As we get close to the end of the year, it’s important to remember and be aware of some tax law changes that came into effect in 2016.
Child Tax Credit
This is the $1,000 credit for which parents of children under the age of 17 are eligible. Nothing changes about the way the credit is calculated or who is entitled to it. What changes is that you now have to have in place a Taxpayer Identification Number (TIN) for that child by the due date of the return.
More importantly, if the IRS finds that you have claimed the child tax credit fraudulently, or even with what they consider reckless disregard for the rules, you are banned from being able to claim that credit, even when you’re eligible for any certain number of years, depending on the “crime.”
Again, the calculation of the credit hasn’t changed so much as the documentation required in order to be eligible. Form 1098-T is the Tuition Statement that everyone who is paying tuition should expect to see in their mailboxes or in an email by January 31st of next year. That document is very important to hold onto, because educational institutions now need to report how much each student paid.
As with the Child Tax Credit, there are some new, stiff penalties in place for anyone who is “reckless and intentional in their disregard for the rules.”
Something new in 2016 that someone might want to take advantage of is that, now, Simple IRA plans are eligible for rollovers from employer-sponsored retirement plans, like a 401(k) plan, as long as that Simple IRA has been open for at least two years.
Another tax savings law change is that there is now no longer a 10% penalty on draws from public safety employees defined contribution plan once they leave service at age 50. Previously, you could draw from your pension at age 50 or older and not have a 10% penalty, but you couldn’t really touch your defined contribution plan without also having a 10% penalty. That, now, is available to public safety employees. In addition, the definition of who falls into the category of public safety employee has been expanded.
Tax Return Due Dates
Lastly, the law has done a flip-flop on us as to which tax returns are due in which month. In the past, the first filing deadline for a partnership return would have been April 15th. It will now be March 15th, and that’s for calendar-year partnerships. Corporations with a December 31st year-end used to have a March 15th initial filing date, and now the corporations will file as late as April 15th and can extend until September 15th if need be. For S-corporations, the March 15th filing due date will remain the same.
To take the best advantage of the tax law changes implemented in 2016, contact me at firstname.lastname@example.org.
Susan A. Moussi, CPA, CFP®, CDFA SMD Tax & Divorce Financial Planning Consultants, Inc. Phone: 614.429.4172 email@example.com