To say this will be one of the most complex and confusing tax years is putting it mildly. Many taxpayers are worried about what they are reading in news reports regarding tax rates, the health care mandate, and other issues that are “in flux” as the new administration sorts through policy changes.
We are here to tell you that filing your taxes this year should not necessarily be as convoluted and fluid a situation as media reports make it appear. The fact is, almost all of the rules, regulations and rates that apply to your tax return were in place prior to the November election, and remain in place today.
Changing tax laws is like turning a battleship – it takes a lot of time and coordination of efforts to get it started, and the process is slow and deliberate. So let’s look at a few of the more high profile issues that continue to make news, sometimes inaccurately.
Affordable Care Act
The individual health care mandate is still the law. But the Internal Revenue Service (IRS), acting in response to an Executive Order from President Trump, has announced that it will not fully enforce compliance. Right now it looks like the IRS will not reject returns that do not comply, nor will the agency delay returns if compliance is not met.
But you should still follow the requirement to check the box on your tax return stating that you had qualifying coverage for all of 2016, and to file the confirming documentation (Form 10990-HC) that your health coverage provider should have sent to you.
If you did not have qualifying health coverage in 2016, there are a number of exemptions to explore that may keep you in compliance. Don’t skip these as “unnecessary” in light of the IRS announcement. You may need to have this documentation at a later date.
Delays in Tax Return Processing and Refunds
The Trump administration’s hiring freeze does not apply to the IRS’ hiring of thousands of temporary workers to manage the “annually recurring” tax season workload. Therefore the pace of tax return processing and refunds should not be affected.
Filing Deadline Reminders
If your business operates on a calendar year, there are several actions you must take by March 15, 2017, including:
- Filing partnership and S Corporation returns. If you need more time, you can file for an automatic six-month extension.
- Electing S Corporation status for all of 2017.
- Making contributions to a profit sharing or pension plan.
- Paying 2016 dividends to avoid the accumulated earnings tax.
- Regular corporations have until April 18 2017 to file returns.
The fact remains that more changes are planned, but that is nothing new when it comes to taxes. It is more important than ever that you consult with a qualified tax professional who is keeping up with the changes. If you have questions on these or other tax topics, please contact Gray, Gray & Gray’s Tax Department at (781) 407-0300.