The new year always brings tax changes and for 2016 one of the big developments is the federal government’s determination to crack down on tax fraud.

With taxpayer data stolen from the Internal Revenue Service (IRS) and the Social Security Administration, crooks have been filing fake electronic tax returns that generate refunds.

The government has estimated that criminals bilked the U.S. Treasury out of $5.8 billion in fraudulent tax refunds in 2013. At the same time, the government stopped more than four times that amount.

The IRS has added new security measures that could require spending a little more time completing tax returns. The service doesn’t want to tip off thieves by divulging all the changes but more stringent passwords could be required to file electronically along with a new policy for unsuccessful IRS login attempts. The IRS will also be monitoring whether multiple returns are being generated from the same computer.

Other Tax Changes for 2016

There are other tax changes coming in the new year:

2016 Tax Brackets Rise

Adjusted for inflation, income tax brackets will rise slightly. The chart below shows marginal tax brackets.

Here is an example of what a marginal tax bracket means for a high-income taxpayer:  If you are a married joint filer and make $466,950 or more, only the income that exceeds that amount would be taxed at the highest tax bracket of 39.6%.

Here is an example using a lower income return by a single filer who makes $35,000. The first $9,275 would be assessed at 10% and the remaining $25,725 would fall into the 15% tax bracket.

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Increase in Affordable Care Act penalty

There will be a significant increase in the federal penalty for Americans who do not have health insurance.

Taxpayers who did not have health insurance coverage in 2015 will have to pay the higher of these two amounts:

  • Two percent of household income up to the national average cost of the Bronze plan from the federal healthcare exchange.
  • Or $695 per adult ($347.50 per child) in the household up to $2,085.

The health insurance penalty is much stiffer than it was when first introduced in 2014 when the maximum penalty was one percent of household income or $95 a person.

Estate Tax Exemption Increases

In 2016, the amount of a deceased’s estate that can be protected from federal taxes increases by $20,000. The estate tax exemption for individuals who die in 2016 will rise from $5,430,000 to $5,450,000.

Later Filing Date

You’ll have a few more days to file your 2015 tax return. April 15, 2016 falls on a District of Columbia holiday called Emancipation Day. As a result, taxpayers can file their taxes as late as April 18, 2016.

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