► Gather your tax forms. The list includes W-2s for yourself (and your spouse, if married), 1099s reflecting capital gains and losses, dividends, retirement plan and IRA distributions, and business and other investment firms such as K-1s for partnerships.
► Protect yourself against scams. Were you or your spouse or dependents issued an Identity Protection Personal Identification Number (IP PIN) for use with a prior year return? If so, you should have received a new number from the IRS via postal mail in December 2015. Keep your notification because you must include that number on your return. You’ll also need to list the IP PINs of your spouse and any dependents whose social security numbers are on your return.
► Review documentation to secure tax deductions, credits, or other tax benefits. Examples of tax breaks that require enhanced recordkeeping include charitable donations, travel and entertainment expenses, vehicle mileage, and business use of your home. For example, you have to get written acknowledgments from charities for monetary gifts of $250 or more. You may also want to retain bank statements to substantiate estimated tax payments and expenses that you can claim as itemized deductions.
► Mark your calendar to keep track of due dates. Thanks to a federal holiday (Emancipation Day), the first date to circle is April 18, 2016. If you live in a state other than Maine or Massachusetts, that’s the due date for making a deductible contribution to a traditional IRA for 2015, filing your federal individual income tax return, or requesting an extension of time for filing until October 17, 2016. That’s also the last day for making your first estimated federal income tax payment for 2016.
► If you live in Maine or Massachusetts, also mark Tuesday, April 19, 2016, on your calendar. Due to a special rule for another holiday (Patriot’s Day), you get an extra day to file your federal income tax return, apply for an extension, or make a deductible IRA contribution for 2015. However, the extra day does not apply to your first estimated federal income tax payment — that is due April 18. Remember: Extensions are available only for filing your return, not for paying taxes.
What’s new in 2016
|Joint returns and surviving spouses||$12,600||$12,600|
|Married filing separately||$6,300||$6,300|
|Head of household||$9,300||$9,250|
|Additional for elderly or blind (married)||$1,250||$1,250|
|Additional for elderly or blind (single)||$1,550||$1,550|
|Income at which itemized deductions and personal exemptions start to phase out|
|Joint returns and surviving spouses||$311,300||$309,900|
|Married filing separately||$155,650||$154,950|
|Head of household||$285,350||$284,050|
|Alternative minimum tax exemption|
|Maximum wages subject to social security tax||$118,500||$118,500|
|Social security earnings limit|
|Under full retirement age||$15,720||$15,720|
|Year full retirement age reached||$41,880||$41,880|
|Full retirement age||No limit||No limit|
|Estate tax top rate||40%||40%|
|Estate tax exclusion||$5,450,000||$5,430,000|
|Annual gift tax exclusion (per donee)||$14,000||$14,000|
|Maximum retirement plan contributions|
|IRA — under age 50||$5,500||$5,500|
|IRA — 50 and over||$6,500||$6,500|
|SIMPLE plan — under age 50||$12,500||$12,500|
|SIMPLE plan — 50 and over||$15,500||$15,500|
|401(k) plan — under age 50||$18,000||$18,000|
|401(k) plan — 50 and over||$24,000||$24,000|
|HSA contribution limit|
|Additional for 55 or older||$1,000||$1,000|
|“Kiddie tax” threshold||$2,100||$2,100|
|“Nanny tax” threshold||$2,000||$1,900|
As you do your planning for 2016, be aware that Congress may make changes to the tax code. See us prior to making business and financial decisions so that current rules and pending changes can be considered.
NEW YEAR 2016 NOTE: This newsletter is issued annually to provide you with information about minimizing your taxes. Do not apply this general information to your specific situation without additional details. Be aware that the tax laws contain varying effective dates and numerous limitations and exceptions that cannot be summarized easily. For details and guidance in applying the tax rules to your individual circumstances, please contact us.