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Tax Updates

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General Tax Changes for 2016

Exemption and Standard Deduction

• Personal exemption is $4,050 $4,000

• Standard deduction:–MFJ/QW $12,600 same

–H/H 9,300 $9,250

–Single/MFS 6,300 same

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Additional Standard Deduction

The additional standard deduction amounts for age 65 or older and/or blind remains $1,250 for MFJ, MFS, and QW and remains $1,550 for single and HH.

Dependent’s Standard Deduction

The standard deduction amount for an individual who can be claimed as a dependent by another taxpayer may not exceed the greater of $1,050 or the individual’s earned income for the year plus $350 but not more than the standard deduction for his or her filing status.

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Limit on Itemized Deductions/Exemptions

There are AGI limitations on certain itemized deductions as well as personal exemptions.

Limit on Itemized Deductions

The overall amount of itemized deductions is limited by the AGI.Phaseout begins at:

• MFJ $311,300

• HH $285,350

• Single $259,400

• MFS $155,650Medical and dental expenses (line 4), investment interest expense (line 14), casualty and theft on personal use property (line 20) and gambling losses (line 28) are not limited.

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Phaseout of Exemptions

Taxpayers with an AGI in the phaseout range will lose part of their personal exemptions.The phaseout range is: • MFJ & QW $311, 300 - $433,800

• HH $285,350 - $407,850

• Single $259,400 - $381,900

• MFS $155,650 - $216,900

Earned Income Credit

The maximum amount of credit has increased to:

• $6,269 if 3 or more qualifying children (from $6,242)

• $5,572 if 2 qualifying children (from $5,548)

• $3,373 if 1 qualifying child (from $3,359)

• $506 if no qualifying child (from $503)

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• Three or more qualifying children and earn less than $47,955 ($53,505 if MFJ)

• Two qualifying children and earn less than $44,648 ($50,198 if MFJ)

• One qualifying child and earn less than

$39,296 ($44,846 if MFJ)

• No qualifying child and earn less than

$14,880 ($20,430 if MFJ)

QC must meet 4 tests: JARR-Joint return, Age,

Residency, Relationship


Investment income limit is $3,400 (same)

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SS Wage Limits

The maximum amount of wages subject to social security tax (OASDI*)

remains at $118,500 (same).

Max of $7,347 ($118,500 x .062)

* Old-Age Survivors and Disability Insurance

Railroad Tier 2

Tier 2 is similar to a qualified contributory retirement plan. The annual maximum is $88,200 (same).

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Child Tax Credit andAdditional Child Tax Credit

The Child Tax Credit is permanently set at $1,000 per qualifying child.

Additional Child Tax Credit

On Schedule 8812, the earned incomeamount used to figure the additional child tax credit is 15% of the income in excess of $3,000. The PATH Act permanently sets the threshold amount at an unindexed $3,000.

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Standard Mileage Rate

For all business miles driven, the standard mileage rate for operating a car, van, or pickup truck is 54 cents per mile (from 57.5 cents) .

54 cents


Remember that a taxpayer can use the business standard mileage rate for a vehicle used for hire, such as a taxicab.

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Basis Reduction for Standard Mileage

The portion of the standard mileage rate that is treated as depreciation is 24 cents (same) for 2016.


• Standard mileage rate for the cost of operating a car for medical reasons or for determining moving expenses is 19 centsper mile (from 23 cents).

• Standard mileage rate for the cost of operating a car for charitable purposes remains at 14 cents per mile.

19 cents-

19 cents

14 cents

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DOT “Hours of Service” Limits

Workers who are subject to the Department of Transportation’s “hours of service” regulations remains at 80% of business meals.This includes certain air transportation workers, interstate truck operators, interstate bus drivers, certain railroad workers, and certain merchant marines.“Certain merchant marines” are those who are under Coast

Guard regulations.

Standard Meal Rate

The standard meal allowance for M&IE

remains at $46 a day for most small localities from January 1 through September 30. Increases to $51 a day from October 1, 2016 through September 30, 2017

The standard meal allowance rates do not apply to travel in Alaska or Hawaii or any other location Outside the Continental United States (OCONUS).

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Standard Meal Rate forTransportation Workers

The special M&IE rates for taxpayers in the transportation industry increases to $63 for any locality of travel within the CONUS and $68 for any locality of travel outside (OCONUS).

Incidental Expenses

The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction remains at $5per day.

$5x

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Incidental ExpensesIncidental expenses are:

• Fees/tips to porters, baggage carriers, bellhops, hotel maids, stewards/ stewardesses and others on ships, and hotel servants in foreign countries.

• Transportation between places of lodging or business and places where meals are taken, if suitable meals cannot be obtained at the temporary duty site.

• Mailing cost associated with filing travel vouchers and payment of Government charge card billings.

Standard Meal Allowance for Daycare Providers for

Location of Provider Breakfast Lunch Dinner Snack

States other than Alaska and Hawaii

$1.32 $2.48 $2.48 $0.74

Alaska $2.11 $4.02 $4.02 $1.20

Hawaii $1.54 $2.90 $2.90 $0.86

Up to three snacks per day for each child

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Passenger Automobile Limits

The maximum depreciation limit for business use of a passenger auto is $3,160 (same).

Trucks or vans are limited to $3,560 ($3,460).

An additional $8,000 is added if the special depreciation is taken ($11,160 and 11,560)

DOT's definition of a passenger vehicle is a car or truck, used for passengers, excluding buses and trains.

Must be reduced by the business use %

SUVs and Other VehiclesFor SUVs and other vehicles (gross vehicle weight of more than 6,000 and not more than 14,000 pounds), the limit remains at $25,000.

Also includes heavy pickup trucks, vans and small buses.

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Special Depreciation Allowance

For new qualified business property placed in service and on or before December 31, 2017, the special depreciation allowance can be 50% (same).

50%

401(k) Plans

Elective deferral limit is $18,000 (same).

If age 50 or older on December 31, 2016, the limit is $24,000 (same).

$18,000 $24,000

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IRA Contribution and Deduction Limit

The contribution limit for a traditional IRA as well as a Roth IRA is $5,500 (same) or taxable compensation for the year, whichever is the smaller amount.

If the taxpayer is 50 years of age or older the limit is $6,500 (same) or taxable compensation for the year, whichever is the smaller amount..

