The Internal Revenue Service said Monday it has begun sending letters to more than 36 million families likely eligible to receive payments starting in July under the newly expanded Child Tax Credit—one of the major antipoverty initiatives in President Biden’s stimulus plan—and announced the dates those payments are expected to hit bank accounts.
Biden’s $1.9 trillion American Rescue Plan significantly expanded the Child Tax Credit for the 2021 tax year: It will now provide eligible parents with a $3,000 credit for every child aged 6 to 17 and $3,600 for every child under age 6 (up from $2,000 per dependent child up to age 16).
Individuals earning up to $75,000 a year, heads of household up to $112,500 a year, and joint filers up to $150,000 a year are eligible to receive the full amount of the credit.
The amount of the payments will phase out by $50 for every $1,000 in adjusted gross income above those thresholds.
The IRS will use information from 2019 or 2020 tax returns or the agency’s online Non-Filers tool to determine eligibility.
Some of that money will come in the form of advance payments, via either direct deposit or paper check, of up to $300 per month per qualifying child on July 15, August 13, September 15, October 15, November 15 and December 15, the IRS said Monday.
Families can claim the remainder of the credit on the 2021 tax returns they file next spring.
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The IRS refunds delayed!
If you’ve not received your income tax refund from the IRS yet, you’re not alone. This year, the IRS is experiencing more refund delays than normal for several reasons — from sending out weekly batches of stimulus payments to recalculating taxes paid on unemployment benefits.
Because of the pandemic, the IRS ran at limited capacity in 2020, which put a strain on its ability to process tax returns and send out stimulus checks. The IRS is now open again and processing mail, tax returns, payments, refunds and correspondence, the agency said, but the pandemic continues to cause delays in some services.
The IRS said it’s issuing most refunds in less than 21 days right now but some are taking longer, including for mailed paper tax returns. The IRS said it’s also taking longer than 21 days to issue refunds for some 2020 tax returns that require review, such as determining recovery rebate credit amounts for the first and second stimulus checks or figuring earned income tax credit and additional child tax credit amounts.
The IRS refunds delayed!
If you’ve not received your income tax refund from the IRS yet, you’re not alone. This year, the IRS is experiencing more refund delays than normal for several reasons — from sending out weekly batches of stimulus payments to recalculating taxes paid on unemployment benefits.
Because of the pandemic, the IRS ran at limited capacity in 2020, which put a strain on its ability to process tax returns and send out stimulus checks. The IRS is now open again and processing mail, tax returns, payments, refunds and correspondence, the agency said, but the pandemic continues to cause delays in some services.
The IRS said it’s issuing most refunds in less than 21 days right now but some are taking longer, including for mailed paper tax returns. The IRS said it’s also taking longer than 21 days to issue refunds for some 2020 tax returns that require review, such as determining recovery rebate credit amounts for the first and second stimulus checks or figuring earned income tax credit and additional child tax credit amounts.
Refunds Delayed in 2021
Dozens of people said they filed their taxes months ago, but haven’t received their refunds. IRS spokesperson Luis Garcia admitted the agency is swamped because of stimulus payments and COVID-19 challenges. “Remember, we’re operating under the same COVID restrictions in 50 states just like everyone else and some of our processing centers have to follow a health and safety protocol to ensure the health and safety of our workers,” he said. “There’s a lot of tax law changes that have come through, there’s the stimulus payments that have to be processed in a way that is efficient and avoids fraud and we’ve had 10 straight years of budget cuts so that may have something to do with it as well.”
What is an IP PIN and Do You Need One?
Identity theft has become a serious problem and fraudsters have used stolen identities to file false tax returns and claim refunds before the rightful filers can do so. Even children’s Social Security numbers are being targeted.
Why it might be a ‘mistake’ to file your 2020 taxes now?
Tax season officially starts Feb. 12 and you have until April 15 to file and pay taxes owed.
But there’s a wrinkle this year and it has to do with coming stimulus payments.
Lawmakers are still negotiating the details of a third stimulus plan, including how much Americans should get in this round.
One proposal would send $1,400 payments to individuals earning up to $75,000 a year and couples earning $150,000 a year. Another proposal aimed to slash that benefit to $50,000 for individuals and $100,000 for married couples.
Whatever the final number ends up being, the government will determine whether you get a check based on your adjusted gross income — from the 2019 or 2020 tax year. If you haven’t yet filed your 2020 taxes, the government will use your 2019 income to determine your eligibility to get a stimulus payment. For people who had a worse 2020 than 2019 — a job loss or hit to income — filing a 2020 return quickly would be a good idea. If the government has your 2019 return, it might miss the fact that you’ve been struggling and are eligible for stimulus.
