Here are some important reminders if you have not yet filed your IRS return for 2021. Your automatic extension runs out on October 17, 2022 which is in less than two months. The IRS says it is still expecting 19 million returns to be filed under the automatic extension.
The first reminder is file electronically especially if you are expecting a tax refund. Unfortunately it’s still taking the IRS as long as a year to process paper returns. Electronic returns can be processed and refunds can be sent in a couple of weeks or even less. And with 19 million returns due, you can expect a serious delay if you are expecting a refund.
And if you are expecting a refund use direct deposit. Waiting for a paper check to be mailed will only mean a long, long wait.
SEVEN TAX BENEFITS FOR 2021
If you’re filing late for 2021 don’t overlook these tax benefits:
1. The Earned Income Tax Credit can give certain low to moderate income workers and their families a tax break.
2. Families can claim the Child Tax Credit even if they received monthly advance payments during the last half of 2021.
3. The Child and Dependent Care Credit may be available to families who pay expenses for the care of a qualifying individual so they can work, or look for work. This tax credit can be worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons.
4. If you missed out of last year’s third round of Economic Impact Payments (stimulus payments) you may be able to claim it on your 2021 tax return.
5. The majority of taxpayers who take the standard deduction can deduct certain cash contributions they made to charity during 2021. For married couples the deduction is $600 and for single taxpayers it is $300 in donations. If you itemize and do not use the standard deduction and make large cash donations you may qualify to deduct the full amount in 2021.
6. There are also tax credits to offset tuition and other education costs under the American Opportunity Tax Credit and the Lifetime Learning Credit.
7. And don’t forget tax credits that are available for making eligible contributions to an individaul retirement account or an employer-sponsored retirement plan.
If you have any questions about these, contact a tax professional. They can put money in your pocket.
REMEMBER THOSE TWO IRS LETTERS
Be sure you have two important letters from the IRS that were sent to you before you prepare your 2021 taxes. These are Letter 6419 showing your total advance Child Tax Credit payments and Letter 6475 showing your total EIP3 (stimulus) payments.
One more reminder: adjust your 2022 withholding now to avoid any tax surprises next year.
And if you find yourself with a big tax debt that you can’t handle, make the free telephone call right now to our office for a free consultation about what help may be available to you including the IRS Fresh Start Initiative and the Offer In Compromise Program. This is a free call, and our experts can answer your questions and let you know if a matter of minutes what programs and help you may qualify for.