Tax season is in full swing – there’s the smell of fresh ink in the air as everyone’s W-2s hit the mail and accountants across the country are actively refilling their coffee cups.
So what can you expect when you get ready to do your 2015 taxes? There are some important changes to popular deductions, deadlines and security requirements, among other things.
Here’s a rundown of what you need to know before you file.
New Tax Filing Deadline
The tax filing deadline usually falls on April 15, but thanks to Emancipation Day in Washington D.C. – a holiday in the nation’s capitol marking the end of slavery– this year you’ll have three extra days to get your taxes done. So mark your calendars; the new deadline to file your 2015 taxes is April 18, 2016.
Health Insurance Penalties
For tax year 2015, the IRS is going to verify that you and everyone on your tax return had health insurance. If you didn’t have health insurance or didn’t qualify for an exemption, you will face a penalty of $325 per person or 2% of your taxable income over the filing threshold, whichever is greater.
If you purchased health insurance through the federal health care exchange or a state-run exchange, you will receive Form 1095-A (the Health Insurance Marketplace Statement) in the mail. The IRS also gets a copy of this form. You will need this form to file your taxes and see if you qualify for any related tax credits or penalty exemptions.
If you have employer-sponsored health insurance or a plan purchased outside of an exchange, you may receive Forms 1095-B and 1095-C. The IRS also gets copies of these forms. You will not need to have them on-hand when you file your taxes – they are informational only and if you do receive them, you can just file them away.
Increases in the Standard Deduction and Personal Exemption
Taxes can get complicated, but in a nutshell, the standard deduction and personal exemption reduce your taxable income (this means you pay less tax on the money you make). For tax year 2015, both the standard deduction and personal exemption are higher – this is a good thing!
Here are the changes to this year’s numbers:
- From $6,200 to $6,300 for single filers
- From $12,400 to $12,600 for married couples filing jointly
- From $9,100 to $9,250 for heads of household
- From $3,950 to $4,000.
Temporary tax benefits go permanent
In December 2015, Congress passed a $1.1-trillion spending package, which included more than $250 billion worth of tax breaks for individuals. Here are some of the popular temporary tax breaks that are now permanent.
American Opportunity Tax Credit: In 2009, this credit was expanded to help tax filers offset the cost of college tuition – you can claim a tax credit of up to $2,500 for qualified education expenses. This benefit was supposed to expire in 2017, but it’s now permanent.
Teacher deductions: Elementary and secondary school teachers who use their own money for classroom supplies are now allowed to deduct up to $250 for those expenses. In addition to making this meaningful credit permanent, the list of deductible items was expanded to include professional development expenses.
Earned Income Tax Credit: This credit was expanded to help low-income families who work receive higher tax refunds. Not only is this credit now permanent, but the maximum credit for families with three or more children was raised from 40% of household earnings to 45%.
Married, Filing Joint Status for Same-sex Couples
Now that gay marriage is recognized at the federal level, same-sex married couples can file as “married, filing jointly” on both their state and federal tax returns. In previous years, same-sex couples had to file separate returns. Now the process is the same for all married couples, regardless of sexual orientation.
Increased Security Requirements
Thanks to an onslaught of tax fraud last year, the IRS has tightened security requirements for certain transactions. For example, filers who want a copy of a previous year’s tax return will need to jump through additional hoops to access their data. Instead of just printing out your old return online, you will be required to wait for a copy in the mail to the address the IRS has in your file.
Also, third-party tax filing software will have new password requirements for their customers. The new guidelines include a minimum 8-digit password that incudes a combination of special characters, numbers and letters. And if you have multiple failed attempts at entering your password, you’ll be locked out of your account.
Filers will also see new, more complex security questions and the IRS will start tracking return information in real time to spot patterns and identify fraud as it’s actually happening.
New ABLE Tax-advantaged Savings Account
In 2014, Congress enacted the Achieving a Better Life Experience Act (ABLE), which included the authorization of ABLE savings accounts. In tax year 2015, the tax benefits of these accounts will finally be realized by millions of Americans.
ABLE accounts are similar to 529 plans, which provides tax benefits to parents who save for their children’s college educations. Before ABLE accounts, parents of children with disabilities had no tax-advantaged way to save for their children’s future needs. And when families did try to save money for things like occupational therapy or assisted living, it affected their ability to access government assistance.
For 2015, an individual can contribute up to $14,000 a year to any ABLE account, which is then invested on your behalf. The contributions are not tax-deductible, but distributions are tax-free as long as the money is used for “qualified disability expenses.”
These expenses include things like medical treatment, special-needs transportation, housing, education, job training and even legal and administrative fees. And, the first $10,000 in an ABLE account is not considered a personal asset, so that money will not affect an individual’s ability to receive government assistance.
Morgan Quinn is a writer and personal finance expert for Tada, a new tax service from Intuit. You can hand-off your taxes to a pro for as little as $20 – Tadaaa!
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