It’s officially tax season, but before you start tracking down receipts and filling in income boxes, there are a few changes from last year that you need to know about.
Delay in getting refund
This year, early filers might see a slight delay in their tax refund. According to the IRS, the Protecting Americans from Tax Hikes (PATH) Act mandates the IRS hold refunds on tax returns claiming the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC).
As a result, the IRS will start to release refunds on Feb. 15, 2017, which means the money won’t arrive in your bank account or on your debit card until the week of Feb. 27. Keep in mind that financial institutions do not process payments on weekends or holidays. The delay might be inconvenient, but it gives the IRS more time to detect and prevent tax fraud.
W-2 verification code
In another effort to combat tax-related identity theft, the IRS is extending its program to verify information on W-2 forms. To do this, the tax agency has placed verification codes on nearly 50 million W-2 forms that will be sent out during tax season, up from 2 million in 2016.
The 16-digit code will appear in a separate, labeled box and tax preparers will be given the following prompt:
“Verification Code: If this field is populated, enter this code when it is requested by your tax return preparation software. It is possible your software or preparer will not request the code. The code is not entered on paper-filed returns.”
Following these instructions helps the IRS validate that the return is real. But don’t worry, filling out the verification code incorrectly will not have a negative impact on you. The IRS assures that tax returns with omitted and incorrect W-2 Verification Codes will not delay the processing of a tax return.
Standard deduction
The standard deduction for heads of household jumps $50 to $9,300 for the 2016 tax year. The other standard deductions will stay the same as they were for 2015 — $6,300 for singles and married couples filing separate returns, and $12,600 for married couples filing jointly. (In October the IRS has announced adjustments for tax provisions for the 2017 tax year, including deduction amounts – you can see them here.)
Increase in health insurance penalty
The Affordable Care Act (ACA), made it easier and more cost-effective for many Americans to attain health insurance. Unless you qualify for an exemption, individuals are required to have insurance. Those choosing to go three or more consecutive months without coverage must pay a penalty when they file their taxes.
For 2016, the penalty for not having healthcare rose to 2.5% of total household adjusted gross income or $695 per adult —whichever is higher (for 2015, it was $325 per person or 2% of household income). For children under 18, the penalty is $347.50 per child, and the maximum you will pay is is $2,085 per family. (There are calculators to help you figure out if and how much you owe.)
With that said, there are several exemptions that will keep you from having to pay the penalty. Some of the most common include:
If you lived abroad for more than a year
If you’re exempt from filing a tax return because your income is too low
If your religion objects to the use of insurance
If you qualify for a hardship exemption due to an issue such as homelessness, bankruptcy, eviction and similarly trying circumstance.
If you are in prison
If you believe you qualify for an exemption, you can claim it when you file your tax return, or apply on the Healthcare.gov website.
Tax Day is April 18
Tax Day is usually April 15. This year, however — just like last year — Tax Day also falls Emancipation Day, a state holiday observed in Washington, DC. Since the IRS can’t schedule the filing deadline to take place on a holiday or weekend, April 18 is the official IRS deadline for 2017. Procrastinators around the world rejoice! You’ll have 3 extra days to get your act together this year: don’t waste it!
Brittany is a writer at Yahoo Finance.
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