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Filing Your 2016 Tax Return – What You Need To Know

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For tax year 2016, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation. By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation and recent tax legislation. More than 50 tax provisions unique to this year’s tax filing season were made to the Tax Code. Here are some things you should know when filing taxes this year:

  • Your 2016 Individual Federal Income Tax Return is due by April 18, 2017.
    – People will have several extra days to file their tax returns this year. The deadline is extended because the Emancipation Day, a holiday in Washington, D.C., will be observed on Monday, April 17, pushing the nation’s filing deadline to April 18.
  • For an automatic 6-month extension of time to file, submit Form 4868 to the IRS. Caution: Although Form 4868 allows you more time to file, it does not extend the time to pay your taxes. Filing or paying after the due date may result in penalties and interest.
  • If you expect to owe on your tax return, see 11 Tips for Taxpayers Who Owe Money to the IRS
  • If you owe because of insufficient federal tax withholding, you can determine the correct amount of withholding here. If you owe due to lack of estimated tax payments, learn about ES Payments here.
  • The personal and dependent exemption amounts have increased to $4,050.
  • The standard deductions for 2016 are:
    Single $6,300
    Head-of-household $9,300
    Married Filing Joint $12,600 (compared to $12,400 for 2014)
    Married Filing Separately $6,300.
    The IRS estimates approximately 66% of taxpayers take the standard deduction, rather than itemizing deductions. See Itemized vs. Standard Deductions – How to Choose
  • To claim a deduction for business use of your vehicle, use the standard mileage rate for each business mile driven. See: IRS Mileage Reimbursement Rates
  • The Alternative Minimum Tax (AMT) 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 39.6% tax rate on ordinary income affects singles whose income exceeds $415,050 (or $466,950 if married).
  • The 2016 estate tax exemption increases to $5,450,000.
  • What are the IRS mileage reimbursement rates for this year? See here for updated vehicle mileage rates.
  • Learn when you should file, even if you’re not required to.
  • Expect to owe on this year’s taxes or still owe for prior years? Here’s what you need to know.

See: Deductible vs. Non-deductible – A Simple Guide

See: 6 Ways to Reduce Your Chance of an IRS Audit

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For help with how to deal with taxes owed on your tax return, contact us today at 1-949-260-4770 for a FREE and CONFIDENTIAL consultation with our CPAs and former IRS Agents.  

                     

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