The holiday season has come and gone but “tax season” is always with us. This tax season may be as complicated as ever due to the pandemic and a flurry of new tax laws that came down from Congress.
Your expectations for your personal and business tax preparation may have to be adjusted, particularly with working with the IRS (always a challenge) and the child and dependent tax credit. Here are some facts to keep in mind as you get your documents in order to file for 2021:
- The Internal Revenue Service (IRS): Delayed and behind
- E-filing begins January 24, 2022: The IRS is already way behind in preparing for this tax season and is still working on 2019 and 2020 tax filings. These disruptions are blamed on the ongoing pandemic along with budget cuts, a shrinking workforce, and outdated technologies at the IRS.
- Delayed refund for returns claiming Additional Child Tax Credit (ACTC). The IRS cannot issue refunds before mid-February 2022 for returns that properly claim ACTC. This time frame applies to the entire refund, not just the portion associated with ACTC.
- The Child and Dependent Care Credit:
- Differences in credits for qualifying children and other dependents tax year 2021
- Enhanced child tax credit. For 2021, the child tax credit applies to qualifying children who have not attained age 18 by the end of 2021. Also, the initial amount of the child tax credit is increased to $3,600 for each qualifying child who has not attained age 6 by the end of 2021 and $3,000 for each other qualifying child who has not attained age 18 by the end of 2021. The credit for other dependents has not been enhanced.
- In the know. Important abbreviations: ACTC means additional child tax credit. ATIN means adoption taxpayer identification number. ITIN means individual taxpayer identification number. NCTC means nonrefundable child tax credit. ODC means credit for other dependents. RCTC means refundable child tax credit.
- Delayed refund for returns claiming ACTC. The IRS cannot issue refunds before mid-February 2022 for returns that properly claim ACTC. This time frame applies to the entire refund, not just the portion associated with ACTC.
- 2021 Child and dependent care credit information: The American Rescue Plan Act of 2021, was enacted on March 11, 2021, making the Child and Dependent Care credit substantially more generous and potentially refundable (up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons) only for the tax year 2021, This means an eligible taxpayer can receive this credit even if they owe no federal income tax. Your federal income tax may be reduced by claiming the Credit for Child and Dependent Care expenses on your tax return. ***
If you have been frustrated the past filing your individual and/or business in the past, this year will not be any different. We are constantly hearing from clients who are having difficulty contacting the IRS to get important information or a consultation on a previously filed tax return.
AK Burton, PC, knows the current tax laws and how to work with the IRS. Our experienced tax preparers can file your business and personal tax returns and represent you to the IRS. Call us at (301) 365-1974 for a consultation. Our office is open. Covid protocols if requested. We serve the Bethesda, Rockville, and Montgomery County, MD area.
*** For more information on Child and Dependent Care Tax Credit, visit the IRS website.