Updated: 7 days ago
The 2022 tax season is here which means it’s time to start thinking about filing your 2021 taxes. Before you start, we’re here to make sure you’re up to date on some of the significant changes that have happened over the past year that could affect your tax return. Luckily, not much has changed compared to last tax season, but there are still things to make sure you’re aware of.
In this article, we’re going to provide you with a list of a few things that have changed and a few things that are carrying over from the 2021 tax season.
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Here’s a list of a few recent congressional acts and their tax implications affecting tax year 2021:
The Federal Consolidated Appropriations Act of 2021
This act initially allowed for a 100% Per Diem deduction if the food was purchased from a restaurant for 2021 and 2022. If the food was not purchased from a restaurant then one could take the normal 80% of the deduction. The IRS recently announced that for 2021 and 2022 all Per Diem is able to be deducted at 100% regardless of if the food was purchased from a restaurant or not. This is for both self-employed CDL drivers and ride alongs if those ride alongs have a business purpose.
The American Rescue Plan Act
This act provided the $1,400 stimulus checks per family member. These checks will be reconciled on the 2021 tax return which means if you haven’t received the check yet or you received a reduced amount of the stimulus check due to income limitations, then you will be able to claim the $1,400 as a credit on the 2021 tax return you file.
This act also expanded the Child Tax Credit temporarily. For 2021, parents with children under age 6 can receive a credit up to $3,600/year for 2021 per child and kids over age 6 but under age 17 receive a credit up to $3,000/child. The IRS provided advanced payments of $300/per month (kids under age 6) and $250/per month (kids over 6 and under age 17) starting in July of 2021, which is half of the full credit amount allowed for the year. Taxpayers, who qualified for the credit, will receive a letter from the IRS that states how much advanced child tax credit they received so they know how much they can still claim on their 2021 tax returns.
The Child and Dependent Care Credit increased for children under the age of 13 or children who are disabled. The credit amount allowed is 50% of the expenses paid for childcare with a maximum of $4,000/dependent and a maximum of 2 dependents. This credit is also now a refundable credit which means if you don’t owe any taxes they will add the credit amount to your refund check.
The Infrastructure and Investment Jobs Act
This act does not contain many current tax law changes. Most tax law changes are anticipated to pass as part of the Build Back Better plan. For now, the biggest tax-related change is that the act will require brokerage firms to report digital assets, such as cryptocurrency, starting in 2024. This reporting will likely be similar to stock transaction tax reporting requirements.
Here’s a list of a few of the things that have carried over from tax year 2020 but have been slightly modified for this tax season:
Retirement Distribution Repayment Option
Last year the IRS allowed taxpayers to distribute, penalty-free, from their retirement accounts if they were distributions related to COVID. Taxpayers were also allowed the choice to repay that distribution over a period of three years (2020, 2021, 2022). If a taxpayer does repay their distributions, partially or in full, they will have to go back and amend their tax return in order for them to avoid paying taxes on those COVID-related distributions.
The charity deduction was expanded for the 2021 Tax Year to $300 per person. This means Married Filing Jointly taxpayers can deduct up to $600 of charitable donations in addition to claiming the standard deduction.
The credit for self-employed individuals that missed work due to COVID or caring for a family member with COVID remained in effect until March 31st, 2021. Self-employed individuals that qualify for this credit would have work time lost, due to COVID, between January 1st, 2021 and March 31st, 2021. They can claim up to 10 days for themselves and up to 50 days for caring for a family member.
The bottom line is that by being aware of these changes you can potentially save yourself money on your taxes. Many of these changes could be temporary, so make sure you’re taking advantage of them now while they are available. If you have any questions, feel free to give us a call at (866) 920-2827 or email us at firstname.lastname@example.org.
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