It’s TaxQuips time from TaxMama.com® – today TaxMama® wants to tell you a little bit about the new law – the American Rescue Plan Act – signed by the President yesterday.
Dear Family,
Well, people have been anticipating this new Tax Act eagerly, waiting to get the next round of stimulus checks. One of the “improvements” in this law is that the $1,400 per person checks will be provided to (or on behalf of) everyone – all dependents, regardless of age. So you don’t have to play games with tax returns and try to put your children on their own tax returns.
More good news for people who collected unemployment last year – the first $10,200 of that income is not taxable. We’ll come back this is in a moment.
Here’s remarkable relief that no one has been talking about – the Premium Tax Credit Repayments – the thousands of dollars people are having to repay for their Marketplace Health Insurance coverage. With all the unemployment income and distributions from retirement plans, taxpayers have been shocked to learn that they have to repay hundreds, or even thousands of dollars, for the advanced premiums paid by the government. (I have been writing about ways to get around this extra tax/penalty – but now, we won’t have to do that anymore). Buried on page 180 of the Rescue Act are two little paragraphs that waive all these penalties/fees for people who received unemployment or took distributions from IRAs and retirement plans, which raised their income above 400% of the poverty level. (This is effective for years after 12/31/2019 – it doesn’t say when it expires – but it is temporary.)
The Child Tax Credit and Credit for Dependent Care have been increased and are fully refundable. Naturally, there are new phase out limits for income levels – but even those are more generous.
- The Child Tax Credit is $3,600 for children under age 6, $3,000 for children under age 17.
- Oops! They changed the age to UNDER 18! You get this for an extra year.
- Starting in July, families will be able to get monthly payments of this credit, in advance of having to file their tax returns next year.
- The expense limits for the Dependent Care Credit have risen to $8,000 (instead of $3,000) per child, for up to two children = $16,000 total annual costs.
- Employer-provided child-care assistance has risen to $10,500 (instead of $5,000)
The Earned Income Credits have also increased, and there is some expansion on the children who qualify the household for the credit.
Unpaid Student Loan Debt will not be taxable for 2021-2025.
There are lots more provisions in this bill, which is, refreshingly, only 242 pages long (as opposed to last December’s 5,593 pages.) I will be recording an on-demand webinar summarizing some of the key points that affect you – in about a week or so.
Meanwhile, be sure to file extensions: Put your business tax return on extension (by March 15th for partnerships and S Corporations – April 15th for everything and everyone else).
For those who have already filed their 2020 tax returns and want to claim some of the breaks (like non-taxable unemployment and Premium Tax Credit penalty waivers), you will need to file amended returns. BUT WAIT, until all the details and procedures are outlined by the IRS.
There’s more you need to know, and your tax pros and I are rapidly learning everything we can to get you the most tax credits and refunds, legally possible. (Right now, I am taking as many classes as time permits.)
For those folks planning to study for the EA Exam this year, it’s going to be a really tough exam! Good news. THIS new law won’t be on the exam.
Join me our annual free webinar (a discount is included for those who attend):
Everything You Wanted to Know About the 2021-2022 Enrolled Agent Exam.
Sign up for one of these dates.
March 18 – 4:00 pm Pacific
https://iTaxMama.com/Everything_EA_March
April 19 – 10:05 am Pacific
https://iTaxMama.com/Everything_EA_April
Meanwhile, I will be posting various updates and webinars that I am teaching, on this Events page – https://irsexams.school/events-and-webinars/
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At https://iTaxMama.com/AskQuestion
To make comments please drop into the TaxQuips Forum.
Keep an eye on these links – the IRS is adding topics every month -no charge and potential CPE or CE credits.
IRS webinars for Professionals – https://www.irs.gov/businesses/small-businesses-self-employed/webinars-for-tax-practitioners
The next one is Sale of Partnership Interest – November 19, 2020
IRS webinars for Small Businesses – https://www.irs.gov/businesses/small-businesses-self-employed/webinars-for-small-businesses
There are some for North Carolina businesses – and the link to the Partnership webinar above.
IRS Webinars for Exempt Organizations and Governmental Entities – in case you are involved with a non-profit, there’s lots of guidance here.
https://www.irs.gov/government-entities/webinars-for-tax-exempt-government-entities
You’re never too old to learn! And since you’re generally stuck at home anyway – why not improve your skills?!
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free. Where? Where else? At https://iTaxMama.com/AskQuestion
To make comments please drop into the TaxQuips Forum.
