By Bill
Five Things You Should Know about the Child Tax Credit
The Child Tax Credit is an important tax credit that may save you up to $1,000 for each eligible qualifying child. Be sure you qualify before you claim it. Here are five useful facts from the IRS on the Child Tax Credit:
1. Qualifications. For the Child Tax Credit, a qualifying child must pass several tests:
- Age. The child must have been under age 17 at the end of 2015.
- Relationship. The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, or half sister. The child may be a descendant of any of these individuals. A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
- Support. The child must have not provided more than half of their own support for the year.
- Dependent. The child must be a dependent that you claim on your federal tax return.
- Joint return. The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.
- Citizenship. The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
- Residence. In most cases, the child must have lived with you for more than half of 2015.
2. Limitations. The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.
3. Additional Child Tax Credit. If you qualify and get less than the full Child Tax Credit, you could receive a refund even if you owe no tax with the Additional Child Tax Credit.
4. Schedule 8812. If you qualify to claim the Child Tax Credit, make sure to check if you must complete and attach Schedule 8812, Child Tax Credit, with your tax return. For example, if you claim a credit for a child with an Individual Taxpayer Identification Number, you must complete Part I of Schedule 8812. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812. You can visit IRS.gov to view, download or print IRS tax forms anytime.
5. IRS E-file. The easiest way to claim the Child Tax Credit is with IRS E-file. This system is safe, accurate and easy to use. You can also use IRS Free File to prepare and e-file your taxes for free. Go to IRS.gov/filing to learn more.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
By Bill
Individuals May Get New Health Care Information Forms This Year
Starting this year, you may receive one or more forms providing information about the health care coverage that you had or were offered during 2015. Much like Form W-2 and Form 1099, which include information about the income you received, these forms provide information about your health care coverage that you may need when you file your individual income tax return. Two of these forms are new this year and on is a form that was sent to some taxpayers in 2015.
The new forms are:
Form 1095-B, Health Coverage.
- Health insurance providers send this form to individuals they cover, with information about who was covered and when.
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage
- Certain employers send this form to certain employees, with information about what coverage the employer offered. Employers that offer health coverage referred to as “self-insured coverage” send this form to individuals they cover, with information about who was covered and when.
The deadline for insurers, other coverage providers, and certain employers to provide Forms 1095-B and 1095-C is March 31, 2016. Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return. While the information on these forms may assist in preparing a return, they are not required; it is not necessary to wait for Forms 1095-B or 1095-C in order to file.
The form that was first issued last year is:
Form 1095-A, Health Insurance Marketplace Statement
- The Health Insurance Marketplace sends this form to individuals who enrolled in coverage through the Marketplace. The form includes with information about the coverage, who was covered, and when.
The deadline for the Marketplace to provide individuals with Form 1095-A is February 1, 2016. If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form.
You are likely to get more than one form if you had coverage from more than one coverage provider, if you worked for more than one employer that offered coverage or if you enrolled for coverage in the Marketplace for a portion of the year and received coverage from another source for part of the year. You are also likely to get more than one form if you changed coverage or employers during the year or if different members of your family received coverage from different coverage providers. You should not attach any of these forms to your tax return but should keep them with your tax records.
For more information about the Health Care Information Forms, visit Health Care Information Forms Questions and Answers.
By Bill
IRS, States and Tax Industry Deploy New Safeguards for 2016
Because of improved protections in recent years, the Internal Revenue Service stops the vast majority of fraudulent tax returns using stolen identities. But identity thieves and criminal syndicates continue to persist and evolve.
As the threat has changed, so has the IRS. In a new era of cooperation, the IRS, the states and the entire tax industry came together to identify what additional steps could be taken to better fight identity theft and better protect the taxpayers.
Starting in January 2016, this renewed effort will make for a safer, more secure filing season for taxpayers.
Many changes will be invisible, but they are critical to making sure the IRS can verify the taxpayer and the legitimacy of the tax return before it ever enters into the tax processing system. More than 20 shared data elements will help the software industry and the IRS stop fraudulent returns at the door.
For example, the IRS will receive information from software providers about the duration of time it took to create the return. This will help identify the computer-generated tax returns that are fraudulent and filed in bulk.
The IRS, states and tax industry will share details of any fraudulent schemes they see on a frequent basis so everyone will have the same information and adjust accordingly to provide increased protection to taxpayers.
