2020 YEAR/ 2021 YEAR TAX COMPARISON
We strongly advise everyone to become well acquainted with these changes.
Category: blog&news
On November 17th IRS unveiled a new online identity verification process for accessing self-help tools.
In our opinion, the IRS ID verify process was way overdue for an upgrade. Successfully verifying their old platform was an act of GOD. Rumor is… this process is much easier… probably because they outsourced it.
To get to the IRS – ID.ME sign in or create a new account link – CLICK HERE
Here are all the other important links that you may be interested in
Child Tax Credit Update Portal – CLICK HERE
Online Account – CLICK HERE
Get Transcript Online – CLICK HERE
Get An Identity Protection PIN (IP PIN) – CLICK HERE
Online Payment Agreement – CLICK HERE
Hope this is helpful!
Here is a short update on what changed with the child tax credit & advance child tax credit.
- One year expansion for 2021 tax year only, per the American Rescue Plan Act of 2021)
- For tax year 2021, the Child Tax Credit is increased from $2,000 per qualifying child to:
- $3,600 for children ages 5 and under at the end of 2021; and
- $3,000 for children ages 6 through 17 at the end of 2021
Note: The $500 nonrefundable credit for other dependents amount has not changed.
- The advance: 50% of it will be paid in advance with monthly payments. But those montly payments will only rund form July to Decemebr 2021. (The payments will be made on July 15, August 13, Spetember 15, October 15, November, 15 and December 15.) The remaining 50% will be calimed as a credit on your 2021 tax return.
- Filers can OPT-OUT of the advance by going online and selecting to receive the full CTC on their 2021 tax return instead.
- IF filers are paid too much (i.e., more than the child tax credit they’re entitled to claim for 2021), they might have to pay back some of the money.
- Filers with 2021 modified AGI no greater than $40,000 (single filers), $50,000 (head-ofhousehold filers), or$60,000 (joint filers) won’t have to repay any child tax credit overpayments.
- Filers with a modified AGI from $40,000 to $80,000 (single filers), $50,000 to $100,000 (head-of-household filers), or $60,000 to $120,000 (joint filers) will need to repay a portion of any overpayment.
- Filers with modified AGIs above those amounts will have to pay back the entire overpayment.
- The $2,500-of-earned-income required is dropped for 2021, too. Children who are 17 years old also qualify for the 2021 credit.
Phaseout-
- The Child Tax Credit begins to be reduced to $2,000 per child if your modified AGI in 2021 exceeds:
- $150,000 if married and filing a joint return or if filing as a qualifying widow or widower;
- $112,500 if filing as head of household; or
- $75,000 if you are a single filer or are married and filing a separate return.
- The first phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
- The Child Tax Credit won’t begin to be reduced below $2,000 per child until your modified AGI in 2021 exceeds:
- $400,000 if married and filing a joint return; or
- $200,000 for all other filing statuses.
The second phaseout reduces the Child Tax Credit by $50 for each $1,000 (or fraction thereof) by which your modified AGI exceeds the income threshold described above that is applicable to you.
If you prefer, here is the link to FAQ – CLICK HERE
For 2021, the American Rescue Plan Act made child, and Dependent care credit substantially more generous. Now taxpayers can get up to $4000 for one qualifying person and $8000 for two or more qualifying persons. Thus, child and dependent care credit can help you pay for the care of eligible children and other dependents. In addition, this is a potentially refundable credit, so you might not have to owe taxes to claim the credit as long as you meet the other requirements. Below are some FAQs that can help you learn if you are eligible and, if eligible, how to calculate your credit.
- Are you eligible to claim the credit?
You are eligible to claim this credit if you (or your spouse in the case of a joint return) pay someone to care for one or more qualifying persons for you to work or look for work, and your income level is within the income limits set for the credit. If you are married, you must file a joint return to claim the credit. However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still claim the credit.
- How do you claim the credit?
To claim the credit, you will need to complete Form 2441, Child and Dependent Care Expenses, when you file your Federal income tax return. You should keep records of your work-related expenses. Also, if your dependent or spouse is unable to take care of himself or herself, your records should show both the nature and length of the disability. Other records you should keep to support your claim for the credit.
- What information do you need from my care provider to claim the credit?
You must identify all persons or organizations that provided care for your child, dependent, or spouse. To identify the care provider, you must give the provider’s name, address, and taxpayer identification number (TIN). If the care provider information you give is incorrect or incomplete, your credit may not be allowed.
- Who is a qualifying person?
- Your dependent who is under age 13 when the care is provided;
- Your spouse, if your spouse isn’t mentally or physically able to care for himself or herself and lives with you for more than half the year;
- and A person who isn’t mentally or physically able to care for himself or herself lives with you for more than half the year, and either:
- Is your dependent OR
- Would have been your dependent except that (i) he or she receives more than a certain gross income amount ($4,300 in 2021), (ii) he or she files a joint return, or (iii) you (or your spouse in the case of a joint return) can be claimed as a dependent on someone else’s return.
- What percentage of my work-related expenses are allowed as a credit?
The percentage of your work-related expenses allowed as a credit depends on your income (and your spouse’s income in the case of a joint return). The maximum percentage of your work-related expenses allowed as a credit for 2021 is 50 percent.
- When does the 50% amount begin to phase out?
The amount of your adjusted gross income determines the percentage of your work-related expenses that you are allowed as a credit. For 2021, the 50-percent amount begins to phase out if your adjusted gross income is more than $125,000, and completely phases out if your adjusted gross income is more than $438,000.
- Is there a limit on the amount of work-related expenses you can take into account in calculating the credit?
Yes. The maximum amount of work-related expenses you can take into account for purposes of the credit is $8,000 if you have one qualifying person, and $16,000 if you have two or more qualifying persons. This means that the maximum total amount of the credit is $4,000 (50 percent of $8,000) if you have one qualifying person, and $8,000 (50 percent of $16,000) if you have two or more qualifying persons.
Please know that IRS continually updating information regarding the child and dependent care credit. For more information on this topic please visit IRS.GOV
To help taxpayers, the IRS annouced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
Here is quick summary on the press release:
Taxpayer who filed prior to change to the handing of the unemployment benefits
- IRS will AUTO Recalculate
- IRS will refund any resulting overpayment or apply to outstanding taxes owed
- The first refunds are expected to be made in May and will continue into the summer.
- NO need to file an amendment unless…
- The calculation changes make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.
- For Taxpayers who have yet to file
- Our software has been updated to accommodate.
- Prepare the return as you would normally
CLICK HERE to read the full press release.