2022 What’s new part one, get ready to get refunds to that Max dive in into income tax 2021 2022. This information can be found on the instructions to form 1040 found on the IRS website, irs dot govt irs.gov. Do date of return file Form 1040 or 1040 s are by April 18 2022.
That’s April 18 2022. The due date is April 18, instead of April 15. Because of the Emancipation Day holiday and the District of Columbia, even if you don’t live in the District of Columbia, if you live in Maine or Massachusetts,
you have until April 19 2022. That is because of the Patriots Day holiday in those states tuition and fees deduction not available so the tuition and fees deduction is not available after 2020. Instead, the income limits for the Lifetime Learning Credit have been increased, you could see form 8863.
And its instructions, we might look at that in the future in our future presentations. Here’s a quick look to form 8863 education credits American opportunity the Lifetime Learning credits, you can find it on the IRS website, irs dot govt as well as the related instructions. Economic Impact payment. In other words,
he IP three we’re talking about the third one, there’s three that went out, we’re looking at the third one specifically here, any economic impact payment you received is not taxable for federal income tax purposes. So in other words, the general idea the general rule for income is basically anything is income, if unless it’s stated otherwise, by the IRS,
they are stating otherwise here in when you receive the economic impact payments, they’re not going to be generally counted as income at the top line of the income tax formula, which would basically, of course, increase or possibly increase the tax. So they’re not included in income.
Note that whenever that’s the case, with income taxes, that’s a good thing. Because everything gets flipped on its head, everything is backwards, income is bad. And so if you have income, it could lead to more taxes. So if you’re not including the income of that would typically be a good thing for the tax calculation.
So it will reduce your recovery rebates credits. So the eip, the economic impact payments, you might hear them called the stimulus payments is going to be connected through the recovery rebate credits.
In a similar way, as you might understand, ease more easily even though it’s a newer thing, the advanced child tax credit is related to the child tax credit. And that’s because we’ve seen the child tax credit in the past, although they’ve changed it or they’ve had some differences to the calculation this time.
And they named the advanced payment, the advanced child tax credits, we didn’t do quite the same thing with the recovery rebate credit, but it is in essence the same concept,
meaning the recovery rebate credit is tied to the actual tax return as a credit, which normally you would not get the credit until you file the tax return. But they gave an advanced payment and instead of calling it and Advanced Recovery rebate credits,
they call it an economic impact payment most likely because they came up with that name first and then tied it to the tax return. But in any case, the other reason it’s a little bit more confusing is because you get the full thing in advance as opposed to the child tax credit.
So also, just note that there’s three economic impact payments that have gone out, the first two are not tied to the 2021 tax return, they’re tied to 2020. So you have the same issue of the advanced payment tied to the recovery rebate credit, but it’s in the prior tax year.
So if you have any issues with it, you got to file the 2020 tax return in 2021. We’re concerned with EIP three, which is tied to the recovery rebate credit tied to the tax return for 2021. tax year, which we’re going to be filing by April 18 of 2022.
In general 2021 recovery rebate credit, this credit is figured like last year’s economic impact payment EIP. Three economic impact payment three, except eligibility and the amount of the credit are based on your tax year 2021 information.
So it’s the same concept. Just remember AIP one and two are tied to last year’s return. This last one, the eip three went out in the current year.
So see the instructions for line 30 And the recovery rebate credit worksheet to figure your credit amount we might take a look at that later, standard deduction amount increased.
So this is the standard deduction the one that everyone would be getting, if they don’t have a larger amount of itemized deductions and therefore would be taking the itemized instead of the standard deduction for 2021.
The standard deduction amount has been increased for all filers the amounts are single or married filing separately 12,550 married filing jointly or qualifying widow widower 25,100. You can see of course, the difference between the two in essence doubling the the amount as we go up from a single or married filing separately to the married return,
which would make sense and And then we’ve got the head of household like in between the 18 800. So we’ll talk more about those later virtual currency. If in 2021, you engaged in a transaction involving virtual currency,
you will need to answer yes to the question on page one a form 1040 and 1040. s are the IRS is very skeptical of virtual currency because they think it might be a way that, you know, you could get income or something and not reported on the tax return.
And so they’re trying to lock that down. They’re trying to Stranglehold you know, the government wants to choke out virtual currency until it’s dead on the floor. So in any case, if you have virtual currency that could be a kind of an issue that they’re concerned about in these in these days.
