Remember These Tips When Filing Your 2016 Tax Return, AICPA Tax Vice President Says
WASHINGTON–(BUSINESS WIRE)–“Each tax filing season is unique and presents taxpayers with new
challenges,” according to Edward
S. Karl, CPA, CGMA, vice president of taxation for the American
Institute of CPAs (AICPA). “Taxpayers always have to learn about new
rules and changes to old rules to avoid making mistakes.”
Karl offers the following 10 tips when preparing your 2016 federal tax
return:
Tax Day is April 18 – Tax returns for 2016 are due April 18,
2016, instead of April 15, because April 16 is Emancipation Day in the
District of Columbia. Therefore, the due date for all federal tax
returns is extended to April 18. Taxpayers who file an automatic
extension on Form
4868 must file their returns by October 16. Filing an extension does
not mean you have an extension to pay. If you do not pay the tax you owe
on April 18 you will pay interest and may have to pay a penalty.
Remember that due dates for state income tax returns vary by state.
Document Charitable Contributions Scrupulously – Charitable
contributions are getting more scrutiny from the Internal Revenue
Service (IRS), so if you claim them as itemized deductions be sure you
have written acknowledgement from the charitable organizations for
contributions of $250 or more. The
letter must include the name of the organization, description of the
property or cash contributed, the value of any goods or services
received in exchange for the contribution or the statement “no goods or
services were received” and the date of the contribution. Contributions
can only be claimed if they are made to qualified organizations. Use the IRS
Exempt Organizations Select Check website to confirm that an
organization is qualified. If the organization isn’t listed, you can
contact the organization and ask for its most recent 501(c)(3)
determination letter. If your contribution is for less than $250 be sure
to keep a precise record to support your donation.
New Due Dates for Some Returns – Some information forms that
taxpayers need in order to file their tax returns will be available
earlier. For example, because partnership tax returns for 2016 must be
filed by March 15, or extended until September 15, taxpayers will
receive their Schedules K-1 earlier so that they know how much income or
loss to report on their individual tax return. In general, shareholders
in S corporations will also get their Schedules K-1 by March 15, unless
the S corporation return is extended.
Fewer Taxpayers Will Have to Amend Returns – Incorrect
information returns, such as Forms 1099 and Schedules K-1, have been a
major reason that taxpayers have to file amended tax returns. Now,
taxpayers who receive corrected information returns after filing their
taxes will not have to amend their return if the error is no more than
$100 in income or no more than $25 in withholding or backup withholding.
Information returns with these de minimis errors will be
considered as having been filed with the correct information.
Don’t Overlook Disaster Losses – In 2016, the federal government
issued 103
federal disaster declarations across the country. If you suffered a
loss in a federally declared disaster area, or a casualty or theft loss
in another situation, the losses can generally be taken as itemized
deductions on your tax return. The losses must relate to your home,
household items or vehicles. The amount you can deduct is reduced by any
salvage value of your property and any insurance payment you received.
Usually these losses are deducted on Schedule A of Form 1040 for the
year in which they occurred. However, losses in a federally declared
disaster area may be taken in the year before the disaster. And, if your
casualty loss is greater than your income, check to see if you qualify
for a net operating loss. You don’t have to be a business to qualify for
a net operating loss under these circumstances.
ID Theft Still a Big Risk – Tax season is bonus time for identity
thieves. Vigilantly protect your personal and financial information.
Never send your tax return information to a tax preparer electronically
unless it’s encrypted or is being submitted to the preparer through a
secure portal. Shred draft copies of your tax return. Be wary of
phishing scams that may take the form of a phone call, email, text or
post on your social media account from an institution you’d normally
trust. The IRS’s first contact with a taxpayer is always with a mailed
letter.
