Just over a month before your taxes are due. If you’re getting ready to file your individual taxes, now is a good time to review these tax developments from 2016 so you don’t miss out on important reporting information or savings.
Sharing Economy – If you receive income from a sharing economy activity such as renting a room, providing a car ride, etc., it is generally taxable income to you even if you do not receive a Form 1099-Misc (Miscellaneous Income), Form 1099-K (Payment Card and Third Party Network Transactions), Form W-2 (Wage and Tax Statement), or some other income statement. This is true even if you provide the service as a side job or to earn part-time income. The IRS created a Sharing Economy Tax Center on its IRS.gov website in 2016 highlighting tax issues for individuals performing services in the sharing economy and to assist them with filing accurate tax returns.
Definition of Marriage – The IRS issued regulations in September 2016 explaining that marriage for federal tax purposes encompasses both opposite-sex marriage and same-sex marriage. The final regulation also clarifies the treatment of common law and foreign marriages. Domestic partnerships and civil unions continue to be excluded from the definition of marriage.
Mortgage Interest – The IRS has announced that it will not dispute the holding of a federal appeals court decision regarding the limit on mortgage interest deductions under Code Sec. 163 (Voss, CA-9, 2015-2 ustc ¶50,427). The court found that when two or more unmarried taxpayers own a qualifying residence, certain limits on the deduction apply per taxpayer, rather than per residence. As a result, the unmarried co-owners could take a larger interest deduction than if the limit applied per residence. It is unclear whether Congress will eventually override this outcome.
Form 1098-T Tuition Statements – In July 2016, the IRS issued proposed regulations that provide detailed guidance to higher education institutions on how to report tuition and other qualified expenses on Form 1098-T Tuition Statement.
60-Day Rollover Deadline – In August 2016, the IRS provided needed relief in the form of a new self-certification procedure for taxpayers who inadvertently miss the 60-day time limit for certain retirement plan distribution rollovers. The IRS provided a number of mitigating circumstances, including mistakes by a financial institution or a roll-over into an account the taxpayer mistakenly thought was an eligible retirement plan. This self-certification procedure provides relief without the time and expense of filing a private letter ruling request.
Pamela Wheeler, EA