The most publicly visible aspect of these partnership efforts will be for those taxpayers who prepare their own tax returns using tax software or online products. There will be new procedures that will help prevent fraudsters from taking over the accounts of taxpayers. These include:
-
New password standards to access tax software will require a minimum of 8 characters with upper case, lower case, alpha, numerical and special characters.
-
A new timed lockout feature and limited unsuccessful log-in attempts.
-
The addition of three security questions.
Out-of-band verification for email addresses, which is sending an email or text to the customer with a PIN – a common practice used throughout the financial sector.
The IRS also has teamed up with state revenue departments and the tax industry to make sure you understand the dangers to your personal and financial data. Taxes. Security. Together. Working in partnership with you, we can make a difference.
It’s important that everyone take steps to protect their personal and financial data online and at home. Computer users should always use security software that includes firewall and anti-virus protections. Sensitive information such as tax records should be encrypted if stored on your computer or secured by lock and key if on paper.
By Bill
The Individual Shared Responsibility Provision – The Basics
The individual shared responsibility provision requires that you and each member of your family have qualifying health insurance, a health coverage exemption, or make a payment for any months without coverage or an exemption when you file. If you, your spouse and dependents had health insurance coverage all year, you will indicate this by simply checking a box on your tax return.
Here are some basic facts about the individual shared responsibility provision.
What is the individual shared responsibility provision?
The individual shared responsibility provision calls for each individual to have qualifying health care coverage – known as minimum essential coverage – for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.
Who is subject to the individual shared responsibility provision?
The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the shared responsibility payment if the dependent does not have coverage or an exemption.
How do I get a health coverage exemption?
You can claim most exemptions when you file your tax return. There are certain exemptions that you can obtain only from the Marketplace in advance. You can obtain some exemptions from the Marketplace or by claiming them on your tax return. You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. You can file any of these forms electronically. For more information on Form 8965, see the instructions. For any month that you or your dependents do not have coverage or qualify for an exemption, you will have to make a shared responsibility payment
What do I need to do if I am required to make a payment with my tax return?
If you have to make an individual shared responsibility payment, you will use the worksheets found in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due. You only make a payment for the months you did not have coverage or qualify for a coverage exemption.
To learn more, visit the Reporting and Calculating the Payment page on IRS.gov/aca, or use our interactive tool, Am I Eligible for a Coverage Exemption or Required to Make an Individual Shared Responsibility Payment?
What happens if I owe an individual shared responsibility payment, but I cannot afford to make the payment when filing my tax return?
The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.
For more information about the Affordable Care Act and your income tax return, visit IRS.gov/aca.
By Bill
In 2016, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged
IR-2015-119, Oct. 21, 2015
WASHINGTON — For tax year 2016, the Internal Revenue Service today announced annual inflation adjustments for more than 50 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2015-53 provides details about these annual adjustments.
The tax items for tax year 2016 of greatest interest to most taxpayers include the following dollar amounts:
- For tax year 2016, the 39.6 percent tax rate affects single taxpayers whose income exceeds $415,050 ($466,950 for married taxpayers filing jointly), up from $413,200 and $464,850, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds for tax year 2016 are described in the revenue procedure.
- The standard deduction for heads of household rises to $9,300 for tax year 2016, up from $9,250, for tax year 2015.The other standard deduction amounts for 2016 remain as they were for 2015: $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly
- The limitation for itemized deductions to be claimed on tax year 2016 returns of individuals begins with incomes of $259,400 or more ($311,300 for married couples filing jointly).
- The personal exemption for tax year 2016 rises $50 to $4,050, up from the 2015 exemption of $4,000. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)
- The Alternative Minimum Tax exemption amount for tax year 2016 is $53,900 and begins to phase out at $119,700 ($83,800, for married couples filing jointly for whom the exemption begins to phase out at $159,700). The 2015 exemption amount was $53,600 ($83,400 for married couples filing jointly). For tax year 2016, the 28 percent tax rate applies to taxpayers with taxable incomes above $186,300 ($93,150 for married individuals filing separately).
- The tax year 2016 maximum Earned Income Credit amount is $6,269 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,242 for tax year 2015. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
- For tax year 2016, the monthly limitation for the qualified transportation fringe benefit remains at $130 for transportation, but rises to $255 for qualified parking, up from $250 for tax year 2015.
