The pandemic has affected so many things in our lives: employment, entertainment, supply chain, personal health. Congress tried to keep up by passing legislation intended to help taxpayers cope financially. You may remember the chaos last year when new laws were passed in mid-March.
There are some new things for 2021, some of which are temporary, only applying to tax year 2021. Here is an overview of some of those changes:
- Due date of the return: April 18. So far this date has not been extended. My office will not be extending this due date, even if the IRS does. Extensions, if necessary, will be filed by April 18.
- Extended due date of the return: October 17. Should you need to file an extension, this is your final due date. This is not the due date for paying your taxes. That due date is April 18.
- Information due date: September 6. This is the final date to submit your tax information for filing. BTS will not guarantee timely filing for any returns submitted after this date.
- Tuition deduction is no longer available. The Lifetime Learning credit has increased limits.
- Economic Impact Payment (EIP) 3, also known as a stimulus check: If you qualified, you should have received up to $1,400 per household member. If you received a payment, you will be sent Letter 6475 indicating how much you received. I need this letter to prepare your return. You can get this information online by signing in to your online account with the IRS. Start here: My Online Account
- Standard Deduction amounts have increased:
- ​Single or Married, filing separately - $12,550
- Married filing jointly - $25,100
- Head of household (certain single parents) - $18,800
- Virtual Currency: If in 2021 you engaged in a transaction involving virtual currency, you will need to inform me of that and provide details of the transaction. This includes things like bitcoin, not Venmo or PayPal.
- You can elect to receive notices from the IRS in a different format, including braille, large print, audio, and electronic. Let me know so I can file form 9000 for you.
- All taxpayers are now eligible for the Identity Protection PIN. This helps protect your identity in that only returns reported with that PIN will be accepted for processing by the IRS. You can opt in to the program online here: IP PIN.
- The child tax credit has been expanded to include 17 year olds. It has also been increased to $3,600 for children aged 5 and younger, and $3,000 for children aged 6 - 17. This is a one year increase and includes lower income limits than in 2021. You may have already received one or more advanced child tax credit payments. You should receive letter 6479 in January 2022 informing you of how much you received. Married parents may receive one for each parent; both should be submitted with your tax information. This credit is totally refundable, meaning you will receive it even if you have no offsetting taxes due. This additional credit is only for 2021, in 2022 it will go back to the old limit of $2,000.
- Dependent care credit, amounts paid for daycare so you can work, have been temporarily increased. For one child that new limit is $8,000, $16,000 for two or more children. You may be eligible for a tax credit of up to 50% of that amount. You must have your daycare provider's information including social security or employer identification number and address to qualify. Your eligible dependent(s) must be under age 13, or disabled. This credit is also totally refundable; i.e. you can get this refunded even if you owe less than this amount in taxes. This credit is only good for tax year 2021.
- If you received the premium tax credit, i.e. participated in the insurance Marketplace and qualified for reduced premiums, you may not have to repay this credit even if your income exceeds the guidelines.
- Earned Income Credit age restrictions have been lifted in all but certain, special circumstances.
- PPE equipment including masks, hand sanitizer, and sanitizing wipes are now deductible as a medical expense.
- Some mileage rates have changed. Here are the rates for 2021:
- ​Business $0.56
- Medical $0.16
- Charity $0.14 (to deliver donated goods, drive for charities such as Meals on Wheels, etc.)
- Business meals taken at a restaurant are temporarily deductible at 100% (usually 50%). Remember, you must keep accurate, contemporaneous records of your meals. Just because you bought food during business hours does not mean they are deductible. They must have a business purpose such as discussions with prospective customers, or while traveling out of town for business.
- Remember, if you took an IRA or early pension distribution in 2020 for which you chose to report over three years, you will be reporting another third of that amount in 2021.
