3 New Changes in Tax Law Explained
Last year, the IRS made a few alterations to its policies and expectations due to the pandemic. A vivid example is the deadline extension, of which many people took advantage. However, the 2022 tax season is set for some rule changes after the IRS made some amendments to the 2021 Tax Season blueprint.
It’s not the first time the IRS has come up with tweaks and adjustments, and it surely won’t be the last as they continue to adopt new policies.
The new changes cut across:
With the new adjustments set to be effective this year, here are the simplified details to keep you informed and up to date.
Your Refund May Be Increased or Decreased Depending on Your Monthly Child Tax Credit Payments
There was quite some excitement as the IRS paid qualifying families the Child Tax Credit. However, in what was quite an unusual move, the IRS sent the Child Tax Credit in the form of advance monthly payments–$300 monthly for each child below six and $250 children from 6 to 17.
The change now is that your tax refund may now depend on the amount of child tax credit you got in 2021. Meanwhile, you may even end up owing extra taxes.
If you have received your Letter 6419, you should confirm the total amount of child tax credit payments you got and declare the amount on your 2021 tax return.
Calculate your Child Tax Credit
Also, for certain reasons, you may have received more or less than you should have. So, it is essential that you verify that the child tax credit amount is commensurate to what you qualify for.
If you got less than the amount you qualify for, you’d be able to claim the rest of the money on your tax return for 2021. But if you got paid in excess, you will be expected to make repayments.
You may have been overpaid if:
- Your qualified kid has moved in with a different parent.
- There is a change in your income or filing status
- You stayed abroad for more than half of 2021
Speak to expert tax professionals to get help on Child Tax Credit here
Recovery Rebate Tax Credit for Third Stimulus Payments
Consequent to the American Rescue Plan Act of 2021, the was a lot of elation as the IRS distributed a third round of stimulus checks to millions of people last year. Americans got up to $1,400, with dependents getting extra $1,400.
If you are yet to receive the third economic impact or stimulus payment, or if you got less than the total amount, you will be eligible for the Recovery Rebate Tax Credit.
It is important that you file a 2021 tax return.
Also, if you for single (or married but filing separately) earning over $12,550, married (and filing jointly) making over $25,100, or head of household earning upwards of $18,800, and you are not claimed as a dependent, it is important that you file a Form 1040 in 2022 (for 2021).
If you’re not sure how much you got in the third stimulus payment in 2021, do not fret. The IRS will send you Letter 6475 in early 2022, where you will find the amount you received as the third stimulus payment. Alternatively, you can check on the IRS website.
Be reminded to ensure that your tax records and these letters are intact, as they will come in handy in claiming the credit on your tax return for 2021.
To get any extra outstanding payment you were due in 2021, you might want to get the assistance of a tax professional to fill in the Recovery Rebate Tax Credit worksheet.
You can Claim Charitable Donations Without Having to Itemize
The good news is: regardless of if you are itemizing or taking the standard deduction, you can now claim up to $300 (or $600 if you’re married and filing jointly) in charitable donations for 2021.
Meanwhile, as a sort of reward, itemizers are allowed up to 100% deduction of their 2021 Adjusted Gross Income (AGI), which is total income after subtracting deductions and expenses.
You can only claim the 100% deduction privilege for the 2021 tax year, and taxpayers who want to take advantage of the limit increase have to act on it as it does not take effect automatically.
Headed by Shauna A. Wekherlien (CPA, Masters in Taxation, and Certified Tax Coach), Tax Goddess is a tax and accounting firm that specializes in tax reduction, audit assistance, and accounting services. As a top 1% CPA in the US, what sets us apart from other CPA’s is our cutting-edge system in which our team of professionals, we are a team of experienced tax professionals who will work with you to develop a customized plan to reduce your taxes while creating the most-effective financial plan possible.
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