- For tax year 2016 participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,250, up from $2,200 for tax year 2015; but not more than $3,350, up from $3,300 for tax year 2015. For self-only coverage the maximum out of pocket expense amount remains at $4,450. For tax year 2016 participants with family coverage, the floor for the annual deductible remains as it was in 2015 — $4,450, however the deductible cannot be more than $6,700, up $50 from the limit for tax year 2015. For family coverage, the out of pocket expense limit remains at $8,150 for tax year 2016 as it was for tax year 2015.
- For tax year 2016, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $111,000, up from $110,000 for tax year 2015.
- For tax year 2016, the foreign earned income exclusion is $101,300, up from $100,800 for tax year 2015.
- Estates of decedents who die during 2016 have a basic exclusion amount of $5,450,000, up from a total of $5,430,000 for estates of decedents who died in 2015.
By Bill
Amended Tax Returns
If you discover an error after filing your return, you may need to amend your return. The IRS may correct errors in math on a return and may accept returns without certain forms or schedules. In these instances, there is no need to amend your return! However, do file an amended return if there is a change in your filing status, income, deductions, or credits. Also, if the Form 8938 (PDF), Statement of Specified Foreign Financial Assets, applies to you, the form must be filed with an annual return or an amended return. See When and How To File in the Form 8938 Instructions (PDF).
Use Form 1040X (PDF), Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040 (PDF), Form 1040A (PDF), Form 1040EZ (PDF), Form 1040NR (PDF) or Form 1040NR-EZ (PDF). You cannot file an amended tax return electronically under the e-file system. See Where To File in the Form 1040X Instructions (PDF) for the address to mail your amended return.
If you owe additional tax for a tax year for which the due date for filing has not passed, file Form 1040X and pay the tax by the due date for that year (without regard to any extension of time to file) to avoid penalties and interest. If the due date falls on a Saturday, Sunday, or legal holiday, filing the form and paying the tax is timely if filed or paid the next business day.
Generally, to claim a refund, you must file Form 1040X within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Returns filed before the due date (without regard to extensions) are considered filed on the due date.
File a separate Form 1040X for each tax year you are amending. Mail each form in a separate envelope. Be sure to enter the year of the return you are amending at the top of Form 1040X. The form has three columns:
- Column A shows original figures (the original return) or adjusted figures (prior amendments or exam changes).
- Column C shows the corrected figures (what they should be).
- Column B is the difference between Columns A and C. There is an area on the back of the form to explain the specific changes you are making and the reason for each change.
Attach copies of any forms or schedules affected by the change including any Form(s) W-2. You should also attach Form(s) 1099 if received after the original return filing and there is income tax withheld.
You can check the status of your Form 1040X (PDF) using the Where’s My Amended Return? (WMAR) online tool or the toll-free telephone number 866-464-2050 three weeks after you file your amended return. Both tools are available in English and Spanish and track the status of amended returns for the current year and up to three prior years.
You must enter your taxpayer identification number (usually your Social Security number), date of birth, and ZIP code in either tool to prove your identity. Once you authenticate, the Web tool shows an illustrated graphic to visually communicate the status of your amended return within the processing stages: Received, Adjusted, or Completed. As a reminder, amended returns take up to 16 weeks to process and up to three weeks to show up in our system. Before that time, there is no need to call the IRS unless the tool specifically tells you to do so.
By Bill
How Your Income Affects Your Premium Tax Credit
You are allowed a premium tax credit only for health insurance coverage you purchase through the Marketplace for yourself or other members of your tax family. However, to be eligible for the premium tax credit, your household income must be at least 100, but no more than 400 percent of the federal poverty line for your family size. An individual who meets these income requirements must also meet other eligibility criteria.
The amount of the premium tax credit is based on a sliding scale, with greater credit amounts available to those with lower incomes. Based on the estimate from the Marketplace, you can choose to have all, some, or none of your estimated credit paid in advance directly to your insurance company on your behalf to lower what you pay out-of-pocket for your monthly premiums. These payments are called advance payments of the premium tax credit. If you do not get advance credit payments, you will be responsible for paying the full monthly premium.
