Panorama Community Magazine
2021 Tax Laws By Alice HortonBarr, CEO, Honest Abe's Taxes, Inc. Some very interesting credits and expenses that will require good documentation and sometimes a need to file when you have not in the past are in play for the tax year 2021. Business Filings began on January 7 and Personal Filing, with W-2’s, began on January 24. As in recent years, if your refund includes Earned Income Tax Credit and Child Tax Credit the refund will come no sooner that mid-February. For many people in the last few years Head of Household status and stimulus recapture has also delayed refunds, sometimes for months. For taxpayers without obligations that would “take their refund” being concerned about the delay they can elect to file with a “Bank Product” so that they can potentially get an advance. The fees for filing this way are paid to a “third party”, the Bank, not your tax preparer. Filing will be required this year for many people who regularly do not need to file due to their income level, or lack of income. Stimulus payments, early Child tax Credit payments, a birth of a child, and dependent care expenses may give refunds or balance
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dues that taxpayers will not expect. If you fail to file a 2021 return, assuming you do not need to, you could find yourself receiving a letter from the IRS within three years that they require a return, and odds are you will not still have your records. Best advice, take your documents to a qualified preparer to see “if you need to file”; make sure that preparer is capable of doing a “look over” for a nominal fee, not full charge, to determine, yes or no, and what their full fee would be. Let’s start with early Child tax Credit payments, these were issued based on tax returns and if a dependent child received Social Security Benefits due to the parents. These credits were not a bonus, they were early credits sent to help the cash flow of income. The credits may not be qualified though unless the parents had earned income and/or their income is so high that the credit “phases out”. If you are not eligible or have too much income, you may have to pay back that early
What Should You Do... Continued from page 31 with the money kept in a liquid, low-risk account. (If you’re already retired, you might need this fund to cover a full year’s worth of expenses.) Without such a fund, you might be forced to dip into long-term investments to pay for costly housing or auto repairs or large medical bills. • Reduce your debt load. It’s not always easy to minimize your debt load, even if you’re careful about your spending habits. But the lower your debt payments, the more money you’ll have available to invest for your future. So, you may want to consider using some of
dollars received. You will be receiving a letter from the IRS about the early money, keep it and bring it in to you tax preparer. Tax Customer “John & Sue”, given various scenarios: Facts: Mom and Dad, on SSI and SSDI, two children who have SS benefits due to the parents, they received $3,000 early credit refund. Scenario A: Neither parent had any earned income and therefore the early refund received must be paid back. (Owe $3,000) Scenario B: Mom and Dad had a part time job in addition to the SS; they now do not owe the early refund back, they get the balance of the Child Tax Credit and may be eligible for Earned Income Credit. (up to Refund of $5,515) Tax Customer “Jane”, does not receive SSI or SSDI, has zero
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your tax refund to pay off some debts, or at least reduce them, starting with those that carry the highest interest rates. • Donate to charity. You could use part of your refund to donate to a charitable organization whose work you support. And if you itemize on your tax return, part of your gift may be deductible. A tax refund is always nice to receive – and it’s even better when you put the money to good use. This article was written by Edward Jones for use by your local Edward Jones Financial Advisor. Edward Jones, Member SIPC
FEBRUARY 2022
