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Tax Law Changes for 2016

The Start Date for Electronic Filing for 2016 Individual Tax Returns will be Jan. 23, 2017.

Refunds for EIC or Additional Child Tax Credit Held Until February 15

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) was enacted Dec. 18, 2015, and made several changes affecting the processing of tax returns where the taxpayer claims the Earned Income Tax Credit and/or the Additional Child Tax Credit. Section 201 of this new law mandates that no credit or refund for an overpayment for a taxable year shall be made to a taxpayer before Feb. 15 if the taxpayer claimed the Earned Income Tax Credit or Additional Child Tax Credit on the return.

To comply with the law, the IRS will hold the refunds on EITC and ACTC-related returns until Feb. 15. The stated reason for this is to allow additional time to help prevent revenue lost due to identity theft and refund fraud related to fabricated wages and withholdings. The IRS will hold the entire refund until February 15. Under the new law, the IRS cannot release the part of the refund that is not associated with the EITC and ACTC. However, taxpayers should file as they normally do, and tax return preparers should also submit returns as they normally do. The IRS will begin accepting and processing tax returns once the filing season begins. This provision only affects when the refund will be released.

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.

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.

Expanded EITC Due Diligence Requirements

The PATH Act expands the EITC due diligence requirements under Code Section 6695 (including the penalty, which will rise for each claimed credit to $510 per credit and per child) 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.

Business Returns Filing Dates Change for Form 1065 & Form 1120

Starting with the 2016 tax returns, for partnership returns (Form 1065), the new due date is March 15 (for calendar-year partnerships) and the 15th day of the third month following the close of the fiscal year (for fiscal-year partnerships). Previously, these returns are due on April 15, for calendar-year partnerships. A maximum extension of six months will be allowed for Forms 1065, U.S. Return of Partnership Income.

Starting with the 2016 tax return, for C corporations (Form 1120), the new due date is the 15th day of the fourth month following the close of the corporation’s year or April 15 (for 2016 Tax Year the due date will be April 17, 2017). Previously, these returns are due on the 15th day of the third month following the close of the corporation’s year or March 15. Corporations will be allowed a six-month extension, except that calendar-year corporations would get a five-month extension until 2026 and corporations with a June 30 year-end would get a seven-month extension until 2026. The new due dates will apply to returns for tax years beginning after Dec. 31, 2015. However, for C corporations with fiscal years ending on June 30, the new due dates will not apply until tax years beginning after Dec. 31, 2025.

Effective with the 2016 calendar year, W-2 and certain 1099-Misc (any Form 1099-Misc that has Non-employee compensation) must be filed with the IRS by January 31.

See Filing Deadline Changes for 2016 Business & Information Returns for more information on how this change affects extensions, fiscal year entities and estates and trusts.

FinCEN Report 114 – The new due date for FinCEN Report 114 is April 15, (old date was June 15) with a maximum extension for a six-month period ending on October 15.

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).

Affordable Care Act – Shared Responsibility Penalty – The fee for not having health insurance in 2016 is increasing significantly over 2015. The fee is calculated 2 different ways – as a percentage of your household income, or per person. The Taxpayer will pay whichever is higher.

  • Percentage of Income
    • 2.5% of household income (2.0% of household income in 2015)
    • Maximum: Total yearly premium for the national average price of a Bronze plan sold through the Marketplace
  • Per Person
    • $695 per adult ($325 in 2015)
    • $347.50 per child under 18 ($162.50 in 2015)
    • Maximum: $2,085 (family of 4) ($975 in 2015)

 On December 8, 2016, the IRS announced that the 2017 due date for employers and coverage providers to furnish information statements, (Form 1095-B and Form 1095-C) to individuals has been extended to March 2. This extension applies only for reporting in 2017 for coverage in 2016.

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


  • 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

Form 2555 Exclusion Amount – For 2016 the maximum exclusion has increased to $101,300.

Tangible Property – Safe Harbor Election – Effective for taxable years beginning on or after January 1, 2016, the Internal Revenue Service in Notice 2015-82 increased the de minimis safe harbor threshold from $500 to $2500 per invoice or item for taxpayers without applicable financial statements.

Updated on September 8, 2020

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