Tax News & Updates
There are good surprises and there are bad surprises. Generally, a tax-related surprise is probably unwanted. To avoid tax surprises, people should review their tax withholding. There’s still time left in 2022 to make changes and see the benefit on their tax return next year.
An adjustment made now will help people avoid the surprise of a balance due or a larger-than-expected refund. People who owe taxes when they file may also face a penalty for underpayment, so they should take steps to avoid that.
Since credit amounts may change each year, it’s imperative that a taxpayer make adjustments to their tax withholding when they make life changes. Events such as marriage, divorce, a new child, a new home purchase, or changes in tax laws can all be reasons to adjust withholding.
Proper withholding adjustments help people boost their take-home pay rather than over-withholding taxes throughout the year and getting it back as a tax refund.
Taxes are generally paid throughout the year, whether from salary withholding, quarterly estimated tax payments, or a combination of both. About 70% of taxpayers, however, withhold too much every year which typically results in a refund.
Please contact us if you need help adjusting your withholding.
In March 2020, federal student loan payments were suspended, with interest rates set to zero as a result of COVID-19. In August 2021, the Biden administration issued an extension of the federal student loan payment suspension to January 31, 2022. With the proliferation of the Omicron corona variant, the administration has postponed repayments to May, 2022.
President is encouraging borrowers to explore other options to reduce their loans, “As we are taking this action, I’m asking all student loan borrowers to do their part as well: take full advantage of the Department of Education’s resources to help you prepare for payments to resume; look at options to lower your payments through income-based repayment plans; explore public service loan forgiveness”.
As millions head into repaying their loans, the most important thing officials and experts say borrowers can do ahead of the pause ending is make sure their contact information is up to date.
Borrowers can expect to see several communications leading up to the deadline, but having their address, email and phone numbers up to date is vital for receiving any and all information.
Borrowers between now and the end of April should also examine their current budgets and decide what they need to do, so they can be ready to make regular payments once again toward their federal student loans, experts say.
The tuitions and fees deduction was replaced with an expanded income limit for the lifetime learning credit. The credit is worth up to $2,000 per tax return and covers many of the same costs as the now obsolete deduction.
Thousands of people have lost millions of dollars and their personal information to tax scams. Scammers use the regular mail, telephone, or email to set up individuals, businesses, payroll and tax professionals.
The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. Recognize the telltale signs of a scam.
Many taxpayers have encountered individuals impersonating IRS officials – in person, over the telephone and via email. Don’t get scammed. We want you to understand how and when the IRS contacts taxpayers and help you determine whether a contact you may have received is truly from an IRS employee.
The IRS initiates most contacts through regular mail delivered by the United States Postal Service.
However, there are special circumstances in which the IRS will call or come to a home or business, such as when a taxpayer has an overdue tax bill, to secure a delinquent tax return or a delinquent employment tax payment, or to tour a business as part of an audit or during criminal investigations.
Even then, taxpayers will generally first receive several letters (called “notices”) from the IRS in the mail.
NOTE THAT THE IRS DOES NOT:
- Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer. Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
- Demand that you pay taxes without the opportunity to question or appeal the amount they say you owe. You should also be advised of your rights as a taxpayer.
- Threaten to bring in local police, immigration officers or other law-enforcement to have you arrested for not paying. The IRS also cannot revoke your driver’s license, business licenses, or immigration status. Threats like these are common tactics scam artists use to trick victims into buying into their schemes.
Know Who to Contact
- Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their “IRS Impersonation Scam Reporting” web page. You can also call 800-366-4484.
- Report phone scams to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add “IRS Telephone Scam” in the notes.
- Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at email@example.com.
On your 2020 tax return, you could exclude up to $10,200 ($20,400 married) of unemployment compensation benefits. However, this exclusion will not be available on your 2021 tax return.
You can get up to $3,000 for children ages 6 to 17 and $3,600 for children ages 5 and under, up from $2,000 for kids of all ages. To receive the full tax credit, your adjusted gross income (AGI) must be under $75,000 (Single); $150,000 (Married Filing Jointly); or $112,500 (Head of Household). If your income is above the aforementioned thresholds, you can still receive $2,000 per child if your income is less than $200,000 (single, Head of Household); or $400,000 (Married filing Jointly).
For 2021, only a $300 charitable deduction is available for single filers who don’t itemize deductions on their tax return. This charitable contribution can be up to $600 for married filers. The limit for charitable contributions in 2021 is 100 percent of your income. The limit for non-cash contribution is 50 percent of your income.
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. Taxpayers who received more than the amount for which they’re eligible may need to repay some or all of the excess payment when they file.
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.
See Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return for more information.
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.
ECONOMIC IMPACT PAYMENTS & 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 also 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. Ensuring they use the correct payment amounts will help them avoid a processing delay that may slow their refund.
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 log in to their IRS.gov Online Account to securely access their Economic Impact Payment amounts.