$5,500 $6,500

Modified AGI Limit for Traditional IRAs

If a taxpayer is covered by a retirement plan at work, the deduction will be reduced (phased out) if the modified AGI is between:

• $98,000 - $118,000 for MFJ or QW (same)

• $61,000 - $71,000 for single or H/H (same)

• Less than $10,000 for MFS If MFS and did not live with spouse at any time during the year, use single

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Modified AGI Limit for Traditional IRAs

The limit for spouse* of a covered employee is:

• $184,000-$194,000 for MFJ (from $183,000 - $193,000)

• Less than $10,000 for MFS (same)

*Not Active Participant

Roth IRA Contribution Limits

The Roth phase out range increases to:

• $184,000 - $194,000 (from $183,000 - $193,000) MFJ and QW

• $117,000 - $132,000 ($116,000-$131,000) single, HH, and MFS (not living with spouse during the year)

• Less than $10,000 (same) MFS who lived with spouse at any time during 2016

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Form 8880

Form 8880, Retirement Savings Contributions Credit, modified AGI increase for:

• MFJ 50% credit: up to $37,000

20% credit: over $37,000 up to $40,000

10% credit: over $40,000 up to $61,500

The AGI cannot exceed $61,500

Form 8880

• HH50% credit: up to $27,75020% credit: over $27,750 up to $30,000 10% credit: over $30,000 up to $46,125


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Form 8880

• Single, QW, and MFS50% credit: up to $18,500

20% credit: over $18,500 up to $20,000

10% credit: over $20,000 up to $30,750


Form 8839

• Maximum Form 8839, Qualified Adoption Expenses, is $13,460 (from $13,400) per child.

If child has special needs, this amount is allowed even if there are no qualifying expenses.

*A special needs child is a child who is a citizen or resident of the US that the state has determined cannot or should not be returned to the parents’ home and probably will not be adopted unless adoption assistance is provided to the adoptive parents.

.

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Form 8839

Qualifying expenses include:• Adoption fees,

• Court costs,

• Attorney fees,

• Traveling expenses (including meals and lodging while away from home), and

• Other expenses directly related to the adoption of a qualified child.

Form 8839

The $13,460 is phased out if the modified AGI is between $201,920 and $241,920 (from $201,010 to $241,010).

Indexed for inflation in later years.

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Form 8839

The adoption credit is not refundable.

Unused credit can be carried forward to the next 5 years or until used, whichever comes first.

Form 8863 Education Credits:American Opportunity Credit The credit is

$2,500 (same) per student.• The credit can be claimed for first four years

of post-secondary education.• 40% of the credit is a refundable credit (up to $1,000).• Qualified tuition/related expenses expanded to include books,

supplies, & equipment needed for course of study whether or not purchased from the ed. Inst. as a condition of enrollment.

Made PermanentMay ask for cancelled checks, receipts for tuition, fees, books and transcripts

from ed. inst. Form 886-H-AOC https://fafsa.ed.gov/FAFSA/app/schoolSearch?locale=en_EN to see if school

qualifies

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Form 8863

The credit is $2,500 per student:• 100% of the first $2,000 of qualified expenses• 25% of the next $2,000 of qualified expenses

Room and board are NOT qualified expenses

Form 8863

Education Credits:

American Opportunity Credit

• The credit is available for MFJ whose modified AGI is less than $180,000 (same), with the phaseout beginning at $160,000 (same) .

• For single and HH the credit is available if the modified AGI is less than $90,000 (same), with the phaseout beginning at $80,000 (same)

Per eligible studentCan’t have a felony drug conviction

Cannot be MFS

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Form 8863

Education Credits:

Lifetime learning credit remains at $2,000 per return.

The amount of the lifetime learning credit is phased out at a MAGI between $55,000 and $65,000 (same) for single and HH, for MFJ $111,000 and $131,000 (from $110,000 and $130,000).

Cannot be MFS

Form 8863

Education Credits:

Lifetime learning credit is 20% of the first $10,000 of qualified expenses.

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Student Loan Interest Deduction

The $2,500 student loan interest deduction remains the same. The phaseout range is:$65,000 - $80,000 (same) single, HH

$130,000 - $160,000 (same) MFJ.None for MFS

Education Savings Bonds Interest

When U.S. savings bonds are redeemed to pay expenses for higher education, the interest may be excluded from income if the taxpayer’s income is below the phaseout range.$116,300 - $145,750 for MFJ (from $115,750 - $145,750)

$77,550 - $92,550 for Single, HH (from $77,200 - $92,200)

None for MFS

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Limitation on Health FSAReimbursements

The maximum amount available forreimbursement as a pre-tax benefit under a qualified cafeteria plan (health FSA) is limited to $2,550 (same).

Health FSAs

Guidance modifying the long-standing "use-or-lose" rule for health flexible spending arrangements permits sec. 125 cafeteria plans to allow plan participants to carry over up to $500 of their unused health FSA balances remaining at the end of a plan year.

Next Year

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Health FSAs

The rollover amount from one year to the next is capped at $500. The rollover amounts cannot be combined to $1,000 to be rolled over into 2017 - only $500 can be carried forward.

Form 8889

Health Savings Accounts

The maximum HSA deduction increases to $3,350 for self; $6,750 (same; from $6,650) for family coverage.

The maximum additional deduction for individuals age 55 or older remains at $1,000.

The minimum annual deductible of a high deductible plan is $1,300 (same) for self, $2,600 (same) for family coverage .

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Form 8889

Remember that the additional tax on distributions from HSAs and Archer MSAs not used for qualified medical expenses is 20%.

YES NO

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Individual Tax Rates for 2016

The individual tax rates are 10, 15, 25, 28, 33, and 35 percent but with a 39.6% rate applying for income above a certain threshold.The applicable threshold is $466,950 for MFJ; $441,000 for HH; $415,050 for single; and $233,475 for MFS. Amounts are inflation-adjusted.

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Capital Gains Rate

The long-term capital gains rate remains at 0% (for 10% or 15% tax bracket) and 15% (for 25%, 28%, 33%

or 35% tax bracket) and 20% (for those in the 39.6% tax bracket).

Single $37,650 MFJ $75,300 HH $50,400 to get 0% capital gain rate

Qualified dividends will still get the capital gain rate

Stepped-up Basis

For property inherited from a person who died in 2016, generally the basis will be the FMV at the date of death.

FMV

Cost + Improvements

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Estate Tax

The estate tax is 40% of the value of the estate after the first $5,450,000 (from $5,430,000). The $5,000,000 is adjusted annually for inflation.

The portability election is now made permanent for all tax years after 2012.

Estate Tax

The DSUEA (portability) is the amount of the gift and estate tax exemption that the first spouse to die does not use. This amount can be transferred from the estate of the first spouse to die to the surviving spouse.

Only applies to a surviving spouse and unused federal estate tax exemptions cannot be transferred to anyone but a surviving spouse.

To take advantage of the portability rule an estate tax return must be filed when the first spouse dies, even if no tax will be due.

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Annual Gift Tax Exclusion

The gift tax exclusion is $14,000 (same).

