Get Ready for Taxes

Get Ready for Taxes

Get ready for taxes: Here’s what’s new and what to consider when filing in 2022

The IRS encourages taxpayers to get informed about topics related to filing their federal tax returns in 2022. These topics include special steps related to charitable contributions, economic impact payments and advance child tax credit payments. Taxpayers can visit IRS.gov/getready for online tools, publications and other helpful resources for the filing season.

Here are some key items for taxpayers to know before they file next year.

Changes to the charitable contribution deduction

Taxpayers who don’t itemize deductions may qualify to take a deduction of up to $600 for married taxpayers filing joint returns and up to $300 for all other filers for cash contributions made in 2021 to qualifying organizations.

Check on advance child tax credit payments

Families who received advance payments will need to compare the advance child tax credit payments that they received in 2021 with the amount of the child tax credit that they can properly claim on their 2021 tax return.

  • Taxpayers who received less than the amount for which they’re eligible will claim a credit for the remaining amount of child tax credit on their 2021 tax return.
  • Eligible families who did not get monthly advance payments in 2021 can still get a lump-sum payment by claiming the child tax credit when they file a 2021 federal income tax return next year. This includes families who don’t normally need to file a return.

In January 2022, the IRS will send Letter 6419 with the total amount of advance child tax credit payments taxpayers received in 2021. People should keep this and any other IRS letters about advance child tax credit payments with their tax records. Individuals can also create or log in to IRS.gov online account to securely access their child tax credit payment amounts.

Economic impact payments and claiming the recovery rebate credit

Individuals who didn’t qualify for the third economic impact payment or did not receive the full amount may be eligible for the recovery rebate credit based on their 2021 tax information. They’ll need to file a 2021 tax return, even if they don’t usually file, to claim the credit.

Individuals will need the amount of their third economic impact payment and any plus-up payments received to calculate their correct 2021 recovery rebate credit amount when they file their tax return.

In early 2022, the IRS will send Letter 6475 that contains the total amount of the third economic impact payment and any plus-up payments received. People should keep this and any other IRS letters about their stimulus payments with other tax records. Individuals can also create or log in to IRS.gov online account to securely access their economic impact payment amounts.

More information:
Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return

How to avoid fraud and scams after a disaster

How to avoid fraud and scams after a disaster

Criminals and fraudsters often see disasters as an opportunity to take advantage of victims when they are the most vulnerable, as well as the generous taxpayers who want to help with relief efforts.

These disaster scams normally start with unsolicited contact. The scammer contacts their possible victim by telephone, social media, email or in-person. Also, taxpayers may search for a charity online and be directed to a website or social media page that is not affiliated with the actual charity.

Here are some tips to help taxpayers recognize a scam and avoid becoming a victim:

  • Some thieves pretend they are from a charity. They do this to get money or private information from well-intentioned taxpayers.
  • Bogus websites use names like legitimate charities. They do this scam to trick people to send money or provide personal financial information.
  • Scammers even claim to be working for ― or on behalf of ― the IRS. The thieves say they can help victims file casualty loss claims and get tax refunds.
  • Disaster victims can call the IRS toll-free disaster assistance line at 866-562-5227. Phone assistors will answer questions about tax relief or disaster-related tax issues.
  • Taxpayers who want to make donations can get information to help them on IRS.gov. The Tax Exempt Organization Search helps users find or verify qualified charities. Donations to these charities may be tax-deductible.
  • Taxpayers should always contribute by check or credit card to have a record of the tax-deductible donation if they choose to give money. individual taxpayers can deduct up to $300 and married couples can deduct up to $600 in qualifying charitable contributions for tax year 2021 even if they don’t itemize.
  • Donors should not give out personal financial information to anyone who solicits a contribution. This includes things like Social Security numbers or credit card and bank account numbers and passwords.

More Information:
National Center for Disaster Fraud
www.disasterassistance.gov

Tax Due Date Extended !

Tax Due Date Extended !

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

Last month, the Maryland General Assembly passed the RELIEF ACT of 2021 MD SB496) which extended the due date of Maryland income tax returns to July 15, 2021

Stimulus Check, Round 3

Stimulus Check, Round 3

Today many taxpayers woke up to find they had more money in their bank accounts thanks to the Third Round of Stimulus checks.

On March 11 President Biden signed the American Rescue Act (ARA) into law. The ARA provides up to $1,400 for eligible taxpayers ($2,800 per married couple) and an additional $1,400 per adult dependent children.

The stimulus payment is tied to your 2020 federal adjusted gross income (AGI) if you have already filed your 2020 return; or your 2019 AGI if you have not filed your 2020 return yet. The stimulus payment will phase out for single taxpayers with income between $75,000 and $80,000, heads of household with incomes between$112,500 and $120,000 and couples filing jointly with income between $150,000 and $160,000.

So if the Treasury Department has your bank account information on file, you should keep checking your bank account for your direct deposit. If your bank information is not on record, you will receive payment in the form of a paper check or debit card so keep an eye on your mail. And double check anything that looks like a credit or debit card.

House Stimulus Bill

House Stimulus Bill

On February 27, 2021 the House of Representatives passed their $1.9 trillion stimulus plan. The bill was sent to the Senate and a vote is expected as early as Wednesday, March 3, 2021.

Here are some of the key provisions in the House bill:

Recovery rebates

The House bill provides individuals with a $1,400 recovery rebate credit ($2,800 for married taxpayers filing jointly) plus $1,400 for each dependent for 2021. As with the two recovery rebates enacted in 2020, the IRS will make advance payments, which the Service has been calling economic impact payments. The recovery rebate credit phases out for taxpayers with adjusted gross income (AGI) over $75,000 ($150,000 for married filing jointly) and uses 2019 AGI to determine eligibility unless you have already filed your 2020 return.

Child tax credit

The bill increases the amount of the credit to $3,000 per child ($3,600 for children under 6). The increased credit amount phases out for taxpayers with incomes over $150,000 for married taxpayers filing jointly, $112,500 for heads of household, and $75,000 for others.

Child and dependent care credit

The bill makes changes to the Sec. 21 child and dependent care credit, including making it refundable for 2021. The bill also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.

Unemployment Compensation

One item not included was the Durbin/Axne proposal to exempt unemployment compensation benefits received from taxable income. It is unlikely that this proposal will be included by the Senate. However, as mentioned 2 weeks ago, Maryland passed SB496 providing a subtraction from Maryland income for certain unemployment insurance benefits.

If you have/are receiving unemployment benefits for 2020, we strongly recommend that you hold off in filing your 2020 tax returns until the Maryland changes can be implemented in your tax preparation software. If you have already filed your 2020 return, you may need to file an amended tax return to recover any Maryland state and local income tax paid on your benefits.