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The Internal Revenue Service won’t accept your 2016 Federal tax return until January 23,

 2017—but it has already warned taxpayers that they’ll need to be patient about receiving 2016 tax refunds.

Here’s a look at the reasons the IRS has announced the delay, along with tips to minimize the wait for your tax refund in 2017.

Improved security measures.   On January 5, 2017 the IRS released a statement that it will process more than 150 million individual tax returns for the 2016 Federal tax year.  If the amount of taxpayers who will receive a tax refund is similar to the 2015 tax year, about 70% of them will get a tax refund of about $2,000.

Yet, the IRS’ past issues with tax fraud are no secret; that ongoing battle means the IRS very must proactively work to reduce the threat that it will continue.

As part of that effort, the IRS announced that it will strategically target tax returns that claim two credits, which are commonly used to commit taxpayer fraud: The Earned Income Tax Credit (EITC), which may be available to low and moderate income workers, and the Additional Child Tax Credit (ACTC ).

While the IRS says taxpayers who are owed a tax refund as a result of eligibility for either of these credits shouldn’t intentionally delay filing their tax return, any refunds owed as a result of will not be processed until February 15th, thanks to a law recently passed by Congress stating as much.  Yet, because that date happens to fall near President’s Day (and a few weekends) the IRS warns taxpayers with these credits not to expect their tax refund any sooner than February 27, 2017.

You can’t do much to get your tax refund before the end of February in this instance, but there are a few steps to make sure that your 2016 tax refund arrives as quickly as possible.  Here’s how:

  • Opt for electronic deposits. Authorize the IRS to deliver your tax refund to your bank account via direct deposit.  You’ll eliminate the three to four weeks that the process of cutting a paper check introduces, along with the amount of time you’ll wait for snail mail delivery.
  • Update your Individual Taxpayer Identification Number. If you don’t have a Social Security Number, you must file your Federal tax refund using an ITIN. Check to make sure that this nine digit number (which always begins with a 9) hasn’t expired. The IRS notes that any ITIN that hasn’t been used in the past few years is automatically considered expired, along with those that have the numbers 78 or 79 as middle digits. It can take seven or more weeks to secure a new, valid ITIN.
  • Know your 2015 adjusted gross income. E-filers will be asked to enter their 2015 adjusted gross income (AGI) before their electronic tax return filing is considered complete. Now that the IRS no longer accepts e-File PIN numbers as a means of filer verification, it’s crucial that you have access to this number to complete your 2016 Federal electronic tax return.
  • Complete all required information. Innocent omissions or oversights on your tax return can lead to delays in receiving your refund.
    • If you include dependents on your tax return, include their social security numbers.
    • Verify the accuracy of your own basic information, including your name, address, and social security number.
    • If you’ll file a paper return, confirm that you have printed, signed, and dated all required pages (and that your spouse does the same if you file jointly).
    • If you’ll mail a hard copy of your tax return to file, weigh the envelope to verify it has enough postage to get it to its final destination.
  • Keep the traditional tax day top of mind. Your 2016 tax return isn’t technically due until Tuesday, April 18, 2017, but it can’t hurt to keep the traditional date of April 15 top of mind. It falls on a Saturday this year, but when you mentally commit to file your tax return by this date, you have the peace of mind that it’s been submitted on time.

IRS Mileage Rates Fall 2017For anyone who has to use their vehicle for ‘business” they know that keeping track of their mileage is very important for tax reasons, especially if they rack up a lot of extra miles. While the IRS does not allow anyone to deduct their commute to and from work, there are other times when taxpayers are asked to use their private vehicles for so called business purposes. Those can be for work, medical purposes, and charitable reasons or for moving. Each year the IRS establishes the mileage rates for the coming year and the agency just announced the 2017 business mileage rates. The news is not terrific, but it’s not terrible, either.

Rates Go Down for Next Year

If you use your vehicle (cars, vans, pickups or panel trucks) for any business-related purpose you will want to take notice as this is how much you will be able to deduct for each business mile you accrue for business, charitable, moving or medical purposes. Beginning January 1, 2017 the rates are as follows:

• 53.5 cents per mile for business miles driven, down from 54 cents for 2016
• 17 cents per mile driven for moving purposes, down from 19 cents for 2016
• 17 cents per mile driven for medical purposes, down from 19 cents for 2016
• 14 cents per mile driven in service of charitable organizations

Downward Trend Continues

The drop continues a downward trend over the past few years as the business mileage rate has now dropped 3.5 cents in the last two years. In 2015 the rate was 57.5 cents a mile. One of the causes of the decline is the drop in gas prices. Meantime, the business mileage rate is not the only rate that has seen a dip recently. The medical and moving rates are both down from 23 cents just two years ago in 2015. The charitable rate, however, remains the same at 14 cents, as it has been fixed at that level since 1997 and does not change.