See virtual currency later for information on transactions involving virtual currency did not leave this field blank. And then the questions must be answered by all taxpayers not just taxpayers who engage in a transaction involving virtual currency, credits for sick and family leave for certain self employed individuals.
The families first Coronavirus response act the ffcra help self employed individuals affected by Coronavirus by providing paid sick leave and paid family leave credits equivalent to those that employers are required to provide their employees for for qualified sick leave wages and qualified family leave wages.
So in other words, we had some responses that were going into the law that were attempting to help employers and their employees possibly attempting to keep the employees basically employed through the pandemic and the problem. And they did that import through credits related to payroll taxes.
The problem with that, of course, is that when you look at the self employment types of taxes for people like a Schedule C type of business, they’re also paying those same types of taxes, which is basically Social Security and Medicare in the form of self employment tax as opposed to payroll taxes,
but they’re in essence, the same thing. So then whenever they do something like that to the payroll taxes, it generally makes sense that they have to do something for the self employed individuals who are playing the self employment tax, we might get into that in more detail in future presentations.
The COVID related tax relief act of 2020 extended the period during which individuals can claim these credits. Now of course, again, note that these credits would generally be involved that we’re talking about here, if they had self employment tax,
so that would be someone for the most common example would be like a Schedule C type of income subject to self employment, where that could come into play. might talk more about that later.
So for more information, see the instructions for Form 7202 and schedule three, line 13 B, you can find those on the IRS website, irs dot g o v. extension and expansion of credits for sick and family leave the American rescue plan act of 2021. Enacted in March 11 2021.
AARP provides that certain self employed individuals can claim credits for up to 10 days of quote, paid sick leave and quote, and up to 60 days of quote, paid family leave and quote,
if they are unable to work or telework due to circumstances related to Coronavirus. self employed individuals may claim these credits for the period beginning April 1 2021 and ended September 30 2021. For more information, see the instructions for Form 7202 and schedule three line 13 H form 9000 Alternative Media preference beginning in 2021.
Taxpayers with print disabilities can use form 9000 Alternative Media preference to elect to receive notices from the IRS in alternative format including Braille, large print, audio and electronic you can attach form 9000 to your form 1040 or 1040 s or or you can mail it separately.
For more information you can see form 9000 on IRS website IRS dot govt all taxpayers now eligible for identity protection pin T i n beginning in 2021 the IRS identity protection and IP p i n opt in program has been expanded to all taxpayers who can who can properly verify their identity. So the plan is going to be kind of like a safeguard against someone trying to steal your identity.
The capacity or the desire for people to try to steal people’s identity specifically to file fraudulent returns has been going up and up these days given the fact that we have more and more like refundable credits and money that’s going out through the IRS in the format of things like child tax credits, advanced child tax credits,
the refundable credits, the economic impact payments, the recovery rebate credits, this is a lot of money going out typically on the more basic or lower in types of tax returns that don’t require a lot of information.
And therefore the desire to kind of steal that information has gone up that capacity or ability to do that would be dependent upon having in essence your social security number and your name for example,
at the minimum in order to file the tax return an obvious See the social security number being something that we’ve had since birth, and we’ve given it to every financial institution. Since that time, every medical institution and so on, it might be compromised at some point in time.
So usually they set up this kind of pin situation as a response to someone who’s already going through the pain of having their identity stolen, and a fraudulent return filed on their behalf.
And the response to that would be okay, let’s clean that up. Let’s identify it as a fraudulent return. And then how are we going to stop it from happening in the future, we’re going to set up a pin, which kind of accident in essence, like a separate social security number.
Now, they’re saying, I’m not going to wait till the fraud happens, you can actually set up your pin in a proactive sense. And this would might be something that you would want to do, especially if you know that your credentials have been compromised.
For example, if someone stole your identity for unemployment purposes, and basically got unemployment on your behalf, or something like that, if you experienced that kind of problem, they might be able to use that same information to try to get in get file a fraudulent tax return.
And so you could try to preemptively stop that with a pin, which is a little bit more of a problem to file, but it gives you the added security with the pen, the pen makes more sense than a social security number. These days, I kind of feel like we’re gonna have to update this whole social security number system at some point, because the pen is going to change,
you know, from year to year, and they’ll give you a new pin each year so that so that it’s less likely that that it’ll be a problem in that shorter period of time. But in any case, an IPP i n helps prevent your social security number from being used to file a fraudulent federal income tax return, you can use the GET AN IPP i n tool on irs.gov.