“Kiddie Tax”

The investment income over $2,100 (same) of children who are age 18 or younger at the end of the year will be taxed at the parent’s rate on Form 8615 which is filed with the student’s return.

It also applies to full-time students ages 19 to 23 unless the student provided more than half of his/her own support with earned income.

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Certain January 1 Birthdays forForm 8615

If a child was born on... Then, at the end of 2016,

the child is considered to be..

January 1, 1999 18*

January 1, 1998 19**

January 1, 1993 24***

*This child is not under age 18. The child meets condition 3 only if the child did not have earned income that was more than half of the child's support.

**This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child’s support.

***Do not use Form 8615 for this child.

Use this chart to determine whether certain children with January 1 birthdays meet condition 3 under the Who Must File rules.

“Kiddie Tax”

Parents may be able to include on their own return the child’s interest, dividends, capital gain distributions and Alaska Permanent Fund Dividends in excess of $2,100 (same) on Form 8814.

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Form 6251 The Alternative Minimum Tax exemption amount is indexed for inflation.

• $83,800 (from $83,400) for MFJ and QW

• $53,900 (from $53,600) for single and HH

• $41,900 (from $41,700) for MFS.

Foreign Earned Income Exclusion

The maximum foreign earned income exclusion on Form 2555 or Form 2555-EZ is $101,300 (from $100,800).

Remember that the tax on amounts earned over the exclusion will be calculated as if all of the income was considered.

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Household Employee

Social security and Medicare tax must be paid if $2,000 (from $1,900) or more in cash wages are paid to any one household employee in 2016.

Made Permanent by PATH Act

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Charitable Distributions From an IRA

Taxpayers 70 1/2 and older can make a tax-free Qualified Charitable Distribution (QCD) from an IRA if the distribution is made directly by the trustee of the IRA to an eligible charitable organization.

There is a maximum of $100,000 per taxpayer each year.

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State and Local Sales Tax

Taxpayers can elect to deduct state and local general sales tax instead of state and local income taxes (but not both) as an itemized deduction.

Generally, either the actual expenses or the state and local sales tax tables can be used to figure the sales tax deduction.

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American Opportunity Credit

Enhanced American Opportunity tax credit is made permanent.

Beginning in 2016, the provision requires the taxpayer claiming the AOC credit to report the EIN of the educational institution to which the individual made tuition payments.

Form 1098-T

On Form 1098-T educational institutions are required to report only qualified tuition and related expenses actually paid, rather than choosing between amounts paid and amounts billed. This applies to expenses paid after December 31, 2016 for education

furnished in academic periods beginning after such date.

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Educator Expenses

An eligible educator can deduct up to $250of qualified expenses. If filing MFJ and both are eligible educators, the maximum deduction is $500 (will be adjusted for inflation).

K – 12 teachers, Instructors, counselors, principals, or aides in the school for at least 900 hours during the school year.

Professional Development

By saving the receipts, teachers can claim the cost of books they purchase for either their personal professional library or their classroom library. They can also claim the cost of subscriptions to magazines and newspapers that they can prove they use in the classroom or that are part of their professional development

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Expanded Section 179 Deduction

Limit on the section 179 expense deduction (will be adjusted for inflation)

• $500,000 for qualified property

• Threshold cost (phaseout) is $2,010,000

Leasehold Improvements

Leasehold and retail improvements and restaurant property are eligible for 15-year SL depreciation or section 179.

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Just Extended

Cancelled Mortgage Debt

The qualified principal residenceindebtedness forgiveness exclusion apply for discharges before January 1, 2017. The cancelled debt is excluded from the taxpayer’s gross income by filing Form 982.

The exclusion will apply to qualified principal residence indebtedness discharged in 2017 if the discharge is made under a binding written agreement entered into in 2016.

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Mortgage Insurance Premiums

Amounts paid for qualified mortgage insurance premiums can be treated as deductible qualified residence interest on Schedule A (through December 31, 2016). The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006.

Tuition and Fees

The income subject to tax can be reduced by up to $4,000 of qualified education expenses (through December 31, 2016).

The student must be either the taxpayer, spouse or a dependent for whom the taxpayer can claim an exemption.

Cannot be MFS

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Bonus Depreciation

Bonus Depreciation e x t e n d e d to:

50% in 2015-2017

40% in 2018

30% in 2019

Energy Credits

$500 Nonbusiness Energy Credit (through December 31, 2016)

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Solar Energy Credits

• Solar Energy Credit available through December 31, 2021.

• 30% through 2019

• 26% in 2020

• 22% in 2021

Tax Changes

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NEW!!Due to the PATH Act, it is now against the law for the IRS to issue a refund before February 15th to any taxpayer claiming the Earned Income Credit (EIC) or the Additional Child Tax Credit (ACTC).

Due Date for Form 1040 Returns

Due to the observance of Emancipation Day, a legal holiday in the District of Columbia on April 17, 2017, the due date for filing 2016 federal tax returns is April 18, 2017.

Extended deadline is October 16, 2017.

18

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Due Date for Partnership ReturnsPartnership returns will be due the 15th day of the third month after year end.

For tax year 2016 calendar year partnerships this deadline will be March 15.

Extended deadline is September 15, 2017.

Due Date for S Corps Returns

S Corps will be due the 15th day of the third month after year end.

For tax year 2016 calendar year S Corps this will be March 15 (same).

Extended deadline is September 15, 2017

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Due Date for C Corp Returns

C Corps will generally be due the 15th day of the fourth month after year end.

For tax year 2016 calendar year corporations this will be April 18 (was March 15)

Extended deadline is October 16, 2017 (corporations are now permitted a six-month automatic extension).

Form 8867

This form has been expanded and revised. Due to changes in the law, the paid tax return preparer EIC due diligence requirements have been expanded to also cover the AOTC and the CTC/ ACTC.

Form 8867 has been modified to account for these changes.

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Form 8867

A paid tax return preparer, must meet specific due diligence requirements when preparing returns and claims for refund involving the EIC, the AOTC or the CTC/ACTC. To meet these due diligence requirements, additional questions may need to be asked and additional information obtained to determine eligibility for and the amount of the EIC, AOTC, and CTC/ACTC.

Form 8867

Form 8867 has changed to a three column form with questions to be answered about EIC, CTC/ACTC and AOTC. Completing the form is not a substitute for actually performing the necessary due diligence and completing all required forms and schedules when preparing the return.

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Penalty Now Indexed for Inflation

The paid tax return preparer due diligence penalty is now indexed for inflation. Therefore, the penalty for failure to meet the due diligence requirements with respect to returns and claims for refund filed in 2017 (tax year 2016) is $510 per credit per return.

Prevention of Retroactive Claims

Prohibits claiming EIC by amending (or filing original return if failed to file) for any prior year in which he or she did not have a valid SSN. Applies to returns filing for “retroactive” claims after December 18, 2015.

