Here’s the good news: Unless you made significantly more or less, your tax bill for 2016 is likely to look a lot like 2015.
OK, maybe not good news, but at least there should be fewer surprises.
“While there aren’t a lot of changes for 2016, there are always things taxpayers should be paying attention to,” said CPA Susan Clifford, tax expert and principal at longtime local accounting firm Hancock Askew &Co.
To help our readers get through the stresses of tax season and better prepare for the year ahead, the Savannah Morning News and Savannahnow.com have again teamed up with Hancock Askew &Co. to take questions regarding individual and small business returns. Five of the firm’s tax accountants will be available at lunchtime Wednesday to take your calls and help you sort through questions regarding your individual or small business return.
What they can’t do, of course, is offer legally binding answers to questions specific to your circumstances. “Because we couldn’t possibly understand anyone’s complete tax situation in one phone call, we’ll give you our best advice based on what we know about your circumstances and suggestions for seeking additional help if you need it,” Clifford said.
What’s new this filing season?
“Your preparer may ask for more information if you are claiming the child tax credit or the American Opportunity credit (AOTC) or are eligible for the earned income credit (EIC),” Clifford said.
Form 8867, which must be attached to your return if any of those apply, is a checklist of questions asking what the paid preparer has done to ascertain that you really are eligible for these credits, she said, adding that you also may be asked for social security cards for your children.
Because the AOTC can only be taken for four years for each student, a paid preparer who hasn’t prepared your return for the past four years (or less, depending on the age of the child), may ask for copies of past returns to make sure the credit hasn’t been taken four times already.
Deductions mostly same
Due to the low level of inflation, some deductions didn’t change while others changed only modestly, Clifford said.
For example, the personal exemption increased by $50 to $4,050, but the standard deduction stayed the same for all but the head of household, which increased by $50 to $9,300.
You can still only put $5,500 into a Roth or traditional IRA (with a $1,000 catch-up allowed for those 50 or older) and $3,350 into a Health Savings account (HSA) if you are single with a high deductible health insurance plan. But the family HSA contribution limit increased to $6,750 (there is a $1,000 catch-up available for those 55 and older).
Things to think about:The fastest way to get your refund is direct deposit into your savings or checking account. The IRS says most (but not all) refunds are issued within 21 days.
Most refund anticipation loans are an expensive way to borrow money – the interest paid is substantial relative to the number of days you actually borrow the money.
If you owe money, you may want to file a new W-4 or G-4 (in Georgia) or a new state W-4 (in South Carolina) to increase your withholding.
If your refund is large, you may want to file new withholding forms to reduce your withholding and receive some of that money throughout the year.
If you have deductible expenses (mortgage interest, taxes, charitable contributions, etc.) but they are less than the standard deduction for your filing status, you likely automatically take the standard deduction. But if you are a Georgia taxpayer, that may not be the best choice. For example, the federal standard deduction for a married couple filing jointly is $12,600 but for Georgia it is only $3,000. If you use the federal standard deduction, you must also use the state. Conversely, if you itemize on your federal return, you must itemized on your Georgia return. Run the return both ways to see if the increase in federal tax by using the somewhat lower itemized deductions is more than offset by the savings on your Georgia tax.
If you filed a return as a resident of Georgia in 2015, you are eligible to voluntarily participate in the IP PIN program. Once you are enrolled in the program, you are assigned a six-digit number that must be used to electronically file your tax return. If your return is paper-filed without the IP PIN, the IRS will delay processing it until they confirm it is yours. To enroll, go to Get an IP PIN on the IRS website. This is currently a voluntary pilot program eligible only to residents of Georgia, Florida, and the District of Columbia. Of course, anyone who has had their Social Security number used fraudulently to file a tax return also receives an IP PIN.
If you are over age 70 ½ and are taking required minimum distributions (RMD) from your retirement accounts, there are two things you should consider. If you have multiple accounts, you must add the value of all the accounts at Dec. 31 together to get the total on which to calculate your RMD. But in most cases, you can pick the account from which to take the RMD – you need not take RMD from every account. So if you structure your accounts so that they each hold a different type of investment, you may be able to avoid taking an RMD from an account whose holdings are doing poorly and instead take it from an account with holdings doing well.
If you donate to charity, you should consider making your contributions from your IRA. The amount will count towards your RMD but on your tax return, the taxable amount of your IRA distribution is reduced by the amount of the charitable contribution. While you cannot deduct it on schedule A, many people of an age to take an RMD do not itemize anyway. And if they do, they may be able to take a greater medical and/or miscellaneous expense deduction. This is because the lower IRA distribution means a lower adjusted gross income (AGI). And those two deductions are limited to the excess over a fixed percentage of your AGI. Also, the cost of your Medicare premium is tied to your AGI, so reducing it could reduce your Medicare premium.
HOW TO PARTICIPATE
What: Five accountants from Hancock Askew & Co. will be available to help answer your tax questions.
When: 11:30 a.m. to 1:30 p.m. Wednesday, March 22.
Call: 912-629-7752. Calls will be answered in the order received. Selected questions and answers will be published in the Savannah Morning News on Sunday, March 29.
Can’t call in Wednesday? Email your questions to email@example.com by 10 a.m. Wednesday. The advisers will answer as many of the emailed questions as space allows in Sunday’s paper.
The Hancock Askew experts who will be available Wednesday to answer your tax questions include:
Susan Clifford, CPA: Susan is a principal at Hancock Askew with more than 30 years of experience in both public and private accounting. She serves individuals, fiduciaries, partnerships, family-owned businesses and nonprofit organizations in the areas of tax planning and compliance.
Billy Griffin, CPA: Billy is a partner at Hancock Askew with more than 30 years of experience working in both public accounting and the private sector. Billy’s areas of expertise are corporate and individual income tax planning, business consulting and transaction advice, succession planning and trusts and estates.
Stephen Leonard, CPA: Stephen is a partner at Hancock Askew. His extensive experience includes tax compliance and planning for individuals, partnerships, corporations, trusts and estates; tax and consulting services for small, mid-sized and large businesses; mergers and acquisitions; business succession planning; and federal and state campaign compliance.
Lindsey Little, CPA: Lindsey is a manager at Hancock Askew with five years of experience in public accounting. In her role at Hancock Askew, she works to provide tax compliance and planning for individuals, partnerships, and corporations. She also leads financial statement review and compilation engagements. She works with clients in several industries, including construction, retail, medical, and service.
Carolyn McIntosh, CPA: Carolyn is a partner at Hancock Askew and has been serving clients for more than 15 years in the areas of tax, financial planning and management services. Her clients include individuals, fiduciaries, partnerships, corporations and nonprofits. Carolyn specializes in business and tax consulting, family-owned businesses, real estate, estate and gift tax.