid trouble with the IRS, you need to know about changes now and plan ahead.

“The IRS and Congress love to make changes to the tax code right up until the deadline each year, and sometimes even after the start of the new year, things can change,” said Al Rivero, an accountant in Fairfield, Conn. “So it’s important to always make sure you are filing tax information based on the full set of rules for that tax year.”

You will need to check IRS documentation closer to December to find out specifics on some of these figures, including 2016’s standard deductible. However, here are five changes you should know about and start planning for now.

1. Penalty for the Uninsured

Under the Affordable Care Act, also known as Obamacare, individuals who choose not to get health insurance through government exchanges, on their own or via their employers have to pay an additional tax.

If you do not have health insurance coverage in 2015, you’ll have to pay the higher of these two amounts:

  • 2 percent of your yearly income above the tax-filing threshold (generally about $10,150) up to a maximum cost of the national average premium to purchase a Bronze Plan from the federal healthcare exchange. Or …
  • $695 per person ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.

Those costs have more than tripled from calendar year 2014 when the penalty was $95 per person or 1 percent of household income.

Related: 19 Medical Expenses You Can Deduct From Your Taxes

2. New Paperwork for Employers Related to the Affordable Care Act

In addition to the increased tax penalties around the ACA this year for uncovered individuals, there are also new rules related to employer-required coverage. For 2014, the IRS released Form 1095-B and Form 1095-C as optional paperwork for employers. For your 2016 filing, that additional paperwork is now mandatory.

For calendar year 2015 filings, form 1095-B must be filed by any employer that provides minimum essential coverage to an individual. Form 1095-C must be filed by all large employers covered under the law that have an average of at least 50 employees or at least full-time equivalent employees as measured by their average hours worked during calendar year 2015. Further, small employers that are members of a controlled group with a collective total of at least 50 full-time employees must also file form 1095-C.

3. New Filing Date

There is some good news in the new tax law changes. Because of the way the calendar is set up, individuals will have a few extra days to put their paperwork together and file it with the IRS. April 15, 2016, is an official District of Columbia holiday called Emancipation Day. As a result, taxpayers will have until April 18, 2016, to file their 2015 returns. Taxpayers in Maine and Massachusetts get an additional day to accommodate Patriots Day, with those state returns due April 19, 2016.

Read: These 7 Tax Loopholes Could Save You Thousands

4. New Filing Deadlines for Businesses and Extenders

The government also is changing the dates for filing by businesses and individuals filing for extensions. Certified public accountant Edward Dzik notes that the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the filing deadlines for partnerships and S corporations, among others.

These entities must now file their returns by the 15th day of the third month after the end of the tax year (meaning March 15 for those entities using a calendar tax year). C corporations, on the other hand, have to file by the fourth month after the end of the tax year (April 15 on a calendar-year schedule), which is a one-month deferral from previous filing requirements.

Taxpayers who cannot file on time now have additional extension options to comply with paperwork related to partnership income (Form 1065 — new six-month extension), estate and trust affairs (Form 1041 — new 5 ½-month extension) and employee benefit plans (Form 5500 series — new 3 ½-month extension).

5. Higher Taxes

Every year, a number of figures change in the tax code. In addition to the deduction levels changing for standard deductions, the income thresholds for each tax bracket also change. Those final income thresholds became even more important after the American Taxpayer Relief Act of 2012 (ATRA) added a seventh federal income tax bracket (39.6 percent) in 2013.

The final incomes that will fall into each tax threshold are not yet available from the IRS, but Wolters Kluwer Tax & Accounting suggests the thresholds listed below will hold. The information services company estimates that for 2016, taxable incomes over the following levels will be taxed at the 39.6 percent rate:

  • Married filing separately: $233,475
  • Unmarried individuals: $415,050
  • Head of household: $441,000
  • Married filing joint returns: $466,950

Related: 10 Most Common IRS Tax Forms Explained

ATRA also made several important changes to the treatment of capital gains. Unmarried individuals with income over $200,000 and married couples filing jointly with income over $250,000 will also pay a 3.8 percent Medicare surcharge tax on investment income, thereby increasing the effective rate on capital gains to 23.8 percent (20 percent plus 3.8 percent).

Wolters Kluwer is also projecting the following tax thresholds and deductions for 2016 filings:

Married Filing Jointly (and Surviving Spouse)

Tax Rate 2016 Taxable Income 2015 Taxable Income
10% $0 – $18,550 $0 – $18,450
15% $18,551 – $75,300 $18,451 – $74,900
25% $75,301 – $151,900 $74,901 – $151,200
28% $151,901 – $231,450 $151,201 – $230,450
33% $231,451 – $413,350 $230,451 – $411,500
35% $413,351 – $466,950 $411,501 – $464,850
39.60% $466,951+ $464,851+
Source: Wolters Kluwer

 

Unmarried Individuals (Other Than Surviving Spouses and Heads of Households)

Tax Rate 2016 Taxable Income 2015 Taxable Income
10% $0 – $9,275 $0 – $9,225
15% $9,276 – $37,650 $9,226 – $37,450
25% $37,651 – $91,150 $37,451 – $90,750
28% $91,151 – $190,150 $90,751 – $189,300
33% $190,151 – $413,350 $189,301 – $411,500
35% $413,351 – $415,050 $411,501 – $413,200
39.60% $415,051+ $413,201+
Source: Wolters Kluwer

 

Head of Household

Tax Rate 2016 Taxable Income 2015 Taxable Income
10% $0 – $13,250 $0 – $13,150
15% $13,251 – $50,400 $13,151 – $50,200
25% $50,401 – $130,150 $50,201 – $129,600
28% $130,151 – $210,800 $129,601 – $209,850
33% $210,801 – $413,350 $209,851 – $411,500
35% $413,351 – $441,000 $411,501 – $439,000
39.60% $441,001+ $439,001+
Source: Wolters Kluwer

 

Married Individuals Filing Separate Returns

Tax Rate 2016 Taxable Income 2015 Taxable Income
10% $0 – $9,275 $0 – $9,225
15% $9,276 – $37,650 $9,226 – $37,450
25% $37,651 – $75,950 $37,451 – $75,600
28% $75,951 – $115,725 $75,601 – $115,225
33% $115,726 – $206,675 $115,226 – $205,750
35% $206,676 – $233,475 $205,751 – $232,425
39.60% $233,476+ $232,426+
Source: Wolters Kluwer

 

Standard Deduction Amounts

Filing Status 2016 2015 Increase
Married Filing Jointly (& Surviving Spouse) $12,600 $12,600 $0
Married Filing Separately $6,300 $6,300 $0
Single $6,300 $6,300 $0
Head of Household $9,300 $9,250 $50
Source: Wolters Kluwer

 

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