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Prohibits claiming the child tax credit by amending (or filing original return if failed to file) for any prior year in which the individual or a qualifying child for whom the credit is claimed did not have an ITIN. Applies to returns filing for “retroactive” claims after December 18, 2015.

XXXXX


Prohibits claiming the American opportunity credit by amending (or filing original return if failed to file) for any prior year in which the individual or a student for whom the credit is claimed did not have an ITIN. Applies to returns filing for “retroactive” claims after December 18, 2015.

NO

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ITINs

An ITIN is a nine-digit number issued by IRS to individuals who are required for U.S. tax purposes to have a U.S. taxpayer identification number but who do not have and are not eligible to get a social security number (SSN).

ITINs

PATH Act Legislation and ITINs. Individual Taxpayer Identification numbers may need renewal this year. Those who have not used their ITIN on a federal tax return at least once in the last three years (covering 2013, 2014, or 2015) will need to renew their ITIN.

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ITINs

Also, all ITINs issued before 2013 will begin expiring this year. ITINs with a 78 or 79 in the middle will expire this year; others will expire on a rotating basis. A tax return cannot be filed using an expired ITIN. Also, there are new documentation requirements when applying for or renewing an ITIN for certain dependents. Renewals began in October 2016.

To Renew The ITIN.

• Mail Form W-7 — along with the original identification documents or certified copies by the agency that issued them — to the IRS address listed on the form (identification documents will be returned within 60 days),

• Use an IRS authorized Certified Acceptance Agents or Acceptance Agents around the country, or

• In advance, call and make an appointment at an IRS Taxpayer Assistance Center in lieu of mailing original identification documents to the IRS.

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ITIN Renewal

To make this renewal effort easier and reduce paperwork, the IRS will be offering a family option for ITIN renewal. If they have an ITIN middle digit of 78 or 79 and receive a renewal letter, they can choose to renew the ITINs of all of their family members at the same time rather than doing them separately over several years. Family members include the tax filer, the spouse and any dependents claimed on their tax return.

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Repair/Capitalization Regs.

De minimus expensing rule allows the deducting of certain amounts paid or incurred to acquire or produce a unit of tangible property. The taxpayer must have a Applicable Financial Statement (AFS), written accounting procedures for expensing amounts paid or incurred for such property under certain dollar amounts, and treat such amounts as expenses on its AFS.

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U.S. Courts on Capitalization Have:

• Stated that if the expenditure merely restores the property to the state it was in before the situation prompting the expenditure arose and does not make the property more valuable, more useful, or longer-lived, then such an expenditure is usually considered a deductible repair

104


To take advantage of the $5,000 de minimus rule, a taxpayer must have written book policies in place at the start of the tax year that specify a per-dollar amount (up to $5,000) that will be expensed for financial accounting purposes.

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105


Smaller businesses can use the safe harbor for taxpayers without an AFS. The per item or invoice threshold amount increased from $500 to $2,500 for taxable years beginning on or after January 1, 2016.

Audit ProtectionFor taxable years beginning before January 1, 2016, the IRS will not raise upon examination the issue of whether a taxpayer without an AFS can utilize the de minimis safe harbor for an amount not to exceed $2,500 per invoice (or per item as substantiated by invoice) if the taxpayer otherwise satisfies the requirements of § 1.263(a)-1(f)(1)(ii).

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Wrongly IncarceratedDue to the PATH Act, persons who were wrongly incarcerated in previous years may be due a refund on taxes paid on settlements received from the respective states. Before that whole amount was considered "taxable income" for both Federal and State. If a large settlements was received in previous years, an amended return can be filed without regard to the statute of limitations to recoup the taxes paid. However, they only have until December 19, 2016, to file those amended returns for closed years.https://www.irs.gov/individuals/wrongful-incarceration-faqs?_ga=1.35282466.269560782.1421821464

Reminders for 2016

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Notice 2014-7

IRS code section 131 excludes qualified foster care payments from gross income, including those payments made as compensation for difficulty of care under State Medicaid waiver programs. As of January 3, 2014 this exclusion is being expanded to include certain Medicaid Waiver payments to biological parents. This is a significant change from the IRS’s prior position.

Notice 2014-7

Accordingly, the IRS will treat qualified Medicaid waiver payments as difficulty of care payments excludable from gross income and this treatment will apply whether or not the care provider is related or unrelated to the eligible individual.

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Notice 2014-7

The programs share the objective of enabling individuals who otherwise would be institutionalized to live in a family home setting rather than in an institution, and both difficulty of care payments and Medicaid waiver payments compensate for the additional care required.

Notice 2014-7

This notice provides guidance on the federal income tax treatment of certain payments to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in section 1915(c) of the Social Security Act (Medicaid Waiver payments).

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Notice 2014-7

Whether IRS will treat payments under a state program other than a state Medicaid Home and Community-Based Services waiver program as difficulty of care payments excludable from gross income will depend on the nature of the payments and the purpose and design of the program.

???????????????

Notice 2014-7

For payments received on or after January 3, 2014, that are excludable from gross income as difficulty of care payments, can the taxpayer choose to include those payments in gross income for 2014 and later years?

No. A taxpayer may not choose to include in gross income difficulty of care payments that are excludable from gross income as provided in Notice 2014-7.

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Notice 2014-7

For qualifying payments claimed in an earlier year an amended return can be filed to exclude them from gross income.

Notice 2014-7

For more information see: https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income

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IRA Distributions

An individual is permitted to make only one nontaxable 60-day rollover between IRAs in any 1-year period.Publication 590, Individual Retirement Arrangements (IRAs), provided that the one-rollover-per-year limitation was applied on an IRA-by-IRA basis.

IRA Distributions

The Tax Court in Bobrow v. Commissioner, T.C. Memo. 2014-21, held that the limitation applies on an aggregate basis, meaning that an individual could not make more than one nontaxable 60-day rollover within each 1-year period even if the rollovers involved different IRAs.

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IRA Distributions

A rollover between an individual’s Roth IRAs will preclude a separate tax-free rollover within the 1-year period between the individual’s traditional IRAs, and vice versa.

IRA Distributions

As before, Roth conversions (rollovers from traditional IRAs to Roth IRAs), rollovers between qualified plans and IRAs, and trustee-to-trustee transfers--direct transfers of assets from one IRA trustee to another--are not subject to the one-per-year limit and are disregarded in applying the limit to other rollovers.

to

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ABLE

Achieving a Better Life Experience Act is designed to assist individuals with disabilities with health care, independence, and quality of life. The new Qualified ABLE Programs are designed to encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life.

