Just after the most wonderful time of the year comes the most frustrating time, when Americans have to figure out how much they owe Uncle Sam.
There are a handful of rule changes this year that may affect your income tax return, says Jackie Perlman, senior tax research analyst with the Tax Institute at H&R Block. (These don’t include six popular tax provisions that Congress still needs to renew this year.)
1. Extended deadline.
Procrastinators, rejoice. The filing deadline for 2015 income tax returns is April 18, 2016. That’s because the traditional April 15 deadline falls on the day commemorating Emancipation Day, the anniversary of the abolition of slavery in the District of Columbia. Emancipation Day is a D.C. holiday, but the IRS treats these as federal holidays for tax-filing purposes.
Emancipation Day typically is celebrated on April 16. But that date falls on a Saturday next year, so the holiday is being celebrated on the Friday before.
Residents of Maine and Massachusetts get even more time. They have until April 19 to file their federal taxes. April 18 is Patriot’s Day, a statewide holiday in both states. The IRS has previously ruled that state residents get an extra day to file taxes if the federal deadline occurs on a statewide holiday.
2. Higher Affordable Care Act penalties.
Those without health insurance will have to pay a bigger penalty this year. The Affordable Care Act (ACA) requires most individuals who don’t qualify for exemptions to maintain minimum coverage or pay a penalty. For 2015, the penalty increases to $325 per adult or 2 percent of net household income, whichever is greater. That’s up from $95 per person or 1 percent of net household income last year.
For a family of four with a household income of $60,000, that’s a difference between $400 for 2014 and $975 for 2015, says Perlman. The penalty is set to increase again next year to $695 per person, or 2.5 percent of net household income.
The penalty comes out of any federal tax refund you get or added onto the amount you owe the federal government in taxes.
3. Two new forms.
Get ready for more paperwork, thanks to the ACA. Workers will get one of two new forms that show you’re insured through your job.
Those employed by a big company — defined as at least 50 full-time workers — will receive a 1095-C form from their employer. The form identifies the employee and employer; shows which months the employee was eligible for coverage; and shows the cost of the cheapest monthly premium. If the company does not offer insurance to its employees, the 1095-C form will indicate that.
If you have health insurance through a smaller employer or insure yourself, you will receive a 1095-B form, which offers more details than the 1095-C, such as who in your household is covered by the insurance. In some instances, you may receive both forms.
Keep these safe, Perlman says, as proof of minimum essential healthcare coverage under the ACA. The forms will also help determine your eligibility for a premium tax credit if your company’s health plan costs more than 9.56 percent of your income.
Workers are supposed to receive the forms by the end of January 2016.
4. New credit for cross-border workers.
Some taxpayers who work in one state but live in another may get an extra tax credit this year, due to the Supreme Court’s ruling in Comptroller of the Treasury v. Wynne in May. The ruling prevents a state from double-taxing personal income earned by its residents in another state through county- or city-level income taxes.
Maryland was the focus of the court case. The state collected income taxes on behalf of the state and the counties. But it only offered residents a state credit on out-of-state income, but not a county-level credit. After the ruling, the Maryland comptroller announced that it would offer a county-level credit that would be retroactive.
Iowa and Kansas also changed their tax laws following the ruling. Kansas residents can take a credit for taxes paid to other states and their localities now and retroactively. Iowa similarly said that a credit for income taxes paid to other states or their local jurisdictions can be taken against its local income surtaxes along with its state income tax. Iowa’s new practice is retroactive, too.
No other states have changed their policy since the ruling.