The 10 top tax issues that matter most in 2016

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There were no major tax law changes in 2015. That's generally good news, meaning taxpayers don't have to worry about how new laws might affect them. However, Congress did manage to make some relatively small tax changes.

There is also the continued implementation of prior tax measures, Uncle Sam's increasing efforts to stop tax identity theft and new tax deadlines, meaning that most taxpayers will encounter at least a few new tax matters in the new year.

Here are 10 tax topics to stay on top of in 2016.

IRS card on desk with tax files © Lane V. Erickson/

© Lane V. Erickson/

1. Targeting of identity thieves

In response to the inroads that identity thieves have made into the U.S. tax system, the IRS convened a Security Summit in March 2015 to brainstorm ways to stop the crooks.

Seven months later, the agency, state tax officials and the private sector tax industry announced a series of steps to stem tax ID theft and related refund fraud, including the sharing of more taxpayer filing data.

Specifically, 20 new pieces of data will be used to validate tax returns in 2016. This information exchange should help validate the authenticity of taxpayers and the entries on tax returns in their names. IRS Commissioner John Koskinen says the added security measures shouldn't be a sea change for filers. However, the new process is likely to slow the IRS' processing of returns, and that could mean some delays in issuing refunds.

2. New tax deadlines

Mark your calendar.

The way the days fall in April 2016 means that the usual mid-month tax-filing deadline is a bit later. In 2016, the Washington, D.C., holiday Emancipation Day is celebrated on April 15. Federal law mandates that any holiday in the nation's capital also applies to offices there, and that pushes the usual due date for annual 1040 filings to Monday, April 18.

Taxpayers in Maine and Massachusetts will get one more day -- until April 19 -- to file their federal returns because offices there will be closed on the 18th for Patriots' Day, the holiday in those states that commemorates the first battles in the Revolutionary War.

3. Obamacare tax penalties, credits

Have health insurance or be prepared to pay the price at tax-filing time as a result of the Affordable Care Act.

The price keeps going up. The individual responsibility payment penalty for not having minimal essential medical coverage is based each month on the number of uninsured members of your family and your household income. An uninsured household of 3 or more during the 2015 tax year could face a maximum penalty of $975. The maximum penalty for the 2016 tax year skyrockets to $2,085.

There is a bit of good news on the Obamacare coverage front. The Supreme Court ruled in June 2015 that the federal premium tax credit is available to eligible taxpayers, regardless of whether they bought their coverage on the federal exchange or through state marketplaces. This government subsidy is available to eligible insurance exchange policy buyers to help them pay for part of their required coverage.

4. Same-sex state tax filing

In a historic ruling for same-sex couples, the U.S. Supreme Court in June 2015 approved same-sex marriage. No state can ban same-sex marriage, and states must recognize legal ceremonies performed elsewhere.

On the tax front, that means gay and lesbian married couples now can file joint tax returns on the state level, just as they already were required to do with their federal taxes.

This should simplify tax tasks for many same-sex couples, since state tax departments tend to use the federal filing as the basis for state returns. Same-sex couples also should check with their state tax departments about possibly amending prior-year returns that the partners had to file as single state taxpayers before the Supreme Court's ruling.

5. Harder to hide international money

Good tax havens are getting harder to find. The Foreign Account Tax Compliance Act, or FATCA, was enacted in 2010 after reports that foreign banks were encouraging U.S. taxpayers to hide assets abroad.

FATCA requires foreign financial firms to report account data for their U.S. account owners or face stiff penalties.

Seventy-nine countries, including the Holy See, have signed FATCA agreements with the IRS. And in October, the IRS announced that it had taken the next step in foreign account reporting. It now is automatically exchanging digital financial account information with tax authorities abroad.

The bottom line is that it's no longer easy for international account owners to fly under the IRS radar. If you try and are caught, you could face substantial penalties and possible criminal prosecution. To avoid that, the IRS recommends you come clean through its offshore voluntary disclosure program. Here, you can pay what you owe on your overseas money, and the IRS will back off on some of the potential penalties.

6. Proving education tax break eligibility

Do you depend on federal tax breaks to help pay for your higher education?

Starting with the 2016 tax year, you'll have to prove you're actually in class. A provision in trade legislation enacted in 2015 requires taxpayers to have in hand Form 1098-T to claim any educational tax benefits.