ABLE

ABLE accounts provide funding for disability-related expenses on behalf of designated beneficiaries with disabilities that supplement (not replace) benefits provided through other sources.

Qualified ABLE programs (529A) are similar to 529 college savings programs.

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Eligible Individual• To be eligible the designated beneficiary

must be disabled or blind, and the onset of the disability or blindness must have occurred before the individual attained age 26.

• Individual must either be entitled to benefits based on blindness or disability under the Social Security Act, or the person must have a disability certificate on file with the IRS for the tax year.

• This is not the same disability certificate used for the purpose of establishing eligibility for social security benefits.

Contributions

Any person may make nondeductible contributions to an ABLE account for the benefit of an eligible individual.

Contributions must be in cash, and the aggregate annual contribution amount cannot exceed the annual gift tax exclusion amount ($14,000 for 2016).A 6% excise tax applies to excess contributions to ABLE accounts.

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Contributions

Allows ABLE accounts (tax-preferred savings accounts for disabled individuals), which currently may be located only in the State of residence of the beneficiary, to be established in any state. This allows individuals setting up ABLE accounts to choose the State program that best fits their needs. Effective for tax years beginning after December 31, 2014

Form 1099-QA

This form is used to report distributions from ABLE accounts.

Form 5498-QA is used to report ABLE account contribution Information

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Tax Planning

ABLE accounts are not estate planning devices. They are mainly meant to shelter assets from means-testing for purposes of government benefits.

Medical Expense Threshold

The threshold to claim an itemized deduction for unreimbursed medical expenses is 10%.

Individuals (or their spouses) who are age 65 or older can still use 7.5%. This exception ends AFTER 2016.

10% 7.5%

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Affordable Care Act

As of tax year 2014, the Patient Protection and Affordable Care Act (PPACA or ACA) has:

Created the Marketplace (Exchange) via the U.S. Dept. of Health & Human Services

Established the Individual Mandate

Established the Employer Mandate

Individual Mandate

Taxpayers must obtain and maintain minimum essential coverage throughout the year, get an exemption, or face a tax penalty for each month they go without coverage.

In the individual and family market major medical coverage that counts as minimum essential coverage can only be purchased during open enrollment*.

*Unless the TP qualifies to access a special enrollment

period because of a qualifying life event.

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Minimum Essential Coverage

Nonexempt U.S. citizens and legal residents must maintain minimum essential health coverage each month for themselves and their dependents, or pay a penalty.

Minimum essential coverage is:

• Coverage under certain government-sponsored plans

• Employer-sponsored plans, with respect to any employee

Minimum Essential Coverage

Minimum essential coverage also includes:

• Plans in the individual market

• Grandfathered health plans

• Any other health benefits coverage, recognized by the HHS Secretary

Any individual plans and those sold to small businesses must offer a comprehensive package.

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Form 1095 Series

Form 1095-A - used to report certain information to the IRS about family members who enroll in a qualified health plan through the Marketplace.

Form 1095-B - generally provided by insurers for individuals who get covered outside the marketplace

Form 1095-C - provided to employees of large employers with 50 or more covered FTE* employees that are subject to the employer responsibility provisions.*Full Time Equivalent

Form 1095 Series

Form 1095-A – All family members who enroll in a qualified health plan through the Marketplacemust appear on a tax return. The tax return can include all family members on the 1095-A.

If the family members on the 1095-A are on separate tax returns, then the policy must be allocated and shared.

If the policy is shared the Form 8962 must accompany the tax return filed.

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Individual Shared Responsibility Payment

If the taxpayer (or any of the dependents) do not maintain coverage and do not qualifyfor an exemption, an individual shared responsibility payment (ISRP) must be made with the taxpayer’s return. In general, the payment amount is either a percentage of the income or a flat dollar amount, whichever is greater.

2016 ACA Penalty

For 2016, the annual payment greater of:• 2.5% of the individuals household income that is

above the tax return filing threshold for his/her filing status, or

• The family’s flat dollar amount, which is $695 per adult and $347.50 per child under age 18, limited to a family maximum of $2,085.

The payment amount is capped at the cost of the national average premium for a bronze level health plan available through the Marketplace.

The IRS will collect the penalty via the tax return (Form 1040, line 61)

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Form 8962

Who Must File Form 8962, Premium Tax Credit, is filed with the income tax return if ANY of the following apply:

1. Taxpayer is taking the PTC*

2. APTC** was paid for the taxpayer or another individual in the tax family

3. APTC was paid for an individual for whom the taxpayer told the Marketplace that a personal exemption would be claimed

*Premium Tax Credit

**Advance Payment of the Premium Tax Credit

Form 8962

Who Must File Form 8962, Premium Tax Credit Part IV, is filed with the income tax return if ANY of the following apply:

1. Taxpayer is divorced or legally separated on the last day of the tax year

2. Taxpayer or another individual in the tax family will NOT be reported on the same tax return.

a. Example a dependent on the 1095-A will file separately

b. Or the dependent on the 1095-A will be reported on another Taxpayer’s return.

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Premium Tax Credit (PTC)

For any tax year, if advance credit payments in any amount are received or if the taxpayer plans to claim the premium tax credit, a federal income tax return for that year must be filed. (1040, 1040A, or 1040NR)

If choose to get it later: Claim the full amount of the premium tax credit when the tax return is filed. This will either increase the refund or lower the balance due.

Form 8965Who Must File

Form 8965, Health Coverage Exemptions.

If the taxpayer is required to file a tax return and wants to claim a coverage exemption for them self or another member of the tax household, Form 8965 must be filed with the tax return (Form 1040, Form

1040A, or Form 1040EZ).

If not required to file a tax return, the tax household is exempt from the shared responsibility payment and there is no need to file a return to claim the coverage exemption.

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2016 ACA Exemptions

No penalty is assessed for individuals who do not maintain health insurance for a period of two (2) months or less during the year.

Allowed only one 60 day period per year. If an individual exceeds the two month maximum during the taxable year, the penalty for the full duration of the gap during the year is applied.

2016 ACA Exemptions

No penalty for:• Those covered by Medicare or Medicaid

• People incarcerated

• Members of Native American tribe

• People who are not legally present in the U.S.

• Members of religion conscientiously opposed to accepting benefits

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Hardship Exemptions

ACA established statutory exemptions from the individual shared responsibility payment when the taxpayer experiences “hardships” preventing them from being able to purchase health insurance coverage. Some exemptions are claimed on the tax return, while some require an application through the exchange.

Hardship Exemption Certificate Number Requirement

An exemption obtained through the exchange has a unique Exemption Certificate Number (ECN). This number is required to report on the Form 8965, Part 1, otherwise the return will be rejected.

There is no way to get the ECN electronically. Clients will need to complete the application and wait to receive the ECN in 2-4 weeks.