Private Debt Collectors on the Job – The IRS, as mandated by a
2015 law, will begin to use private debt collectors this year for
certain overdue federal tax bills. Taxpayers whose tax debts are turned
over to the debt collection agencies will receive a letter from the IRS
to let them know, and the debt collection agency will send another
letter confirming that it is responsible for collecting the debt. The
collection agencies are allowed to identify themselves as IRS
contractors and must
follow the rules under the Fair Debt Collection Practices Act. Any
checks should be paid to the U.S. Treasury, not the private debt
collection agency. If you have an outstanding federal tax bill, consider
contacting the IRS to apply for an online
payment agreement, to make an offer
in compromise or to request a temporary
delay in collection. It’s often wise to consult a tax professional
who has experience with these programs if you’re in this situation.
Some ITINs Have Expired – Taxpayers who use an Individual
Taxpayer Identification Number (ITIN) may need a new one. ITINs expire
if not used on a federal tax return at least once every three years.
And, beginning in 2017, all ITINs issued prior to 2013 will have to be
renewed on a rolling renewal schedule. The first set of ITINs requiring
renewals are those with the middle two numbers of “78” and “79.” These
ITINs expired at the end of 2016. If you’re in this situation, submit
your application for renewal (Form
W-7) and the required documentation now or attach the forms and
documentation to your 2016 federal tax return. Filing your tax return
without a renewed ITIN or without the renewal application will result in
an adjustment to your return as filed. The return will be processed, but
no refunds will be issued and any exemptions or credits claimed on the
return will be denied. If tax is owed as a result of these adjustments,
interest and penalties may be due.
New Deadline for FBAR Filers – Taxpayers with foreign bank
accounts who must file the U.S. Department of the Treasury FinCEN Report
114, most often referred to as an FBAR (Report of Foreign Bank and
Financial Accounts), must
do so by April 18 this year, instead of by June 30 as in previous
years. However, you will be granted an automatic six-month extension if
you do not file by April 18; a written request for an extension is not
required. The law was changed to make the FBAR filing date consistent
with filing deadlines for federal tax returns.
Choose Your Tax Preparer Wisely – If you decide to hire a CPA or
other tax professional to prepare your taxes, get referrals, verify
their credentials, check to see if they have any consumer complaints
filed against them, interview them, and ask them how they bill and
inquire about how they secure their clients’ financial information. Make
sure they have an IRS Preparer Tax Identification Number (PTIN). It’s
required by law. If they don’t have one, walk away. Other red flags when
looking to hire a tax preparer include not asking to see your prior
year’s return, refusing to tell you how they bill, suggesting a tax
credit or deduction that makes you uncomfortable, asking you to sign an
incomplete or blank return or wanting your refund to be deposited into
their bank account instead of yours.
About the American Institute of CPAs
The American Institute of CPAs (AICPA) is the world’s largest member
association representing the CPA profession, with more than 418,000
members in 143 countries, and a history of serving the public interest
since 1887. AICPA members represent many areas of practice, including
business and industry, public practice, government, education and
consulting. The AICPA sets ethical standards for the profession and U.S.
auditing standards for private companies, nonprofit organizations,
federal, state and local governments. It develops and grades the Uniform
CPA Examination, offers specialized credentials, builds the pipeline of
future talent and drives professional competency development to advance
the vitality, relevance and quality of the profession.
The AICPA maintains offices in New York, Washington, DC, Durham, NC, and
Ewing, NJ.
Media representatives are invited to visit the AICPA Press Center at www.aicpa.org/press.
About the Association of International Certified Professional
Accountants
The Association of International Certified Professional Accountants (the
Association) combines the strengths of the American Institute of CPAs
(AICPA) and The Chartered Institute of Management Accountants (CIMA) to
power opportunity, trust and prosperity for people, businesses and
economies worldwide. It represents 650,000 members and students in
public and management accounting and advocates for the public interest
and business sustainability on current and emerging issues. With broad
reach, rigor and resources, the Association advances the reputation,
employability and quality of CPAs, CGMAs and accounting and finance
professionals globally.
Contacts
American Institute of CPAs (AICPA)
Shirley Twillman,
202-434-9220
shirley.twillman@aicpa-cima.com
