November, 2021, East Tennessee’s Mountain Views • 11B
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It’s Not Too Late to Take Advantage of These 2021 Tax Saving Ideas
Still Waiting on Your 2020 Refund? s of September 8, 2021, the IRS had a backlog of 7.8 million individual income tax returns that require manual processing. Many needed further review because the amount of Economic Impact Payments (Stimulus) claimed as being received differed from the IRS records. This contributed to over 9 million returns identified with math errors prompting notices being sent to taxpayers. The good news is this is a great improvement over the 16.7 million unprocessed returns as of June 25. As of September 8 there were more than 2.8 million Forms 1040X (Amended Tax Returns) that were awaiting processing. Business returns were also backlogged with some 2.3 million unprocessed employment tax returns filed on Form 941. And good luck trying to call the IRS with a question or to check on the status of your refund. So far in 2021, only 9% of callers reached a live IRS customer service repre-
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sentative. Part of the problem is the historic number of phone calls. The IRS reports receiving over 200 million calls so far in 2021 The American Rescue Plan Act (ARPA) introduced many new tax changes when it was enacted in March 2020. Many of those changes will affect the 2021 tax return filings. Economic Impact Payments ARPA enacted another round of economic impact payments that were sent to qualifying taxpayers in 2021. Just like the two 2020 rounds of stimulus payments, the payments were sent out in advance. The 2021 recovery rebate credits provided individuals with a $1,400 recovery rebate credit ($2,800 for married taxpayers filing a joint tax return) plus $1,400 for each dependent claimed on their 2021 income tax return. The credit is phased out for single taxpayers with adjusted gross income (AGI) over $75,000 and is completely phased out with AGI over $80,000. For married taxpayers who file married-filing- jointly, the phase out
starts at $150,000 and the credit ends at $160,000. The payments started being sent to eligible taxpayers in April and will continue throughout year. While the payments are not considered taxable, you will have to declare them on your 2021 income tax return if you received the payment. For eligible taxpayers who do not receive the advance payment, they will receive it when they file their 2021 income tax return. So be sure to confirm that you received your payment. Child Tax Credit ARPA also expanded the Child Tax Credit and provided for advance payments. The credit is fully refundable for 2021 and 17 year-olds are eligible. The credit was increased to $3,000 per child ($3,600 for children under 6). The increase is phased out for taxpayers whose income is over $150,000 ($75,000 for single taxpayers). The credit phases out by $50 for each $1,000 of income over these thresholds. Advance payments for 50% of the credit were sent to eligible taxpayers from July through December. You will need to reconcile the advance payments you receive in 2021 with the actual amount of credit you are entitled when you file your 2021 tax return. Employee Retention Credit ARPA extended the employee retention credit through the end of 2021. The employee retention credit was originally enacted in the Coronavirus Aid, Relief and Economic Security Act (CARES) and allows eligible employers to claim a credit for paying qualified wages to employees. Year-End Gifts Now is a great time to consider gifts of appreciated property. A taxpayer can make gifts to any number of donees before the end of the year as long as each gift is no more than $15,000. Non-taxable gifts will not be included in the donor’s unified estate and gift tax exemption. Gifts to any one donee in excess of $15,000 will reduce the unified estate and gift tax exemption and may be worthy of consideration if Congress reduces the exemption. Married taxpayers can make joint gifts up to $30,000 for each donee. Gifts should be made prior to December 31 and checks dated in 2021, but not deposited or cashed until 2022 are considered gifts made in 2022, not 2021. For taxpayers who have to take the Required Minimum Distribution (RMD) and who wish to make a charitable donation to a qualified charity should consider a Qualified Charitable Donation (QCD). You should direct your plan administrator to make the donation directly from your IRA and it will count as part of your RMD. Realize Stock Losses to Off-set Gains Taxpayers who own appreciated investments but have realized capital losses in 2021 should consider selling appreciated investments. Or if they have realized gains on stocks, should consider if they have losses that can be realized to off-set the capital gains. Amounts Paid for Home COVID-19 Tests are Medical Expenses The cost of personal protective equipment, such as mask, hand sanitizers, wipes and home COVUD-19 tests are considered medical expenses for taxpayer’s who itemize their medical expenses on Schedule A. Simplified Per Diems Set by IRS For 2022 the simplified per diems for lodging, meals and incidentals in high-cost locales, is $296 per day. The daily amount for all other areas is $202. For meals and incidentals only, the rates are $74 a day in high-cost locales and $64 elsewhere. The per diem for solely incidental expenses is $5. The use of these simplified amounts can reduce the amount of records and receipts required to be maintained. Understanding the complexity of the tax code and making sure you realize the full benefit of the tax laws can be very challenging. The tax professionals at WarrenJackson can assist in you maximizing your tax advantages.