There are several new changes for the upcoming tax filing season. Business as usual is not what it was a few years ago or even last year.
The IRS will start accepting tax returns January 23, 2017. I remember every year tax season started on the 15th of January and if you filed early you would receive your refund in two weeks or less, unless there were some problems with your return. Taxpayers claiming earned income tax credit, child tax credit, additional child tax credit or education credit refunds will be delayed including the portion that does not have anything to do with the credits. These refunds will not be issued before February 15, 2017.
Even though the IRS will begin to issue refunds on the 15th of February your refund might not arrive at your bank until the week of the 27th.
Let’s discuss what qualifies a taxpayer to claim the earned income tax credit, child tax credit, additional child tax credit and the education credit. We are going to about dependents, let’s face it without dependents you can’t claim the first three credits.
The dependent has to be related to you by blood, marriage or adoption to qualify for the tax credits. Dependents has to be your son, daughter, stepchild, foster child, brother, sister, step brother/sister, grandchild, niece, nephew. They also have to meet the age test under age 19 at the end of the year or under 24 if they are in college and younger than you. You have to pay over half of their support and they lived with you over half of the year. Your dependents income has to be less than $4,000 in 2015, it will be a little higher for 2016.
Dependents can be claimed by ONLY taxpayer even if more than one person qualifies to claim the dependent. There are tie breaker rules we will not discuss here.
To qualify for an education credit your dependent has to attend a higher education school, the credit is not for elementary or high school students attending a private school. Students are allowed to claim the American Opportunity Credit for the first four years attending school for higher education. After the first four years your dependents may qualify for the lifelong education credit. This year students have to have form 1098T to qualify for the education credit.
Individual Taxpayer Identifying Number (ITIN)
There may be processing delays for individuals with expiring ITIN numbers. If you have not filed used your ITIN on a tax return at least once in the past three years or your middle number for your ITIN is 78 or 79 it could expire at the end of December 2016. If you plan to file a tax return next year and your ITIN is expiring, you should renew it before it expires.
Taxpayers will be effected by the 2015 Path Act changes.
Individuals cannot file an amended return to claim EITC for prior years that a qualifying child did not have a Social Security Number. This provision went into effect on the date the PATH Act became law on December 18, 2015.
The IRS can stop taxpayers from claiming EITC for 10 years if the IRS finds they have fraudulently claimed the credit.
The EITC is now subject to the penalty for erroneous claim for refunds and credits.
Incorrectly claimed refundable credits will now be taken into account when determining the underpayment penalty.