As the tax filing season approaches on January 23 in the United States, the Internal Revenue Service (IRS) in Washington has reminded taxpayers of things they should do to get ready. The tax season in the U.S. means mounds of paperwork with individuals and accounting firms often overwhelmed before tax returns are due in on April 18, 2017.

A myriad of IRS tax forms are used for taxpayers and tax-exempt organizations to file and report financial information to the IRS. These are used to report income, calculate taxes to be paid to the federal government, and to disclose other information as required by the Internal Revenue Code (IRC). There are in fact over 800 various forms and schedules.

For most taxpayers, December 31 is the last day by which to take actions that will impact their 2016 tax returns. Charitable contributions, for example, are deductible in the year made and donations charged to a credit card before the end of 2016 count for the 2016 tax year, even if the bill is not paid until 2017. Checks to a charity count for 2016 as long as they are mailed by the last day of the year.

According to a communiqué from the IRS published this month:  “Taxpayers who are over age 70 ½ are generally required to receive payments from their individual retirement accounts and workplace retirement plans by the end of 2016, though a special rule allows those who reached 70 ½ in 2016 to wait until April 1, 2017 to receive them.”

The statement added: “Most workplace retirement account contributions should be made by the end of the year. However, taxpayers can make 2016 IRA contributions until April 18, 2017. And, for 2016, the limit for a 401(k) [a tax-qualified, defined contribution pension account] is $18,000. For traditional and Roth IRAs, the limit is $6,500 – if aged 50 or older and up to $15,500 for a Simple IRA for those fifty years of age or older.”

Taxpayers who have moved should tell the US Postal Service, their employers and the IRS, it was advised. And, to notify the IRS, mail IRS Form 8822, Change of Address, to the address listed on the form’s instructions.

For those taxpayers who purchase health insurance through the Health Insurance Marketplace, which is also known as the Health Insurance Exchange, individuals should notify the Marketplace when they move out of the area covered by their current Marketplace plan.

Each year the Marketplace, the place where people without health care insurance can find information about health insurance options and buy health care insurance, has an open enrollment period. Information via the IRS can be found regarding eligibility for help with paying premiums and reducing out-of-pocket costs.

The 2017 open enrollment period began November 1 and runs through January 31, 2017. To have coverage commencing on January 1, 2017, people had to enroll by December 15 this year.

Social Security Administration

As for name changes due to marriage or divorce, notify the Social Security Administration (SSA),  an independent agency of the US federal government that administers social security, a social insurance comprising of disability, retirement and survivors’ benefits, so that the new name will match IRS and SSA records. In addition, notify the SSA if a dependent’s name changed.

“A mismatch between the name shown on your tax return and the SSA records can cause problems in the processing of your return and may even delay your refund,” the communiqué stated.

Individual Taxpayer Identification Number

Effective January 1, 2017, any Individual Taxpayer Identification Number (ITIN) not used at least once on a tax return in the past three years will no longer be valid for use on a return.

Furthermore, an ITIN with “middle digits 78 or 79” will also expire at the start of January 2017. Those with expiring ITINs who need to file a return in 2017 must renew their ITIN. But affected ITIN holders can avoid delays by starting the renewal process now.

“Taxpayers should allow seven weeks from January 1, 2017, or the mailing date of the Form W-7, whichever is later, for the IRS to notify them of their ITIN application status – nine to 11 weeks if taxpayers wait to submit Form W-7 during the peak filing season, or send it from overseas,” the communiqué stated.

It added: “Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits. For more information, including answers to frequently-asked questions, visit the ITIN information page on”

It is worth pointing out that all  ITINs not used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return as of January 1, 2017. And, all ITINs issued prior to 2013 will begin expiring this year, commencing with those with middle digits of 78 and 79. For example, 9XX-78-XXXX.

Keeping copies of tax returns is clearly important since the IRS makes changes to protect taxpayers and authenticate their identity. Starting in 2017, taxpayers using a software product for the first time may need their Adjusted Gross Income amount from a prior tax return to verify their identity.

Taxpayers can learn more about how to verify their identity and electronically sign their tax return at Validating Your Electronically Filed Tax Return via the IRS website.

W-8 Series & Foreign Persons

The form W-8BEN, or the ‘Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding’ to give its full name, is used by foreign persons (including corporations) to certify their non-U.S. status.

