With tax season set to start on January 19, there are a number of important tax changes that taxpayers and preparers should be aware of to help make the filing process as smooth as possible.

Greg Rosica, a tax partner at Ernst & Young and contributing author to the EY Tax Guide 2016, pointed to several important developments for this tax season in the Affordable Care Act for both individuals and businesses.

“The main change for people who have not gotten the required health coverage is the increased penalties,” he said. “They have gone up quite a bit. They’re also a bit complicated in that they can be a certain amount per adult and per child and are based on income levels.”

The penalties for not having what the IRS deems minimum essential coverage are continuing to grow more onerous each year. For 2015, the annual payment amount is either the greater of 2 percent of household income above the tax return filing threshold for the taxpayer’s filing status, or the family’s flat dollar amount, of $325 per adult and $162.50 per child, limited to a family maximum of $975. For 2014, the annual payment amount for 2014 was the greater of either 1 percent of household income above the tax return threshold for the taxpayer’s filing status, or the family’s flat dollar amount, of $95 per adult and $47.50 per child, limited to a maximum of $285.

For businesses, the IRS, the Treasury Department and Congress have delayed some requirements. In December, the IRS and the Treasury extended by two months the February 1 due date for employers and issuers to provide individuals with forms reporting on offers of health coverage and coverage provided.  The February 29 and March 31 deadlines for reporting this information to the IRS (by paper or electronically) were extended by three months (see Some Obamacare Reporting Requirements for Employers Extended by IRS).

“It’s important for businesses to focus on how the change in this extension impacts them and the new timing as to when they’re going to have to comply with these kinds of things,” said Rosica. “It does give a little bit of breathing room for many businesses, but still it’s not something that you want to just ignore and put off. It’s still on the horizon and it needs to be addressed. People ought to be taking a look now to understand what their implementation plan is going to be.”

The tax extenders legislation passed by Congress last month also delayed the so-called “Cadillac tax” on high-cost health insurance plans from 2018 to 2020, and it suspended the medical device tax for two years.

The Supreme Court’s landmark ruling last year in the Obergefell v. Hodges case could also have an impact on same-sex married tax clients, making such marriages legal in every state. The 2013 case of U.S. v. Windsor had left complications for same-sex couples, with many of them needing to file as married on their federal tax returns and single on their state returns. The Obergefell case should clarify the situation for same-sex couples and make their tax filing less complex this tax season. But there are still some decisions to make similar to those for opposite-sex couples in terms of deciding between filing jointly or separately as married couples.

“It gives more clarity to that area,” said Rosica. “It certainly allows people who are recognized as married and have been in such situations to be able to file the same way that others do. You have to really look at it to see what married filing jointly does. We still have the marriage penalty tax, and the impact on the rate structure and what not. Oftentimes married filing separately may or may not make sense. You really want to understand what the implications of that are and the optimal way to file.”
Beyond those matters, the tax extenders legislation made many traditional tax breaks permanent, such as the enhanced Child Tax Credit, the enhanced American Opportunity Tax Credit, the enhanced Earned Income Tax Credit, the above-the-line deduction for teachers who buy school supplies, the charitable deduction of contributions of real property for conservation purposes, along with the Research & Development Tax Credit and Section 179 expensing (see Congress Makes Some Tax Extenders Permanent).

“The things that people may have relied on in prior years to take deductions should be there again for the most part, but they should just make sure how it’s going to affect them,” said Rosica. “Also there are very slight changes in the tax brackets. No changes in tax rates, but a slight change in the tax brackets. Not a lot, just $1,000 or $2,000 increases before you hit the next tax rate level. It’s good to understand that. Know what your tax bracket is. There are so many different brackets and levels these days with regard to both the income tax bracket and also when the Net Investment Income Tax hits you, and when the itemized  deduction phase-out and Pease provisions come into play. They all have different income amounts associated with them, so it’s good to understand where you are, because it helps identify what that extra dollar of income is going to get taxed at or whether that extra dollar of deduction is going to benefit you.”