WASHINGTON (AP) — What's new when you file your taxes this year? Taxpayers without health insurance will face larger penalties, and those insured by their employers will get a new tax form. There also have been adjustments for inflation, and Congress extended expiring tax benefits, some permanently.
"The good news is that we finally have some certainty," said Kathy Pickering, executive director of the Tax Institute at H&R Block.
The Internal Revenue Service began accepting returns last week, which means it's time to be gathering documents. They include W-2 forms reporting wages or salaries, which employers will send out this month. You'll also need Form 1099 reporting interest and dividend income, Form 1098 showing interest paid on a home mortgage, and Form 1095-A if you bought coverage through the health insurance marketplace.
First, the bottom line: You'll have extra time to file without needing an extension. The deadline is April 18 because of the celebration of Emancipation Day in the District of Columbia.
With taxpayers increasingly choosing to file electronically, the IRS expects to pay more than 90 percent of refunds in less than 21 days.
"Choosing e-file and direct deposit for refunds remains the fastest and safest way to file an accurate income tax return and receive a refund," the IRS said on its website.
Electronic filing was up 2.4 percent in 2015 from 2014. Similarly, the use of direct deposit for refund checks also is gaining in popularity. Last year, more than 86 million tax refunds were paid through direct deposit, up 2.7 percent over 2014.
Overall, the average refund in 2015 was $2,797, a slight increase over the previous year.
Tax brackets, the value of each exemption and the standard deduction have been adjusted for inflation. So have the levels at which certain tax credits and deductions begin to phase out.
Fewer people are itemizing because the standard deduction continues to creep upward, said Barbara Weltman, a consultant and author of books on taxes, law and finance.
For 2015, the standard deduction is $6,300 for single filers, $12,600 for married couples filing jointly and $9,250 for heads of household. Each personal exemption is worth $4,000, up from $3,950 in 2014, according to the IRS.
Sometimes the first indication of identity theft is a notice from the IRS that a tax return already has been filed with a taxpayer's Social Security number.
"The IRS and the states have been working to get better at detecting these false returns, but as the criminals steal more and more personal data, they can do an even better job of making a tax return look legitimate," IRS Commissioner John Koskinen said. "In short, the criminals are evolving, and so must we," he said.
One visible change: Taxpayers who use private-sector tax software accounts will see new password protections. New standards require a minimum eight-digit password using a combination of letters, numbers and special characters. Software providers will incorporate new features that lock users out of filing after a certain number of missed passwords. These companies also will ask additional security questions to identify users. Such features make it more important for taxpayers to keep backups of their documents in case they get locked out of the software at a critical time and need to start the process over again.
TurboTax, the largest online tax filing service, will now alert users if a second account has been created with their Social Security number, giving taxpayers a heads-up that someone else may be trying to file in their name.
For the first time, the IRS, state tax officials and tax software providers will share information in real time about suspicious returns in an effort to spot patterns and catch fraud as it happens.
Health insurance and taxes
"The Affordable Care Act has now made health care a tax issue," Pickering said.
When filing Form 1040, filers now need to pay attention to line 61, attesting that they have health care coverage. Form 1040EZ and Form 1040A have similar requirements on line 11 and line 38, respectively.
Filers who bought coverage through a federal health care exchange should expect to receive Form 1095-A in the mail from that exchange by early February. Form 1095-A records total insurance premiums paid as well as tax credits received for each month of the year. The information will help you fill out Form 8962, which allows you to claim any credit to which you are entitled.
Taxpayers also will see some new forms, 1095-B and 1095-C, if they have employer-provided health insurance or got it outside the marketplace. Lisa Greene-Lewis, CPA and editor of the TurboTax blog, called the forms a "non-issue." She said they are informational only.
"The IRS computers are going to be able to verify your information that you and your dependents had the coverage," she said.
Taxpayers who didn't have coverage in 2015 or didn't qualify for an exemption from coverage will face significantly higher penalties than last year.
For those who don't qualify for an exemption, the penalty for not having insurance in 2015 is generally the greater of $325 per person or 2 percent of taxable income over the filing threshold up to certain limits.
Last year was the first time penalties were collected. Recently released IRS numbers indicate that 7.9 million households paid fines averaging $210 apiece on their tax returns for 2014. The penalties then were lower — $95 for the flat fee, or 1 percent of taxable income.
Many lower-income people are exempt from the penalty, so taxpayers should check if they qualify for an exemption (use Form 8965 to do so).
Taxpayers can either get the credit in advance when buying insurance through the exchanges or receive it as a refund on their taxes. Either way, they need to fill out Form 8962 and attach it to their return.
Congress acted in mid-December to extend about 50 expiring tax benefits for individuals and businesses. "Some of the credits and deductions which are pretty popular with people have been extended permanently," Pickering said.
The American Opportunity Tax Credit, for example, provides eligible students with a maximum annual credit of $2,500 for the first four years of college. The congressional action making it permanent helps students or their parents plan four years out, she said.
Congress also made permanent the $250 above-the-line deduction for elementary and secondary-school teachers who use their own money to buy school supplies, as well as the deduction for state and local sales taxes, primarily designed for people who live in states without a state income tax.
Also made permanent was the expanded and enhanced earned income tax credit for taxpayers with three or more children. "It's really a lifeline for low-income working families," Pickering said.
Previous years' returns
Taxpayers who need a copy of a tax return for a specific tax year will face added hurdles this season when it comes to getting information via the IRS Get Transcript program.
Koskinen said tax filers are asked to plan ahead if they need an old tax return via Get Transcript. A filer could still request a return for a previous tax year online at www.irs.gov via the Get Transcript system.
But thanks to some serious ID fraud relating to Get Transcript last year, legitimate taxpayers will face more roadblocks, too.
This year, you won't be able to quickly print out that old return after viewing it online. Instead, the earlier return will be mailed to the address that the IRS has on record. And it could take five to 10 calendar days to receive that old return, Koskinen said.
And here's another warning about scam artists: The IRS states that the IRS never sends emails requesting that you obtain or access your transcripts.
The change is a result of some previous activity by fraudsters. Last June, Koskinen reported that between mid-February and mid-May 2015 criminals successfully gained access to 100,000 Get Transcript accounts. Crooks had tried to access roughly another 100,000 accounts.
Same-sex married couples should have an easier time filing taxes as a result of a Supreme Court decision last June. With gay marriage now recognized across the nation, gay and lesbian couples can file as "married, filing jointly" on both their state and federal returns.
Greene-Lewis said that before the ruling, some couples had to prepare as many as five separate returns. Now, she said, "The process is as any married couple."
This report includes material from the Detroit Free Press, the Washington Post and GOBankingRates.com.