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What You Need to Know• Does the taxpayer qualify for a premium

tax credit (PTC)? Did they meet the criteria?

Did they buy insurance on the exchange?

• Does the employer offer insurance?

• Did the taxpayer apply on healthcare.gov for a hardship exemption? Does the taxpayer have the certificate number?

Additional Medicare Tax for HighIncome Workers

An additional 0.9% Medicare tax will be imposed on the wages of individualtaxpayers (including self-employment income) received with respect to employment in excess of:

• $250,000 for MFJ• $125,000 for MFS • $200,000 in all other cases

Form 8959, Additional Medicare Tax

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Additional Medicare Tax for HighIncome Workers

There is no employer match for the additional Medicare tax, and no requirement that an employer notify employees when it begins withholding the additional Medicare tax.

An employer is required to begin withholding the additional tax in the pay period in which it pays wages in excess of $200,000 to an employee.

Medicare Contribution Tax onInvestment Income

A Medicare contribution tax on net investment income is imposed on individuals, estates and trusts. Investment income includes interest, dividends, capital gains, taxable annuities, royalties and passive rental income.

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The amount of tax owed will be equal to 3.8% multiplied by the lesser of

(1) net investment income; or

(2) the amount by which their MAGI exceeds the $200,000/$250,000 thresholds.

Taxpayers with MAGIs below the

$200,000/$250,000 thresholds

will not be subject to the 3.8-percent


The threshold amount is:• $250,000 for a MFJ or surviving spouse,

• $125,000 for MFS, and

• $200,000 for all others

Form 8960, Net Investment Income Tax-Individuals, Estates, and Trusts

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Schedule C

May choose either simplified method or regular method for any taxable year

Choose method on timely filed, original return for taxable year

Once chosen cannot change to other method for that same year

Schedule C

Simplified Option for Home Office Deduction

Does not make it easier to qualify

Tests are the same

Generally regular method will provide

a larger deduction but is more complicated.

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Schedule C

Alternative to deducting actual expensesMortgage interest, taxes claimed in full on Schedule ADoes not apply to an employee with a home office if receive advances or reimbursement

Does not change criteria for who can claim but simplifies the calculation and recordkeeping.

Schedule C

Standard deduction of $5 per square foot (maximum 300 square feet)

Still subject to overall limitation

No receipts to save (utility bills, repairs, etc.)

No home depreciation deduction or later recapture of depreciation

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Schedule C

If use simplified method for one year and use regular method later, must calculate depreciation using the appropriate table

No carryover of excess deductions

Sharing Economy Tax Center

IRS debuted an online Sharing Economy Resource Center to help taxpayers better understand how to file taxes for income earned through ride-sharing services like Uber and Lyft, or from renting out rooms and houses like Airbnb and Homeaway.

Even if the taxpayer is earning income and not receiving a 1099 form or W-2 from companies like Airbnb or Uber, generally taxes will have to be paid on that income, even if it’s just a part-time activity.

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Certain business expenses can be deducted. if the car is used as a ride-share driver, a standard mileage rate of 54 cents a mile may be claimed.

“Special rules” apply to the rental of a home or apartment that a taxpayer uses as a residence and the rental income must be reported. Any expenses incurred have to be split up between personal and business purposes and there are special deduction limits.

But if it’s an occasional short-term rental host — meaning you rent out the personal residence id rented for less than 15 days a year, that income does not have to be reported but the rental expenses can’t be deducted.

Sharing Economy Tax Center

Due Diligence for EIC*

A tax return preparer will be subject to a penalty of $510 if he or she fails to comply with certain due diligence requirements in determining the eligibility of a taxpayer for EIC and the amount of

the credit.

*Also applies to CTC/ACTC and AOTC

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Due Diligence

IRS is sending due diligence letters to paid preparers who may be noncompliant in meeting their EIC due diligence requirements. Letters are sent to preparers who completed highly questionable EITC claims.

IRS will continue to monitor the EITC returns prepared in the upcoming filing season to see if the quality of the preparers’ returns improves.

• Letter 5025: You may not have met your due-diligence requirements on returns with questionable qualifying children and self-employment income.

• Letter 5025C: You may not have met your due-diligence requirements on returns with self-employment income.

• Letter 5025Q: You may not have met your due diligence requirements on returns with questionable qualifying children.

Effective for tax year 2016, Congress expanded the EITC due-diligence requirements to include two additional refundable credits: the Child Tax Credit/Additional Child Tax Credit and the American Opportunity Tax Credit.

There are also Spanish versions of these letters

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These letters:

• State that IRS believes the preparer completed inaccurate claims,

• Highlight the consequences of preparing inaccurate claims,

• Outline due diligence responsibilities,

• Provide tips on preparing accurate returns and point to online tools, information and other resources, and

• Inform preparer that IRS is monitoring their future returns.

If a preparer gets a letter from IRS, don’t ignore it. Review the office procedures to make sure that all four due diligence requirements are met. If a preparer receives this letter, IRS will continue to monitor the returns he/she prepares. If the quality of the returns doesn’t improve, the preparer may be subject to special follow-up procedures.

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IRS sends the letters to help preparers complete accurate claims in the future. IRS does not assess penalties against preparers at the time the letters are sent, but returns filed by these preparers are monitored to ensure accuracy improves. If there is no improvement, IRS may follow-up with phone calls, additional letters, educational visits or due diligence compliance audits.

Due Diligence

Preparers may also receive the Letter 5138, Return Preparer EITC Client Audit Notification.

This letter informs preparers we may also audit their clients’ returns.

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Schedule C

The preparer should ask sufficient questions of taxpayers claiming self-employment income to be satisfied that the client is actuallyconducting a business, has records to support income and expenses, or can reasonably reconstruct income and expenses records, and has included all income and related expenses.

What to Look For

• Schedule C income in round numbers

• Schedule C cash businesses as the only income on a return claiming EIC

• Schedule C with little or no expenses when expenses would be expected

• Schedule C taxpayers with little or no records for income and expenses

• Any Schedule C income that brings the taxpayer to the maximum EIC

• Schedule C without a Form 1099 MISC

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Obtaining Information• Conduct a thorough and in depth interview

about the business activity.

• When the basic question/answer format does not seem to be creating a clear and consistent picture, asking their client to describe daily and weekly activities can provide a great deal of information.

• Casual conversations about business practices may prove insightful.

Obtaining InformationEducate taxpayers on the need for recordkeeping and the consequences of failure to keep records.

Reach out to existing taxpayers at the beginning of the tax year to educate them and help them establish a good recordkeeping system so that the next filing season they will have a much easier time of filing an accurate return.

