April is “the cruellest month,” T.S. Eliot famously wrote. But from a tax standpoint, this April won’t be much “crueller” than last year’s. The tax forms haven’t changed radically and no big tax laws kicked in. However…
There are always new wrinkles for tax filers (and snafus like the IRS’s recent electronic filing outage). And if you don’t know them, you could wind up missing out on write-offs or owing an unnecessary tax penalty. To learn what’s new, I just spoke with Barbara Weltman, a contributing editor of J.K. Lasser’s Your Income Tax 2016, who literally wrote the book on the subject.
Next Avenue: What’s new for people for their 2015 taxes?
Barbara Weltman: For one thing, Tax Day will be Monday, April 18, not Friday, April 15, because the Washington D.C. Emancipation Day holiday will be observed on April 15. And Tax Day will be April 19 if you live in Maine or Massachusetts. That’s the latest I can ever remember for Tax Day.
For the first time, you’ll be able to automatically invest all or part of your tax refund in a myRA retirement account if you have one.
— Barbara Weltman, J.K. Lasser
April 18 is also the deadline for filing an extension, for paying the first installment of estimated taxes for 2016 and for contributing to a 2015 IRA.
Are the forms different this year?
There’s not a lot dramatically different. But one thing that may be different and confusing to some people is the receipt of 1095-B or 1095-C information returns [resulting from the Affordable Care Act] that they didn’t get before.
What are they?
The 1095-C returns are issued by employers with 50 or more employees to describe the extent of an employee’s health coverage and the 1095-B is from an insurer or a smaller business with a self-insured health plan. You can use them to see if you qualify for any exemption from the individual mandate for health insurance or to figure the amount of any penalty you owe.
Do you need to send these in to the IRS?
No. Just hold onto them. If you worked and got a 1095-C, you just check on your tax return that you had health coverage for the full year. It’s the same as last year, but this is the first year it’s mandatory for employers to send the information returns.
To further complicate matters, this is the first year employers have to get an extension for these returns, so many people will file their taxes without having the 1095-C forms. You won’t need to amend your return once you get one.
Any tax advice for people who bought health insurance through an exchange last year?
You may have to complete Form 8962 for the Health Premium Tax Credit if you claimed the credit in advance when you obtained coverage. Maybe you claimed too little or took too much when you signed up.
And what about the tax penalty for people who didn’t have health coverage last year?
The penalty amount is higher than for 2014. For 2015, it’s the higher of 2 percent of household income above your filing threshold or $325 per person in your household, up to a maximum of $975. You can learn more about how this works on the IRS site or the Healthcare.gov site.
Next year, that penalty goes up dramatically, to a maximum of $695 per person and $2,085 per household.
What else has changed for 2015 returns?
Because of cost-of-living adjustments, you can’t assume you are eligible or are not eligible for tax breaks you had last year because the income limits may have changed.
Maybe you qualified for a Roth IRA contribution this year, but you didn’t last year. [The 2015 Roth IRA contribution limit of $5,500 or $6,500 for people 50 or older is phased out if your 2015 modified adjusted gross income is over $183,000 and under $193,000 and you’re married filing jointly or over $116,000 and under $131,000 if you are single.]
The standard deduction [$12,600 for married people filing jointly and $6,300 for singles] and the standard mileage rates for the business use of your car [57.5 cents a mile] and for medical or moving purposes [23 cents a mile] are slightly higher for 2015, too.
Any changes for people planning to claim a home office for 2015?
No. The simplified method for writing off a home office still means using $5 per square foot, for up to 300 square feet.
Will there be any tax surprises for investors when they complete their returns?
It’s very possible you will have received a mutual fund distribution you didn’t expect or a larger one than you expected and you’ll have to pay taxes on it. And not just income taxes. Maybe also the additional 3.8 percent Medicare tax on net investment income. That comes into play when modified adjusted gross income in 2015 was at least $250,000 for married couples filing jointly and $200,000 for singles.
Is there anything new for people getting tax refunds?
I’ve read that the IRS can now audit your return after six years. In the past it was three years. What’s that about?
The IRS always had the opportunity to audit you for six years if you omitted 25 percent of your gross income. What changed is that Congress has now said that an ‘overstatement of basis’ [the price you paid] on property you sold resulting in an understatement of income of 25 percent or more can let the IRS audit your return six years later.