If the advance credit payments are more than the allowed premium tax credit, you will have to repay some or all the excess. If your projected household income is close to the 400 percent upper limit, be sure to consider the amount of advance credit payments you choose to have paid on your behalf. You want to consider this carefully because if your household income on your tax return is 400 percent or more of the federal poverty line for your family size, you will have to repay all of the advance credit payments made on behalf of you and your family members.
For purposes of claiming the premium tax credit for 2014 for residents of the 48 contiguous states or Washington, D.C., the following table outlines household income that is at least 100 percent but no more than 400 percent of the federal poverty line:
| Federal Poverty Line for 2014 Returns |
| |
100% of FPL |
. |
400% of FPL |
| One Individual |
$11,490 |
up to |
$45,960 |
| Family of two |
$15,510 |
up to |
$62,040 |
| Family of four |
$23,550 |
up to |
$94,200 |
The Department of Health and Human Services provides three federal poverty guidelines: one for residents of the 48 contiguous states and Washington D.C., one for Alaska residents and one for Hawaii residents. For purposes of the premium tax credit, eligibility for a certain year is based on the most recently published set of poverty guidelines at the time of the first day of the annual open enrollment period for coverage for that year. As a result, the premium tax credit for 2014 is based on the guidelines published in 2013. The premium tax credit for coverage in 2015 is based on the 2014 guidelines. You can find all of this information on the HHS website.
Use our Interactive Tax Assistant tool to find out if you are eligible for the premium tax credit. For more information, see the instructions to Form 8962 and the Questions and Answers on the Premium Tax Credit on IRS.gov/aca.
By Bill
Can You Use the Standard Mileage Deduction?
IR-2014-114, Dec. 10, 2014
WASHINGTON — The Internal Revenue Service today issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
- 57.5 cents per mile for business miles driven, up from 56 cents in 2014
- 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
- 14 cents per mile driven in service of charitable organizations
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.
Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after claiming accelerated depreciation, including the Section 179 expense deduction, on that vehicle. Likewise, the standard rate is not available to fleet owners (more than four vehicles used simultaneously). Details on these and other special rules are in Revenue Procedure 2010-51, the instructions to Form 1040 and various online IRS publications including Publication 17, Your Federal Income Tax.
Besides the standard mileage rates, Notice 2014-79, posted today on IRS.gov, also includes the basis reduction amounts for those choosing the business standard mileage rate, as well as the maximum standard automobile cost that may be used in computing an allowance under a fixed and variable rate plan.
By Bill
Moving this Year? If You Receive the Premium Tax Credit, Report this Life Event
If you moved recently, you’ve probably notified several organizations – like the U.S. Postal Service and utility companies – about your new address. You may have even notified the IRS about your address change. If you get health insurance coverage through a Health Insurance Marketplace, you should add one more important notification to your list: the Marketplace.
If you are receiving advance payments of the premium tax credit, it is particularly important that you report changes in circumstances, including moving, to the Marketplace. There’s a simple reason. Reporting your move lets the Marketplace update the information used to determine your eligibility for a Marketplace plan, which may affect the appropriate amount of advance payments of the premium tax credit that the government sends to your health insurer on your behalf.
Reporting the changes will help you avoid having too much or not enough premium assistance paid to reduce your monthly health insurance premiums. Getting too much premium assistance means you may owe additional money or get a smaller refund when you file your taxes. On the other hand, getting too little could mean missing out on monthly premium assistance that you deserve.
Changes in circumstances that you should report to the Marketplace include:
- an increase or decrease in your income, including lump sum payments like a lump sum payment of Social Security benefits
- marriage or divorce
- the birth or adoption of a child
- starting a job with health insurance
- gaining or losing your eligibility for other health care coverage
Many of these changes in circumstances – including moving out of the area served by your current Marketplace plan – qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find information about special enrollment periods at HealthCare.gov.
The Premium Tax Credit Change Estimator can help you estimate how your premium tax credit will change if you experience a change in circumstance during the year.
By Bill
Telephone Scam Now Making the Rounds
The IRS warns consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. Characteristics of this scam include:
- Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
- Scammers may be able to recite the last four digits of a victim’s Social Security Number.
- Scammers spoof the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
- Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
- After threatening victims with jail time or driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
If you know you owe taxes or you think you might owe taxes, call the IRS at 1-800-829-1040. If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), call and report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484.