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Obtaining Information

Review supporting material. If supporting material is not provided, preparers should inform the taxpayer that IRS may audit them. In that event, the taxpayer would need to provide receipts to support the figures.


Preparers should inquire how income and expenses were computed and document the responses. In circumstances where the preparer feels the information is not accurate or the supporting material is insufficient, he or she may ask to see the supporting material.

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In the event of a loss of taxpayer records or due to poor recordkeeping, a preparer may need to help reconstruct the records. The reconstruction will demonstrate that the preparer exercised due diligence and it will also teach the taxpayer about recordkeeping.

EIC Preparer Compliance

Targeted

Approach is to look at returns with a high likelihood of EIC error completed by the samepreparer.

Tailored

Look for the cause of the errors. Is it not knowing the tax law; not applying it correctly, or, is it an intentional disregard of the tax law?

Tiered

Goal is to reduce preparer errors by matching IRS response to the risk level of the same preparer continuing to have a high level of EIC error. Responses range from reducing errors through education to barring return preparation through injunction.

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The goal of record reconstruction is to use available documentation to develop a sound and reasonable estimate of the taxpayer's business income and expenses to support the Schedule C prepared.

Although the taxpayer may not have formal books and records with supporting documentation, they may have partial recordsthat can be used as a basis for reconstruction.

Schedule CPreparers should ensure that the amount of net self-employment income reported is correct. Taxpayers sometimes want to over-report or under-report their income to qualify for or maximize the amount of EIC.

More information on Schedule C and recordkeeping can be found athttps://www.eitc.irs.gov/Tax-Preparer-Toolkit/sctraining

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EIC Errors

About 60% of EIC errors fall into three key categories:

• Claiming a child who does not meet the age, relationship, joint return, or residency tests

• Filing as single or head of household when legally married,

• Over-or under-reporting income or business expenses to maximize the credit.

Areas of Concern

• Children that are not son, daughter, grandchild

• Children whose last name is not the same as the TP and/or spouse

• Children who lived with the TP for only a portion of the year

• Filing as head of household with very little income

• Child/dependent being disabled

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To comply with the EIC knowledge requirement, you must not know or have reason to know that any information used to determine the taxpayer's eligibility for, and the amount of, the EIC is incorrect. You may not ignore the implications of information furnished to or known by you, and you must make reasonable inquiries if the information furnished appears to be incorrect, inconsistent, or incomplete. At the time you make these inquiries, you must document in your files the inquiries you made and the taxpayer's responses.


On Zeenet, Tax Support under EIC there is also an IRS EITC Training Course on Due Diligence and other due diligence information.

https://www.eitc.irs.gov/Tax-Preparer-Toolkit/ddmodule

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Also on the IRS website there is a section that preparers frequently ask concerning fraud. http://www.eitc.irs.gov/EITCCentral/faqs_Fraud.pdf


There are due diligence videos at:

https://www.eitc.irs.gov/Tax-Preparer-Toolkit/ddvideos

Remember to:

Know the law

Ask the right questions

Get all the facts

Document

Give preparers Pub.4687, EITC

IRS

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The EIC Audit

During these audits, the IRS employee provides official IRS identification.

The examiner interviews the preparer about the office business practices.

If the preparer is an employee of a tax preparation firm, the examiner also contacts the employer for an interview.

The EIC Audit

The examiner is looking for compliance with all four due diligence requirements.Know the law - Ask the right questions - Get all the facts -Document

The examiner reviews at least 25 EIC returns reviewing the following documents:

• The preparer's due diligence records,

• The probing questions asked and the client's responses,

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The EIC Audit

• All questionnaires, checklists, worksheets and

• Copies of any client provided documents relied on to determine eligibility for EIC or to compute the amount of EIC.

If the examiner identifies failures to meet due diligence on any of the returns, they may expand the audit to more returns.

More information can be found at:

http://www.eitc.irs.gov/EITC-Central/main

Repayment of the First-Time Homebuyer’s Credit

Taxpayers who purchased their home before January 1, 2009 and took the credit must continue to repay the credit in 2016.

The credit is recaptured over 15 years. If disposed of or ceases to be the principal residence, the remaining credit is recaptured in that year, not to exceed the gain on the disposition.

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Repayment of the First-Time Homebuyer’s Credit

When an entire home is converted to rental use, it ceases to be the taxpayer’s main home and the credit must be repaid.

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Casualty Loss

Form 4684 is a 3 page form with a section C for Theft Loss Deduction for Ponzi-Type Investment Scheme.

95% no potential for third-party recovery

75% if potential for third-party recovery

Report on Section B, Part II

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Installment Agreement

An installment agreement is an option for those who cannot pay their entire tax bills by the due date. Penalties are reduced, although interest continues to accrue on the outstanding balance.

Form 2848

For joint returns, both taxpayers must complete and submit a separate Form 2848 to authorize their representative to deal with a joint tax return year(s).

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Form 2848

Any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns. However, tax professionals have differing levels of skills, education and expertise.

An important difference in the types of practitioners is “representation rights.”

Form 2848For returns prepared and signed after December 31, 2015, the unenrolled return preparer must also possess:

(1) a valid AFSP Record of Completion for the calendar year in which the tax return or claim for refund was prepared and signed; and

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Form 2848

(2) a valid AFSP Record of Completion for the year or years in which the representation occurs. (An AFSP Record of Completion is not required for returns prepared and signed before January 1, 2016).

Form 2848

The key difference between AFSPparticipants and PTIN holders without an AFSP Record of completion is that the former can discuss tax information, while the latter can only request tax information.

AFSP IRS

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Form 8821

If an unenrolled return preparer does not meet all of the representation requirements, the taxpayer may authorize the unenrolled return preparer to inspect and/or request the tax information by filing a Form 8821.

Filing a Form 8821 will not authorize the unenrolled return preparer to represent the taxpayer.

Marijuana Industry

Sec. 280E, enacted well before any states had legalized marijuana, prohibits the deduction of expenses incurred in a business trafficking in a controlled substance. Therefore, the businesses selling marijuana generally cannot deduct their expenses. However, this does not apply to deductions for costs of goods sold.

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Updates for 2017

Personal Exemption for 2017

Personal exemption amount is $4,050 (same)

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Limit on Personal Exemptions for 2017

The overall amount of personal exemptions is limited by the AGI.

Begins at:

MFJ $313,800 (from $311,300)

HH $287,650 (from $285,350)

Single $261,500 (from $259,400)

MFS $156,900 (from $155,650)

Standard Deduction for 2017

• MFJ and QW $12,700 $12,600

• HH $ 9,350 $9,300

• Single $ 6,350 $6,300

• MFS $ 6,350 $6,300

Additional standard deduction for elderly or blind

• MFJ, MFS, QW $1,250 same

• Single, HH $1,550 same

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Standard Deduction for 2017

Standard deduction amount for an individual who can be claimed as a dependent by another taxpayer may not exceed the greater of $1,050 (same) or the individual’s earned income for the year plus $350 (same)

but not more than the standard deduction amount.

