Mobility

February 2017

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28 Mobility | February 2017 WORLDWIDE ERC ® GOVERNMENT AFFAIRS 2017 Each year, the Internal Revenue Service (IRS) and Social Security Administration (SSA) make inflation adjustments respectively to tax deductions and other tax items, as well as to Social Security benefits and the maximum amount of earnings subject to the Social Security tax. In the case of tax deductions, there are 55 tax provisions adjusted for an annual inflation update with varying changes for 2017. Social Security benefits went up marginally, while the threshold for limiting the Social Security tax raised by 7.34 percent. TAX DEDUCTIONS AND OTHER ITEMS In the notice IR-2016-139 and Revenue Procedure 2016-55, the Internal Revenue Service provided its annual changes to tax items subject to inflation updates. The changes are for the tax year 2017, for tax returns filed in 2018. Some items increased slightly, while others are unchanged. For example, the standard deduction amounts for singles and married couples increased from $12,600 to $12,700 for couples and from $6,300 to $6,350 for singles, but the personal exemption of $4,050 remains the same. The foreign earned income exclusion rises from $101,300 to $102,100, and the alternative minimum tax exemption amount goes from $53,900 to $54,300 for singles and from $83,800 to $84,500 for married couples filing jointly. The income levels for each of the tax brackets increased by different percentages, but all by fairly minimal amounts. For high-income taxpayers subject to the 39.6 percent rate, the income at which that rate kicks in goes up from $415,050 to $418,400 for singles, and from $466,950 to $470,700 for married couples. On health care tax provisions, the penalty for not meeting the requirement for maintaining essen - tial health coverage is unchanged. The penalty is the greater of $695 or 2.5 percent of income for an individual, or $2,085 or 2.5 percent for a family, with a maximum penalty of $13,000. The amount an employee can voluntarily contribute to a health flexible spending account increased $50 from 2016, to $2,600 for 2017. The penalties for minimum essential health care coverage were set under the Affordable Care Act, as were the limitation on contributions to flexible spending accounts. Regarding some interesting provisions of note, the passenger air transportation excise tax increases for 2017. For each domestic (within the lower 48 states) segment of a flight, the tax increases by $0.10, to $4.10. For each international segment that either begins or ends in the U.S., the tax increases by $0.20, to $18. The tax for flights starting or ending in Alaska or Hawaii is up $0.10, to $9. Individuals who receive high-value gifts from certain foreign persons will need to report the gifts to the IRS if the aggregate value of the gifts exceeds $15,797. Finally, unfortunately, for the first time in several years the excise tax on arrow shafts has increased, from 49 cents to 50 cents per shaft. The penalty for failing to file or filing incorrect information on returns such as Forms W-2, which was indexed for inflation after 2015, goes up to $260 per return. There is a maximum penalty of $3,218,500. To access IR-2016-139, please go to https://www.irs.gov/ uac/newsroom/in-2017-some-tax-benefits-increase-slightly- due-to-inflation-adjustments-others-are-unchanged?_ga=1. 157801466.1958370245.1473172629, and for RP-2016055, please go to https://www.irs.gov/irb/2016-45_IRB/ar12. html?_ga=1.82293590.1958370245.1473172629. SOCIAL SECURITY BENEFITS For 2017 there was a slight increase of 0.3 percent in Social Security benefits due to inflation. Last year, there was no increase in the amount of benefits paid, which was also the situation in 2010 and 2011. Over the past 10 years, the average increase or cost-of-living IRS and SSA Inflation Changes for 2017 By Peter K. Scott and Tristan North

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