Tax Law in 2016
Every year, modified or new tax laws impact individuals, businesses and tax professionals. Since the 2016 tax season is approaching, take some time now to refresh yourself on some recent tax law adjustments. An Increased Health Insurance Penalty In 2014, the penalty for not having health coverage was only 1 percent of a person’s income or $95, whichever was greater. However, in a continuing effort to encourage people to have adequate health insurance, the federal government has made the penalty for lacking coverage in 2016 much higher. This penalty equates to either 2.5% of a person’s income, or $695 per adult—whichever is higher. This constitutes a 731% increase since 2014. For children who do not have health insurance, the penalty for each uninsured child is half the amount for adults — $347.50 in 2016. (Important to note is the household maximum of $2085.) Some circumstances qualify people to be exempt from the penalty. For example, certain life events, claims of hardship and group coverage can spare some taxpayers from paying the fee. Virtual Currency as Income Virtual currencies, such as bitcoin, must be reported on tax forms. However, since virtual currency is not legal tender in the United States or any other country, bitcoin counts as property, not money. The Internal Revenue Service notes the following about virtual currency:
- Virtual currency paid as wages must be reported on a W-2. These wages are subject to standard withholding procedures.
- Self-employed workers must report any virtual currency payments they receive.
- In some cases, virtual currency counts as a capital asset, which means that the currency may be treated similarly to stocks and bonds when realizing gains and losses.
- Other retirement plans, including Roth IRAs, experienced changes on contribution limits. The AGI phase-out range for taxpayers making contributions to a Roth IRA for married couples filing jointly as well as singles and heads of household both increased by $1000.