The coronavirus pandemic (COVID-19) continues to impact day-to-day life. With new tax laws and stimulus checks, ACC Experts share what you need to know when it comes to preparing your taxes this year.
How has the pandemic affected your 2021 tax return?
The pandemic brought a number of changes to filing tax returns over the past two years. Here are some things to consider when filing your 2021 individual tax return.
Did you receive unemployment compensation? In the 2020 tax year, unemployment compensation up to $10,200 was not taxable, but this was NOT continued for 2021. Therefore, if no or too few taxes were withheld from your unemployment compensation, you could end up with a smaller refund or even owing taxes.
Did you pay for daycare while you worked or looked for a job in 2021? The eligibility of the child and dependent care credit has been expanded for 2021. Depending on your qualifications and income limitations, you can now receive up to $8,000 for this credit ($4,000 per qualifying dependent). For more information, click the following IRS link: https://www.irs.gov/newsroom/child-and-dependent-care-credit-faqs
Did you receive an Advance Child Tax Credit (AdvCTC) in 2021? If you received any AdvCTC payments, you will need to report that amount on your 2021 tax return. If you did not receive all the advanced payments but are entitled to the Child Tax Credit for 2021, you will be able to receive the full credit that you are entitled to when you file your 2021 tax return. You should have received a Letter 6419 from the IRS in December/January 2022 with your AdvCTC payments on it. Are you not sure how much you received? Look up your payments by setting up an online account with the IRS here: https://www.irs.gov/payments/your-online-account
Did you receive the third Economic Impact Payment (EIP) (Stimulus Payment)? Many eligible taxpayers received their third EIP (stimulus payment) around late January 2021. If you did not receive all the stimulus payments that you were entitled to, you will be able to claim the Recovery Rebate Credit when you file your 2021 tax return for the amount owed to you. You should have received a Letter 6475 from the IRS in late January 2022 with your third EIP on it. Are you not sure how much you received? Look up your payments by setting up an online account with the IRS here: https://www.irs.gov/payments/your-online-account
Did you make any charitable contributions in 2021? About 85% of taxpayers use the standard deduction, instead of itemizing their deductions, and therefore do not deduct their charitable contributions. However, in 2021, you are allowed to deduct up to $300 ($600 for married individuals filing joint returns) of cash contributions to qualified charities in addition to the standard deduction. For more information regarding this deduction, including links to see if a charity is qualified and recordkeeping rules, check out: https://www.irs.gov/newsroom/year-end-giving-reminder-special-tax-deduction-helps-most-people-give-up-to-600-to-charity-even-if-they-dont-itemize
Do you need help filing your 2021 tax return?
Foundation Communities offers tax help sites to help you maximize your tax refund and minimize your stress. It’s easy and best of all it’s FREE! VisitProsperTaxHelp.org or call 2-1-1 to schedule an appointment today. Click on the link above for income eligibility requirements and other free resources for everyone.
This article was written by Austin Community College Professors Tracie Miller-Nobles, Jay Thibodeaux, and Kristy McDermott — all of whom teach taxation courses through the college’s Accounting Program. To learn more about the Accounting Program and its tax courses, visit https://www.austincc.edu/accounting.