The form, which needs to be updated every three years and can only be submitted directly to your withholding agent, establishes that one is a non-resident (aka ‘alien’) or foreign corporation, so as to avoid or reduce tax withholding from U.S. source income, such as rents on U.S. property, interest on U.S. bank deposits or dividends paid by U.S. corporations.

Late this November I received such a request from the brokerage firm through which I hold stocks, some of which are American. As my current W-8BEN form expires on 31 December 2016, it means that unless one renews you will become unable to hold or trade U.S. securities from 1 January 2017 onwards.

Therefore, if you are planning any investments in U.S. securities for 2017 and beyond, it is recommended renew your W-8BEN as soon possible before the 2016 year end. It’s also easy to forget about such matters at this time of year over the festive period. Also, should one not renew online or have done so via post the U.S. securities one holds will be sold.

A communiqué from my broker in the UK that is part of a Canadian firm read: “We’ll do this without further notice on or after 1 January 2017. We’re unable to say when this will be but you’ll receive the valuation that applies at the time we place the trade. If we need to sell your U.S. securities, online trading commission plus a £40.00 (c.$50) fee will apply to each sale we place.”

However, the good news here is that it is easy to renew and once completed trading U.S securities with your broker can be undertaken until the end of 2019.

Taxing Worldwide Income Of US Citizens & Residents

The U.S. federal and most state income tax systems tax the worldwide income of citizens and residents. A federal foreign tax credit is granted for foreign income taxes. Those individuals residing abroad may also claim foreign earned income exclusion and in order to qualify for the exclusion, the taxpayer’s tax home must be outside the U.S.

Additionally the taxpayer must meet either of two tests, namely; (1) Bona Fide Resident Test: where the taxpayer was a bona fide resident of a foreign country for a period that includes a full U.S. tax year; or, (2) Physical Presence Test: where the taxpayer must be physically present in a foreign country (or countries) for at least 330 full days in any 12-month period that begins or ends in the tax year in question.

Those citizens and residents living and working abroad from the U.S. may be entitled to a foreign earned income exclusion, which reduces taxable income. For 2015, the maximum exclusion was $100,800 per taxpayer and $101,300 for 2016, with future years indexed for inflation.

IRS Tax Forums & Filing

As part of the IRS’s on-going efforts to improve matters, IRS Tax Forums were held in five U.S. cities during 2016 with more than 10,700 tax professionals attending the three-day events held earlier this year in July, August and September.

The agency, which collects approximately $3.1 trillion in tax revenue each year and has around 90,000 employees and a budget of approximately $10.9 billion, has been developing a so-called ‘Future State’ plan, which envisions the taxpayer experience over the next five years and beyond. This initiative is designed to “improve the IRS’s ability to fulfill its mission in the years to come.”

They are seeking to enhance and expand their services for all taxpayers, to provide the services they need whether in-person or on-line. The objective is to make interactions with the IRS timelier and easier for taxpayers and tax professionals.

A central component of the plan is the creation of online taxpayer accounts as a new option through which taxpayers will be able to obtain information from and interact with the IRS.

“While technology and new service options are important parts of Future State, you can’t overlook the continuing need to have in-person service available to taxpayers over the phone and in-person,” John Koskinen, IRS Commissioner said commenting late this December.

He added: “Our hope is that expanded online options will provide help to taxpayers who prefer that option, while also freeing up valuable resources for people who need help over the phone or in-person.”

John Koskinen, commissioner of the IRS, speaks during a National Press Club luncheon in Washington, D.C., U.S., on March 31, 2015. (Photographer: Andrew Harrer/Bloomberg).

As part of the IRS’ Tax Forums this year, tax professionals received a demonstration of the online tax account application. In November 2016, the IRS went from the demo to an actual launch of the online tax account application on, which provides information to taxpayers with straightforward balance-owed inquiries in an easy, secure and convenient way.

This new Finding Out How Much You Owe feature, paired with existing IRS online payment options, increases taxpayer self-service options. Highlighting early use for the online account, in around four weeks since its launch, taxpayers had checked their account balance over 76,000 times and used the new offering to initiate over 8,600 tax payments, worth over $27.6 million, through the Direct Pay feature.


Source: FORBES