Michael McDonald: Here’s What You Need To Do When Filing Your 2015 Tax Return
By Michael McDonald, GOBankingRates.com (TNS)
Each year, the IRS makes a host of procedural changes that complicate the filing of tax returns. The IRS revises many of its tax forms so they comply with new regulations, new IRS mandates, or even just the changing dollar values of things like deductions and personal exemptions.
The changes on deductions and personal exemptions might be trivial, but some of the revisions on other forms are more significant. Accountants in particular need to be aware of these changes, but it is good for the general public to be informed as well.
HOW HEALTH REFORM IMPACTS THIS YEAR’S FORMS
Some of the biggest changes in tax forms are related to the ongoing evolution of Obamacare requirements. This year for the first time, taxpayers must state whether they have obtained health insurance through an employer, one of the government’s health care exchanges or directly from a private insurance company.
Although not there yet, it looks like the IRS is moving closer to becoming an agency that not only collects taxes and verifies income but also corroborates health insurance coverage status. These changes also mean new lines on forms taxpayers file, such as Form 1040, Form 1040A and Form 1040EZ. The IRS does not have as many new forms so far for 2016 as it did in 2015, but the modifications are still significant.
WHAT YOU NEED TO DO TO AVOID MAKING TAX FORM MISTAKES
The changes related to health care reporting are where an uninformed tax filer is most likely to make a mistake that could result in a procedural audit. When filing Form 1040, filers now need to pay attention to line 61 attesting that they have health care coverage. Form 1040EZ and Form 1040A have similar requirements on line 11 and line 38 respectively.
Filers who bought coverage through a federal Obamacare exchange should expect to receive Form 1095-A in the mail from that exchange by early February. Form 1095-A records total insurance premiums paid as well as tax credits received for each month of the year.
This form is important and should be kept with W-2s and other similar tax documents. The information will help you fill out Form 8962, which allows you to claim any credit to which you are entitled.
There are a total of five new tax forms released by the IRS related to Obamacare. “These five new forms could potentially add one to three additional hours of preparation time to your return and potentially increase some people’s tax preparation bill this year, courtesy of the Affordable Care Act,” said accountant William Rivero of accounting firm Correia Rivero & Lefebvre in Danbury, Conn.
In addition, Rivero said that unless a taxpayer has substantial medical bills, he is unlikely to have many deductions available for medical costs. Rules have changed, and in general, a taxpayer now must accumulate medical expenses totaling more than 10 percent of the person’s income before the individual can deduct anything. This is a major change from previous years.
HOW NEW SECURITY MEASURES AFFECT YOUR TAX FILING
The IRS has issued a series of recommendations related to records taxpayers need to gather for this year. One of the biggest procedural changes is that taxpayers should place more emphasis on creating electronic backups of documents. This step will be important when filing documents as well.
In 2016, the IRS is tightening security on filing and processing of refunds in hopes of cracking down on identity theft. This means new policies and procedures for tax filers.
The IRS plans to use 20 new pieces of data on tax returns this year and is working with tax-preparation companies to help cut down on false filings. To deter identity theft, filers will be required to use more stringent passwords to access tax software.
Similarly, software providers will incorporate new features that lock users out of filing after a certain number of missed passwords. These companies also will ask additional security questions to identify users. Such features make it more important for taxpayers to keep backups of their documents in case they get locked out of the software at a critical time and need to start the process over again.
Being prepared — such as by keeping backups of documents — is always good advice for any taxpayer. Having tax documents compiled and ready to go in advance should help ensure a smoother process whether one is using tax software or paying a tax provider to do the work, Rivero said.
When you are ready to dive into your taxes, you will find the proper updated forms on the IRS website.
Michael McDonald writes for GOBankingRates.com (), a leading portal for personal finance news and features, offering visitors the latest information on everything from interest rates to strategies on saving money, managing a budget and getting out of debt.
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Photo: Filling Out 2015 form 1040EZ. David Besnette via Flickr
