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Things to Know for the Current Tax Year


Protecting Americans from Tax Hikes Act of 2015 (PATH Act, also known as the Extender Bill)

When Refunds will be Released for Taxpayers who Claim EITC and/or Additional Child Tax Credit
Everyone needs to be aware that a provision was included in the PATH Act mandating any refund related to a federal return claiming the Earned Income Tax Credit or the Additional Child Tax Credit may not be issued to the taxpayer until February 15 starting with the upcoming 2017 filing season.

This means that refunds for federal returns that are filed in January or early February and claim one of these credits will take longer for the taxpayer to receive than in previous years.

Additionally, since W-2s will be received by the IRS earlier than in previous years, the IRS will be matching the wage income reported on all EITC returns over the entire 2017 filing season.

Expansion of Preparer Due Diligence Requirements
The PATH Act expands the EITC due diligence requirements under Code Section 6695 (including the $500 penalty) to include the Child Tax Credit and the American Opportunity Education Credit beginning with 2016 individual federal tax returns.

As a result of the expansion of the due diligence requirements the Form 8867 will be modified as follows:

  • Form has been renamed to be “Paid Preparers Due Diligence Checklist”.
  • The questions related to qualifying children have been removed from Form 8867 and are included on a worksheet.
  • The questions have been completely rewritten to include questions for not only EITC but also the Child Tax Credit and the American Opportunity Education Credit.

For more details on these changes see the draft of the 2016 Form 8867 on the IRS website.

Earned Income Tax Credit (EITC) Changes
The following changes were made that may affect individuals who claim EITC on their returns:

  • Taxpayers cannot retroactively (file an amended return) claim the credit for any year the qualifying child did not have a Social Security Number. This provision went into effect immediately when the PATH Act became law on December 18, 2015.
  • The IRS can bar an individual from claiming EITC for 10 years if the IRS finds they have fraudulently claimed the credit.
  • The EITC is now subject to the penalty for erroneous claim for refunds and credits.
  • From now on, all incorrectly claimed refundable credits will be taken into consideration when determining the underpayment penalty.

Changes for Child Tax Credit and the American Opportunity Education Credit
The following changes apply to returns that claim the Child Tax Credit or the American Opportunity credit:

  • If the IRS determines that an individual has intentionally disregarded the rules for claiming the Child Tax Credit and/or the American Opportunity Education Credit they can bar them for two years from claiming either or both of these credits.
  • Taxpayers cannot retroactively claim either credit for any year the qualifying child did not have a Social Security Number or ITIN in the case of the Child Tax Credit.
  • The EIN of the educational institution will be required to be reported on Form 8863. If the EIN is missing the IRS will reject the return.

Trade Preferences Extension Act of 2015 (HR 1295)
This trade bill included the following federal tax related provisions:

Child Tax Credit – Taxpayers who elect to exclude from gross income any amount of foreign earned income or foreign housing costs may not claim the refundable portion of the Child Tax Credit.

Penalty on Filing Information Returns Late – Maximum penalty is increased to $250 (from $100). If the failure is corrected within 30 days the penalty will now be $50 (was $30).

Education Credit and Tuition Fees Deduction – Beginning with Tax Year 2016, an individual must receive a Form 1098-T in order to claim an education credit (American Opportunity or Lifetime Learning) or the Tuition and Fees Deduction.

The Surface Transportation and Veterans Health Care Choice Improvements Act of 2015 (HR 3236)
This highway bill had the following provisions that will change the due dates for partnership and C Corporations beginning in 2017.

Return Due Dates for Business Returns

  • Form 1120 (C Corporations) due date will be April 15; Extension date will remain September 15 through 2025 when it will change to October 15.
  • Form 1065 (Partnership) due date will be March 15.
  • The due date for C Corporations with a June 30 year end will remain September 15 until the end of 2025 when it will change to October 15.
  • Fiscal year C Corps due date will be the 15th day of the fourth month after the year end.
  • The FBAR filing due date will be April 15 (was June 15).

Tax Year 2016 Annual Changes and Reminders (For Returns Filed During 2017 Filing Season)

Standard Mileage Rates

  • Business purposes: 54 cents per mile
  • Medical/Moving purposes: 19 cents per mile
  • Charitable purposes: 14 cents per mile

Schedule A – Medical Expense Threshold Percentage (Reminder)
Deductible on Schedule A when the medical expenses exceed:

  • Taxpayers under 65: 10% of AGI
  • Taxpayers 65 or older: 7.5% of AGI

Beginning in 2017 the threshold will be 10% for all taxpayers.

Exemption Amount: $4,050 per exemption

Standard Deduction
Basic:

  • Single/Married Filing Single: $6,300
  • Married Filing Joint/Qualifying Widow(er): $12,600
  • Head of Household: $9,350

Additional Amount for Aged and Blind:

  • $1,250 for each
  • $1,550 for each individual that is unmarried and a surviving spouse

Recent Tax Updates

Warning to Tax Preparers of New Phishing Scam that is Attempt to Steal Passwords
Aug 8, 2017

IRS Security Summit Launches “Don’t Take the Bait” Education Campaign Aimed at Tax Preparers
Aug 1, 2017

IRS Announces Which ITINs Will Be Expiring at End of 2017 and That They Are Now Accepting Renewal Applications
July 27, 2017

IRS Use of Private Debt Collection Agencies
June 20, 2017

Expired Individual Federal Tax Provisions
May 10, 2017

Reminder to Watch for Phishing Email Schemes
March 22, 2017

IRS Identity Verification Letters
March 1, 2017

Additional Reminders for this Filing Season
February 16, 2017

Additional Updates
© 2016 Petz Enterprises, LLC
PUTTING CUSTOMERS FIRST SINCE 1974
PUTTING CUSTOMERS FIRST SINCE 1974