Actual Costs vs. Standard Deduction

The IRS determines the business mileage rates based on all the different factors and costs of owning a vehicle, including repairs and insurance, as well as the costs for gas and oil. Of course, you do not have to take the standard deduction rates for any of these uses, but if you choose to claim your deductions based on the actual amount of money you spent using your vehicle for business purposes then you will definitely need to keep detailed records of all your vehicle expenditures. One other important factor to keep in mind is that you are not allowed to “use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.” Lastly, taxpayers are not allowed to use the business standard mileage rate for more than four vehicles at the same time.

Visit IRS.gov to Learn More

For more information regarding the IRS’s announcement, including the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan, you can click here. So there you have it. If you are someone who racks up a lot of miles on your vehicle for business use, these deductions can really add up when it comes time to file your tax return. So keep close track of every mile and earn every penny you deserve.

tax changes 2017You won’t feel the immediate impact of the recent changes the IRS has put into place in 2017 for another year (after you’ve file your 2016 tax return), but they’ll impact you eventually. Here’s a look at some recent adjustments that have been made for 2017 tax policies, and how they could effect how much tax you ultimately pay—and a few tips to help you prepare for future tax changes that could be in the pipeline once President-elect Trump takes office.

  1. Tax brackets have been adjusted for inflation. Inflation remains nominal, but as the experts at the Tax Foundation explain, tax brackets for 2017 have changed slightly compared to 2016. The move is intended to prevent “bracket creep,” a side effect of inflation that can push a person into a higher earning tax bracket, despite that the value of his or her earnings hasn’t technically increased. In 2016, for example, the 25% tax bracket caps earnings for single filers at $91,150; in 2017, that same filer can make up to $91,900 and remain in same tax bracket.
  1. More people may qualify for retirement contribution deductions. The income limits for who may qualify to deduct retirement contributions made to a traditional IRA or a ROTH IRA will increase in 2017. In that tax year, the phase out ranges for single filers who contribute to a traditional IRA in 2017 will increase to $62,000 to $72,000 (an increase of $1, compared to 2016); the phase out range increases $2,000 to $99,000 to $119,000 for married couples filing jointly.

Phase out ranges for ROTH IRA contributions will also increase in the 2017 tax year, to $118,000 to $133,000 for single filers; the range is $186,000 to $196,000 for married couples who file jointly. These changes could be a new opportunity for those who previously made too much money to qualify for the deduction to increase retirement savings, and lower their tax bill.

  1. Reduced potential to deduct medical expenses for seniors. Taxpayers under the age of 65 cannot deduct medical expenses unless they exceed 10% of their adjusted gross income (AGI) in either 2016 and 2017, but 2016 marks the last tax filing year that taxpayers who are 65 years old or older can deduct medical expenses that exceed just 7.5% of their AGI. When they file 2017, seniors’ medical expenses must also be more than 10% of their AGI to qualify for deduction.

Preparing for Tax Changes that “Could” Be In the Pipeline

You can count on the changes noted above for the 2017 tax season, but other tax changes that may be on the horizon once President-elect Trump takes office remains speculative for the time being.  However, Forbes reports that if the tax changes that were discussed on the campaign trail do indeed come to fruition, they could include cutting tax brackets, eliminating personal exemptions and capping itemized deductions for married couples. Whether, when, or to what degree these changes could impact your financial life, for better or worse, remain to be seen.

But if you do believe tax policy changes will soon occur, Forbes’ contributor and tax expert Robert Wood explains that the most likely outcome is that future tax deductions will be worth less beyond the 2016 tax year. Based on that assumption, he writes that taxpayers may want to consider these steps before 2016 ends, to leverage the current advantages:

  • Maximize potential charitable contributions. This may include monetary donations to qualifying charitable organizations, donating stocks that have lost value, and even donating assets of considerable value, like vehicles, to charity.
  • Sell losing investments in 2016. If you’re ready to part with some losers in your portfolio, their decreased value could be worth more in overall tax advantage, compared to their value in the 2017 tax year.
  • Business owners should buy. Wood says business owners who need to invest in equipment may find it more financially beneficial to do so before the year ends, and may want to consider deferring income into 2017, where possible.

ira rollover changesIf you change jobs (or plan to one day retire from one), there may come a time when you no longer want to keep your retirement funds in your old employer’s retirement plan. While providers (and employer human resources departments) vary in just how simple or complex they make the process of an IRA rollover for retirement plan account holders, it requires that you complete a series of steps in a specified amount of time to avoid being taxed on the funds withdrawn from an IRA, before retirement age.