People should be determining whether they should file or not,
It would be a mistake for any person to file their 2020 tax return at this time if their 2020 income is higher than 2019. Since so many people rely on tax refunds to cover living expenses, it will be hard on them not to file and most may go forward and file and lose out on part of their third stimulus.
Your ITIN may expire before you file a tax return in 2021
- attach your original identification documents or certified copies by the issuing agency and any other required attachments.
- select the reason for needing the ITIN as outlined in the Form W-7 and W-7(SP) instructions.
Note: Generally, a tax return is not required with a renewal application, however, spouses and dependents cannot renew in advance. They may renew their ITIN only when filing an individual tax return, or someone else files an individual income tax return claiming them for an allowable tax benefit (such as a dependent parent who qualifies the primary taxpayer to claim head of household filing status).
4 Reasons You Should Change Your Tax Withholdings
Even though this year’s tax season is over, that doesn’t mean your tax business is done.
You may want to revisit the tax withholdings from your paycheck, pension check, or unemployment benefits check. The wrong amount of withholdings could mean a smaller tax refund next year or even worse, a big tax bill.
There are several reasons why you may need to change your tax withholdings. Here’s what to know.
Major change to your life
Did you get married or divorced? Did you have or adopt a child? Did your income (or your spouse’s) income dramatically change? These are all good reasons to review your paycheck withholdings to make sure enough is being paid to the government.
Need more cash flow
If your income is lower than it used to be — perhaps from the economic fallout from the coronavirus pandemic — changing your withholdings could be one way to increase your monthly cash flow.
You can opt to send less tax per paycheck to the federal government and pocket it yourself, helping you with bills and other financial obligations. The downside is that you will get a smaller or none at all next year at tax time. Don’t reduce your withholdings too much, though, or you could end up owing the tax man next year.
The wrong amount of withholdings could mean a smaller tax refund next year, or even worse, a big tax bill.
You’re getting unemployment benefits
If you lost your job and are now receiving unemployment benefits, make sure your taxes are withheld from each check.
If you live in Alaska, Florida, Nevada, South Dakota, Texas, Washington, or Wyoming, you will only have to pay federal tax because those states have no personal income tax. In California, New Jersey, Oregon, Pennsylvania, and Virginia, there is a tax exemption for unemployment benefits.
How to change your withholdings
You can change your paycheck withholdings by filling out a new Form W-4 and submitting it to your employer’s payroll department.
To figure out your withholdings, use the IRS’s Tax Withholding Estimator, which can be adjusted to meet your personal circumstances. The tool allows you to choose what refund amount you want to receive next year — if any — and will calculate how much to withhold to achieve that goal.
To get the most reliable withholdings estimate, you’ll need your most recent pay statements for yourself and your spouse, if applicable; any information for other sources of income you have; and your most recent income tax return. Use the results to change your paycheck withholdings.
On your employer paycheck: Complete a new Form W-4, Employee’s Withholding Certificate, which you can get from your employer’s payroll department. Submit the form to your employer as soon as possible. Many companies have an automated system for submitting withholdings changes. Check with your payroll department to see if this option is available.
If you receive pension income: Complete a Form W-4P and give it to your pension or annuity payer.
On your unemployment check: When you first apply for unemployment benefits, you should have the option to elect automatic withholding. If you failed to do this, you can file a W-4V, or Voluntary Withholding Request, to have state and federal taxes automatically withheld from your unemployment payment.
8 tax tips that could save you money this year
It’s smart to look at ways you might minimize your tax liability. That’s especially true for 2019, the second year the sweeping new tax legislation (commonly known as the Tax Cuts and Jobs Act) generally applies. In light of the new income tax rates and significant changes to traditional deductions, it’s particularly important to speak with your tax advisor. Speak with them about some or all of the following ideas.
What is new for 2018 US Income Taxes?
Standard deduction amount increased. For 2018, the standard deduction amount has been increased for all filers, and the amounts are as follows.
Single or Married Filing Separately—$12,000.
Married Filing Jointly or Qualifying Widow(er)—$24,000.
Head of Household—$18,000.
Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4.
Deduction for personal exemptions suspended. For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.
Changes to itemized deductions. For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.
Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.
You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income.
Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).
You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.
The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income.
Moving expenses no longer deductible. For 2018, you can no longer deduct your moving expenses unless you are a member of the Armed Forces on active duty.
Child tax credit and additional child tax credit. For 2018, the maximum credit increased to $2,000 per qualifying child. The maximum additional child tax credit increased to $1,400. In addition, the income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Credit for other dependents. A new credit of up to $500 is available for each of your dependents who does not qualify for the child tax credit. In addition, the maximum income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Social security number (SSN) required for child tax credit. Your child must have an SSN issued before the due date of your 2018 return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit. If your dependent child has an ITIN, but not an SSN, issued before the due date of your 2018 return (including extensions), you may be able to claim the new credit for other dependents for that child.