Each year the tax code sees a wide spectrum of changes and updates, and the 2016 filing season is no exception. This year the IRS has rolled out a number of new measures to prevent people from taking advantage of several substantial tax credits. The 2016 Tax credits affected by these changes include:
- EIC, Earned-Income Credit
- American Opportunity Credit, Tuition
- Child Tax and Additional Child Tax Credit
The aforementioned tax credits are refundable, and can be utilized despite your tax liability. With the Child Tax Credits, one of the most important aspects is making sure that the IRS' strict guidelines have been met, to ensure eligibility and prevent any future issues. Two of the most important considerations are age and proof of current residency. These are not entirely new, however, they're more important than ever for those claiming a dependent who is not your child, such as nephews, grandchildren, etc.
2016 Child Tax Credits
Child Tax Credits have been implemented and will affect anyone who has a child dependent under that age of 17. These credits are typically worth up to $1,000 per child claimed, and considering the significance, you'll need to make sure that the proper forms have been filled out. In the case of a child who does not reside at your legal residence, please reference Form 8332. This is a release from that can be used in the case of divorce or separated parents, and should accompany your 2016 tax return if you're planning on claiming them.
American Opportunity Tax Credit
This tax credit is applicable during the first four years of higher education, and one that many may not be aware of. Form 1098-T is issued directly by the college, university or learning institution, and it is mandatory for anyone wishing to take advantage of this education tax credit. It's important to note that the numbers on the issued 1098-T are not always correct, so have your institution's billing statement on hand for referencing any student loan, paid tuition or scholarship/grant information requested.
2016 Tax Return Delays
Anyone filing a 2016 tax return with the Additional Child Tax Credit or Earned-income Credit (EIC) will see their return slightly delayed. Because of the high levels of fraud circulating around these credits, no refunds will be issued until February 15th and may take until February 27th to fully fund. This does not apply to those who have filed with just the standard Child Tax Credit or American Opportunity credit, though.
For more information on how these changes will affect your 2016 tax filing, or for expert assistance with tax preparation in Rochester NY, Flower City is here to help. We staff a team of tax professionals who are well-versed on Federal and NY taxes, and offer reliable, honest help for individuals, families and businesses. Call Flower City Tax & Accounting today at 585-663-8210 and we'll be happy to help.