Some good news as the April 18 deadline to file 2021 federal income taxes approaches: Refunds are, on average, $333 higher, the IRS says.
 |
| The Internal Revenue Service says questions about the advance child care tax credit, the recovery rebate credit and a question all taxpayers have to answer about virtual currency are among the problems cropping up on 2021 federal income tax returns. (Shutterstock) |
ACROSS AMERICA— Some 91 million Americans have already filed their 2021 income tax returns as the April 18 filing deadline approaches, about 2.1 percent fewer than at this time last year, according to the Internal Revenue Service.
Taxpayers have three extra days to file their tax returns this year. April 15 is traditionally Tax Day, but the Emancipation Day holiday in the District of Columbia is observed on that day. Holidays in Washington, D.C., by law affect the tax deadlines for all Americans, as other federal holidays do.
Maryland and Massachusetts residents have an additional day to get their taxes done due to the Patriots' Day holiday observed on April 18.
The deadline for 2021 state income tax returns is also April 18 for most states, although Delaware, Iowa, Louisiana, Maine, Massachusetts and Virginiaset different deadlines.
Taxpayers who have filed are, on average, receiving larger refunds, according to the IRS. Refunds are running about $3,226 on average this year — about $333 more than last year, for an 11.5 percent increase. So far, the IRS has paid out about $204 billion in refunds.
If you haven't filed yet, here are seven things to know:
1. File Your Taxes Electronically
For folks who aren't familiar with the process, file returns electronically if possible to get refunds more quickly. Taxpayers can use their computers, smartphones and tablets, whether through IRS Free File, offered to taxpayers earning $73,000 or less, or other e-file income tax providers.
Tax software guides people through each section of their tax return using a question-and-answer format. Enter information carefully. This includes any information needed to calculate credits and deductions. Using tax software should help prevent math errors, but taxpayers should always review their tax return for accuracy, the IRS says.
2. You May Be Eligible For A Recovery Rebate Credit
People who missed a COVID-19 stimulus payment or didn't get the full amount may be able to claim a recovery rebate credit on their 2021 federal tax return.
Parents of a child born or adopted in 2021, as well as those who fostered children last year, may be able to receive up to $1,400 per child. It can also be applied if an adult became a qualifying relative, such as a parent, nephew or niece, or grandchild became a qualifying relative in 2021, but had not previously been listed as one on tax returns.
Others who can claim the $1,400 credit include people who saw their income drop in 2021. That includes:
Single filers who earned at least $80,000 in 2020, but less in 2021;
Married couples filing a joining return whose combined incomes were more than $160,000, but less in 2021;
Head of household filers who had incomes above $120,000 but less in 2021.
3. Advance Child Care Credit Causes Confusion
The IRS says it is seeing confusion about how the advance child care tax credit — in effect, an advance on their refunds — applies to their individual situations.
The tax credits, part of President Joe Biden's $1.9 trillion coronavirus relief program, increased payments to up to $3,600 annually for each child age 5 or younger, and $3,000 for those 6-17. Monthly, that amounted to between $250 and $300 per child.
Read more: How The Child Tax Credit May Affect 2022 Refund
Families whose adjusted gross income was at $150,000 or below for married couples (or $75,000 for single-filer parents) are eligible for the credit.
To get all or the rest of the money due from the tax credit, parents need to file an income tax return — even if they've never done so before or don't owe any taxes.
That means families who didn't receive any of the advance tax credit payments during 2021 can claim the full amount of the credit on their tax returns. Those who received the payment from July-December must file a tax return to get the credit for the first six months of 2021, again, regardless of the family's tax filing history.
Divorced parents who share custody of their children often switch who claims the child tax credit each year when they file their returns. Because the tax credit payments were based on 2020 tax returns, they may or may not have gone to the parent with physical custody in 2021.
A parent who did not have physical custody in 2021, but who received the tax credit payments, could have to pay back at least part of that money. Here's another scenario that could complicate tax returns. Many families saw their income plummet during the pandemic but rebound as their jobs returned, and they may have received more than they should have in child tax credits. They may have to pay some of that money back.
Families who received payments should have received a notice — "Letter 6419, 2021 advance CTC" — letting them know for tax filing purposes how much they've been paid. Some of those forms may include incorrect information.
4. Did You Give To Charity?
The IRS again is allowing taxpayers who don't itemize to claim a deduction of up to $300 (or $600 for married couples filing jointly) for filers who made charitable contributions in 2021.
Most charities apply, according to the IRS.
Taxpayers who itemize can claim a deduction for charitable contributions up to 100 percent of their adjusted gross income.
5. Answer The Virtual Currency Question
Even taxpayers who haven't been involved in virtual currency need to pay attention to a question about it included on 2021 Forms 1040 and 1040-SSR.
The question asks if, at any time during 2021, the filer received, sold, exchanged or otherwise disposed of any financial interest in any virtual currency. Taxpayers should not leave this field blank but should check either "Yes" or "No."
6. Don't Forget To Report Jobless Pay
The IRS says it's seeing situations where people aren't reporting unemployment compensation received in 2021. For the 2020 taxable year, a special law allowed taxpayers to exclude unemployment compensation, but it was only for that year. Unemployment compensation received in 2021 is generally taxable, so taxpayers should include it as income on their tax return.
7. How To Get Extension, Find Other Answers
Taxpayers can request a six-month filing extension to Oct.17 to prevent late filing penalties by using IRS free filing services or Form 4868. But keep in mind that, while an extension grants additional time to file, tax payments are still due April 18 for most taxpayers.
Advice on filing can be found on sites such as GetYourRefund.org, operated by IRS-certified Volunteer Income Tax Assistance to help families earning less than about $66,000 a year file their taxes for free. Volunteers provide help in both English and Spanish.
Other helpful sites are MyFreeTaxes.com, a United Way-supported site that provides virtual assistance to people who make $58,000 or less to file their federal and state taxes for free, and many other free file sites curated with an IRS tool.
Post a Comment