Tax Talk

Some tax refunds may be delayed.

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) will affect taxpayers who claim the Earned Income Tax Credit and the Additional Child Tax Credit on 2016 federal income tax returns. Under the law, the IRS is required to hold refunds on returns claiming those credits until February 15, 2017, as an identity theft deterrent. While returns will be accepted if filed earlier, the entire refund will be delayed.

“Unforeseen” equals partial exclusion.

Generally, single taxpayers can exclude up to $250,000 of gain from the sale of a home, and married tax-payers can exclude up to $500,000, when the home is used as a primary residence for two years in a five-year period that ends on the date of sale. Tax law also provides for a partial exclusion when the time and ownership requirements are not met, if the primary reason for the sale is unforeseen circumstances. “Unforeseen” means events the taxpayer could not have reasonably anticipated before buying the home and moving in. How flexible is the definition? Recently, the IRS allowed a partial exclusion when a family living in a two-bedroom, two-bath condominium gave birth to another child and needed a larger residence before the two-year rule was met.

No exception for cash incentives.

Cash and cash equivalent incentives and rewards are taxable income to employees, no matter the amount. Is that also true of cash rewards for participating in a wellness program? The IRS says yes, for cash, cash equivalents, and items such as gym memberships and reimbursements for the wellness program premium.