To request an IPP I in file Form 15, two to seven if your income is $72,000 or less, or make an appointment to visit a Taxpayer Assistance Center direct deposit now available for returns filed late.
So you can now receive a direct deposit of your refunds, even if you file your 2021 return after November 30 2022. So it used to be you had the capacity to get the direct deposited, if you file basically, you know, on time or before a certain date.
So you might say hey, why isn’t it April 18, because you got you know, you got the extension that would be involved in there as well. But any case they extended it out now,
they’re trying to get as many things electronically deposited as possible import because they’re short staffed, and they don’t want people to have to physically work on things. Because you know, they have this whole COVID thing and the restrictions and distancing has fallen,
I believe heavily more heavily on the federal workers because that’s where, you know, they have the most control over some of these things. And that made the need for automation even more heavy, you would think in places like the Internal Revenue Service,
which means they’re backed up on anything that causes actual manual labor over there. Instead of electronic things so expanded dependent care assistance, AARP expanded the Child and Dependent Care Tax Credit for 2021 by making it refundable for certain taxpayers and making it larger for 2021.
The dollar limit on qualifying expenses increases to $8,000 for one qualifying person and $16,000 for two or more qualifying persons. The rules for calculating the credit have also changed the percent of qualifying expenses eligible for the credit has increased along with income limit at which the credit begins phasing out.
Additionally, the taxpayers who receive dependent care benefits from their employer or the dollar limit of the exclusion amount increases for 2021.
For more information, see the instructions for Form 2441 publication 503, you can find the form and that publication on the IRS website IRS dot govt the Child Tax Credit.
Under AARP, the child tax credit has been enhanced for 2021 substantial changes here, the child tax credit has been extended to qualifying children under age 18.
Depending on modified adjusted gross income, you may receive an enhanced credit amount of up to $3,600 for a qualifying child under H six. So now we’ve got this age requirement h six, up to $3,000 for a qualifying child h five and under age 18.
So you got this kind of two tiered structure in terms of the ages that are taking place. And then of course, we also have the advanced child tax credits,
which I believe basically said, we’re going to try to figure out what your child tax credit would be under these new calculations. It’s all I believe, refundable at this point to make kind of that calculation or advanced calculation easier in some instances,
or that might be part of the rationale. And then they’re going to give the advanced payment of half of it in advance. So you got to deal with those advanced payments that have already been received to try to figure out how much you would still get in the Child Tax Credit.
We got a change to the calculation of the credit new rules on that. And we got the advanced credits that have already gone out that we’ll need to know, in order to calculate the proper Child Tax Credit still applicable,
are still being able to take the portion you’d get a benefit from when filing, the enhanced credit amount begins to phase out were modified adjusted gross income exceeds 150,000.
In the case of a joint return, or surviving spouse 112,500, in the case of a head of household and 75,000. In all other cases, Child Tax Credit, if you or your spouse is filing jointly lived in the United States, for more than half the year, the child tax credit will be fully refundable, even if you don’t have earned income.
So what that means is a big term these days and they keep their the refundable credits have been a, you know, bigger issue these days. That means that your tax liability goes below zero, and you still get a quote, refund in quote, but it’s not really a refund at that case, or at that point, it’s really a program to benefit people at that point in time.
Because at that point, you’re not paying taxes, you’re not getting the money back that you were going to pay taxes back in the form of a refund, you’re getting kind of a benefit, a benefit kind of program at that point.
So when we talk about the refundable portion of a credit, we’re talking about the benefit, the amount of money that you would get back even if you go below zero in the fact that you’re not paying any taxes at that point in time and still getting a benefit in the in the case, basically a refund.
That’s not really a refund benefit. So if you don’t meet the residency requirements, your child tax credit will be a comp, a combination of the non refundable child tax credit and a refundable additional child tax credit, as was the case in 2020. So the credit for other dependents has not been enhanced, and is figured as it was in 2020.
So when we talk about dependents, basically we got the two two kind of tiers that are on there, you’ve got a dependent. The major benefits you currently have at this point in time is going to be the child tax credit if they qualify as a child or the other dependent if they do not.
They’ve made changes to the Child Tax Credit component, not not much change, no change really to the other dependents component of it. So we’ll dive more into those credits later. These are just kind of the changes at this point.