Limit on Itemized Deductions for 2017

The overall amount of itemized deductions is limited by the AGI.

Phaseout begins at:

MFJ $313,800 (from $311,300)

HH $287,650 (from $285,350)

Single $261,500 (from $259,400)

MFS $156,900 (from $155,650)

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Earned Income Credit for 2017

The maximum credit is:

$3,400 for 1 child (from $3,373)

$5,616 for 2 children (from $5,572)

$6,318 for 3 or more children (from $6,269)

$510 for no children (from $506)

Maximum income limit is $53,930 (from $53,505)


• Three or more qualifying children and earn less than $48,340 ($53,930 if MFJ)

• Two qualifying children and earn less than $45,007 ($50,579 if MFJ)

• One qualifying child and earn less than

$39,617 ($45,207 if MFJ)

• No qualifying child and earn less than

$15,010 ($20,600 if MFJ)

QC must meet the 4 tests: JARR

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Investment income cannot exceed $3,450 ($3,400).

Education Credits for 2017

Lifetime learning credit remains at $2,000.

The amount of the lifetime learning credit is phased out at a modified AGI between $55,000 and $65,000, for MFJ $112,000 (from

$111,000) and $132,000 (from $131,000)

Per returnCannot be MFS

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Education Savings Bonds Interestfor 2017

The interest may be excluded from income if the taxpayer’s income is below a certain range. The phaseout range will begin at:• $117,250 for MFJ (from 116,300)

• $78,150 for S and HH (from $77,500)

The filing status cannot be MFS.

Adoption Credit for 2017

Maximum Form 8839 is $13,570 (from $13,460).

Phaseout begins at $203,540 (from $201,920).

If child has special needs, this amount is allowed even if there are no qualifying expenses.A special needs child is a child who is a citizen or resident

of the US that the state has determined cannot or should not be returned to the parents’ home and probably will not be adopted unless adoption assistance is provided to the adoptive parents.

.

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Social Security Tax for 2017

The wage base for computing social security tax (OASDI*) will remain at $127,200.

Max FICA withholding will be $7,886.40

* Old-Age Survivors and Disability Insurance

Standard Mileage Rate for 2017

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• xx (down from 54) cents per mile for business miles driven

• xx (down from 19) cents per mile driven for medical or moving purposes

• 14 cents per mile driven in service of charitable organizations

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Depreciation and Section 179 in 2017

Special depreciation allowance is 50% for 2017.

Section 179 limit is $510,000.

Passenger Automobile Limits for 2017

The maximum depreciation limit for business use of a passenger auto is $3,___.

Trucks or vans are limited to $3,___.

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Standard Meal Rate for 2017

The standard meal allowance for M&IE

is $51 a day for most small localities.

The standard meal allowance rates do not apply to travel in Alaska or Hawaii or any other location Outside the Continental United States (OCONUS).

Standard Meal Allowance for Daycare Providers for 2017

Location of Provider Breakfast Lunch Dinner Snack

States other than Alaska and Hawaii

$1.31 $2.46 $2.46 $0.73

Alaska $2.09 $3.99 $3.99 $1.19

Hawaii $1.53 $2.88 $2.88 $0.86

Up to three snacks per day for each child

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Form 8863 for 2017

Education Credits:American Opportunity Credit remains at $2,500

per student.MAGI in excess of $80,000 ($160,000 for MFJ)

Lifetime learning credit remains at $2,000 per return.

MAGI in excess of $55,000 ($112,000 for MFJ)

Form 6251 for 2017

Form 6251, Alternative Minimum Tax, exemption amount is projected to be:

•$54,300 (from $53,900) for single and HH

•$84,500 (from $83,800) for MFJ and QW

•$42,250 (from $41,900) for MFS Estates and Trusts $24,100 (from $23,900)

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401(k) Plans for 2017

Elective deferral limit is $18,000 (same).

If age 50 or older on December 31, 2017, the limit is $24,000 (same).

$18,000 $24,000

IRA Contribution Limit For 2017

The contribution limit for a traditional IRA as well as a Roth IRA remains at $5,500 or taxable compensation for the year, whichever is the smaller amount.

If the taxpayer is 50 years of age or older the limit remains at $6,500 or taxable compensation for the year, whichever is the smaller amount..

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Modified AGI Limit for Traditional IRAs for 2017

If a taxpayer is covered by a retirement plan at work, the deduction will be reduced (phased out) if the modified AGI is between:

• $99,000 - $119,000 for MFJ or QW

• $62,000 - $72,000 for single or H/H

• Less than $10,000 for MFS If MFS and did not live with spouse at any time, use single

Modified AGI Limit for Traditional IRAs for 2017

The limit for spouse of a covered employee is increased to:• $186,000 - $196,000 (from $184,000 -$194,000)

for MFJ

• Less than $10,000 (same) for MFS

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Roth IRA Contribution Limits for 2017

Roth IRA contribution will begin to phase out at:

• $186,000 (from $184,000) MFJ and QW

• $118,000 (from $117,000) single, HH, and MFS (not living with spouse during the year)

• Less than $10,000 (same) MFS who lived with spouse at any time during 2017

Retirement Savings Contributions Credit Limits for 2017

The modified AGI for:• Up to $62,000 for MFJ for a 10% credit

• Up to $46,500 for HH for a 10% credit

• Up to $31,000 for MFS and single for a 10% credit

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If No Health Insurance for 2017

Taxpayers will pay the higher of:

• 2.5% of yearly household income (Only amount of income above the tax filing threshold, about $10,400 for an individual in 2017, is used to calculate the penalty.) The maximum penalty is the national average premium for a Bronze plan.

• $695 per person ($347.50 per child under 18)The maximum penalty per family using this method is $2,085.

Form 8889 for 2017

Health Savings Accounts

• The maximum HSA deduction increases to $3,400 for self; $6,750 for family coverage.

• The maximum additional deduction for individuals age 55 or older remains at $1,000.

• The minimum annual deductible of a high deductible plan is $1,300 for self, $2,600 for family coverage.

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Foreign Earned Income Exclusion for 2017

The maximum foreign earned income exclusion on Form 2555 or Form 2555-EZ is $102,100 (from $101,300).

Remember that the tax on amounts earned over the exclusion will be calculated as if all of the income was considered.

Annual Gift Tax Exclusion for 2017

The gift tax exclusion remains at $14,000

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Estate tax for 2017

The basic exclusion amount used to compute the unified credit against estate tax is projected to be $5,490,000 (from $5,450,000).

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