This statement, which is sent by schools to students and copied to the IRS, verifies that you paid what the IRS calls "qualified educational expenses" in the preceding tax year. These include tuition, any fees that are required for enrollment and required course materials.

If you don't get this official verification, you cannot claim the American opportunity or lifetime learning tax credits or the tuition and fees deduction. This reporting requirement was made after the Treasury inspector general for tax administration audits found that in 2011 and 2012, the IRS allowed billions of dollars in education tax credits for ineligible students.

The change won't affect any education claims made on 2015 returns filed in 2016. But if you're planning to claim them on the 2016 return you'll file in 2017, make sure you get your 1098-T first, or you won't get the education tax break.

7. Tax preparer regulation effort continues

In 2015, the IRS revived and revised its efforts to regulate tax preparers. After the courts threw out the agency's plans to require certain tax preparers to take classes and pass tests, the IRS set up a voluntary continuing education program for tax pros.

The Annual Filing Season Program remains in place for 2016. However, IRS Commissioner Koskinen wants more. He's continuing to lobby Congress for a law change that would give the IRS authority to establish the kind of oversight system it wants. There have been indications that the commissioner is gaining support in this area; a bipartisan bill to allow stricter regulation was drafted by members of the Senate Finance Committee but was pulled before reaching the full committee for consideration.

However, while Capitol Hill resistance might be easing, the IRS is again facing legal challenges to its tax preparer regulatory efforts. A lawsuit filed by the American Institute for CPAs aimed at ending the voluntary program is working its way through the federal court system.

8. MyRAs and ABLE accounts open

Taxpayers in 2015 were introduced to 2 new tax-favored savings accounts that are designed for individuals who don't make a lot of money.

The starter retirement savings account known as myRA became available to all on Nov. 4, 2015. The myRA is aimed at lower-income earners, allowing them to open a retirement savings plan with minimal contributions and no fees. The accounts are patterned after Roth IRAs, which means there's no immediate tax benefit, but the account grows tax-free.

The Achieving a Better Life Experience, or ABLE, account option became available Jan. 1, 2015. This account resembles popular state-run 529 college savings plans and is designed to help people with disabilities and their families save and pay for disability-related expenses. Contributions to an ABLE account are not tax-deductible, but withdrawals for qualified expenses are free from federal taxation.

Advocates are hopeful that these 2 fledgling savings plans will help underserved tax constituencies and become more widespread as eligible taxpayers learn about them.

9. Fantasy sports fallout

Fantasy sports are a big business, but many question the games' legality. As the fantasy sports leagues morphed into daily games, several states -- most notably Nevada and New York -- declared them gambling enterprises and ordered the operations halted within their borders.

The tax stakes grow as states with casinos report losing millions in tax revenue to the online fantasy games. Capitol Hill has also weighed in, with some in Congress questioning whether the Unlawful Internet Gambling and Enforcement Act loophole that sanctions fantasy sports as games of skill should be closed. As the sports seasons roll along and fantasy sports participation grows, look for a more definitive designation of the game.

From a fantasy sports player's tax perspective, the IRS now considers the money made on fantasy sports as taxable hobby income. If the games are deemed gambling, that won't change the taxability of winnings. However, it will change how players are able to deduct any of their costs and losses against their winnings.

So, fantasy sports players, keep an eye on how state tax departments and Uncle Sam will ultimately deal with your hobby.

10. Persistent tax scams

The IRS' expanded efforts to stem tax identity theft and related false refunds are just part of the fraud fight. The agency reminds taxpayers that they have a critical role in staying alert for possible identity theft scams.

The IRS, state tax officials and the tax industry officially launched a public awareness effort on Nov. 19 to encourage taxpayers to be careful when it comes to their tax data.

"It's clear that when it comes to identify theft, we all have a part to play," said IRS Commissioner Koskinen in announcing the "Taxes-Security-Together" campaign. "With the public's help, this will greatly strengthen and improve the new tools being put into place by the IRS, states and industry."

The IRS, on its website, continues to issue warnings about tax scams, including fake IRS agent phone calls, email phishing and other identity theft attempts by criminals.

Although official and individual efforts against tax crooks do help, the criminals are creative. They are constantly tweaking their felonious attempts to steal information that they then use to file for false refunds. In addition, a new law that requires the IRS to use private bill collectors to track down some tax debts could be used as a hook by crooks looking for another way to con conscientious taxpayers out of their cash. So in 2016, remain diligent when it comes to protecting your tax data.


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