If you conduct a direct rollover (your old retirement plan makes payment directly to your new plan) or a trustee- to -trustee transfer, you won’t receive a check made payable to you for the withdrawn funds. But if you do receive an IRA rollover check from your plan in order to move funds from an old account to a new one, the Internal Revenue Service states the money must be deposited into a new IRA account within 60 days from the time funds are issued. Miss that date and you could be on the hook for a significant tax bill.

Though the IRS has long offered an appeals process (called a private letter ruling, or PLR) for taxpayers who miss the 60 day IRA rollover window, it’s not free, easy or quick. The IRS fees alone could cost $10,000 or more, the appeals process can take six to nine months, and you could have to hire a professional to help you navigate the system.

But in late summer 2016, the IRS changed the appeals process for those who miss the 60 day IRA Rollover deadline into one that’s far more user-friendly. In fact, it even allows a number reasons account holders can use to explain why they missed a 60 day IRA rollover deadline in order to avoid the tax implications that follow.

Knowing these new rules (and exceptions to them) could save you thousands of dollars if you attempt to rollover your IRA funds but don’t complete the transaction within the allowable amount of time. Here are the important changes now in effect for IRA rollovers.

A more taxpayer friendly appeals process

Under the new system, taxpayers could avoid a penalty and painful appeals process, provided the explanation for why they missed the deadline is aligned with the excuses the IRS considers acceptable, which include:

  • An error made by one of the financial institutions involved in the transfer
  • A lost distribution check that has not been cashed by the IRA account owner
  • Mistakenly depositing the distribution into an ineligible account
  • An incident resulting in serious damage at the taxpayer’s principal residence
  • Death of a family member
  • Family member of the taxpayer of the taxpayer him or herself becomes seriously ill
  • Incarceration of the taxpayer
  • Restrictions imposed by a foreign country
  • Postal mistake
  • A distribution was made to an account of a levy under Section 6331
  • Party making the distribution did not get the taxpayer information needed to complete the transaction in a timely manner

Provided a retirement account holder meets one of these qualifications, the IRS provides a sample letter taxpayers can use to complete a self-certification letter they can provide to the appropriate financial institutions notifying them that a rollover that’s past the 60 day deadline still meets the 60 day rollover timeline, under the IRS’ list of exceptions. The new rules assume that the taxpayer will complete the distribution transaction within 30 days of the missed deadline.

Taxpayers who complete the process should maintain records of the self-certification letter if the IRS later disputes or denies the self-certification claim, or initiates an audit.   For taxpayers whose self-certification claim isn’t accepted, the PLR process remains in tact as an alternative for making appeals (albeit, far more time consuming and expensive than the self-certification process).

tigta and offer in compromise audit

So what happens when you choose to submit an OIC to the IRS? The short answer is that it’s not always an easy process. To that end, recently the Treasury Inspector General for Tax Administration (TIGTA) conducted an audit to evaluate how efficiently the IRS is handling the OIC process. The audit hoped to determine whether or not OICs are being processed appropriately and in a timely manner. According to the IRS’s own policies, the OIC program can only be successful if:

  • Taxpayers make adequate compromise proposals which are consistent with what they can actually pay; and
  • The IRS makes quick and reasonable decisions.

What the TIGTA Audit Discovered

With that background in mind, here is what the TIGTA audit found. The IRS has in fact made some positive changes aimed at improving the entire OIC process both for the agency and for taxpayers, including:

  • Updates to the application forms
  • The creation of an online prequalifier tool
  • Creating a group of “offer” specialists to work payroll service provider cases
  • Encouraged more taxpayers to consider whether offers would benefit them

On the other hand, it wasn’t all good news. Some of the offer employees failed to complete the initial process in a timely manner in all cases. Additionally, they did not always contact taxpayers by the stated deadline, nor did they send an update letter when those stated deadlines were not met. In addition, 11 percent of the cases that were rejected did not include any documentation indicating that IRS employees discussed other possible resolutions with the taxpayer.

What Changes Still Need to Be Done

Therefore, while the audit found that the IRS has in fact made and implemented some important changes to the offer in compromise process, there is still more work to be done to streamline the OIC program. These are the additional recommendations from TIGTA:

  • Remind employees they are required to complete the processing determinations within 16 days and to contact taxpayers within 120 days.
  • Ensure that employees understand the requirements for sending interim letters when they miss the initial 120-day contact deadline.
  • Update the review guidance to specifically include verification that alternative resolutions were discussed with taxpayers when an offer is not accepted.
  • Management should emphasize the need to discuss alternate resolutions in refresher trainings and operational reviews.

IRS Agrees With Audit

It should be noted that the IRS agreed with all the recommendations included in the TIGTA audit and also stated that it would issue a memorandum to remind both managers and employees of these important policies regarding the OIC process. The IRS also agreed to conduct alternative resolution refresher training and to either revise or add verification language to the review process to help ensure that employees discuss alternative resolutions with taxpayers when applicable.