 Internal Revenue Service IRS tax news 2021 tax extension filers don't overlook these important tax benefits. Honestly, is it just me or is the term tax benefit an oxymoron? I mean, the IRS is like that dude from the movie called Back to the Future named Biff. Who keeps hitting Marty McFly in the face and calling him a chicken? And this would be like one day if Biff came up to Marty McFly and was like, Hey, if you jump through this hoop right here, I'll give you a Biff benefit of like not getting hit in the face by me, Biff or called a chicken for the next five seconds. And it's like, I mean, it would be nice not getting hit in the face or called a chicken for a few seconds. But like, you're still the one hit me in the face and call me a chicken. Dang it. I mean, you, you can't hit someone less and be like you're doing them some kind of favor. Can you? That's not how things work. You're not doing me any favors here, IRS. You're the one hit me in the face. Hey, did the IRS just call me a chicken? Nobody calls me a chicken. Anyways, first an attempt at a joke. I once saw a man fight a bear with his bare hands. He wore sharp clawed bare hands. The bear, not to be outdone, wore boxing gloves. The man fighting the bear with his bare hands. The bear fighting the man with his man hands. It was quite confusing listening to the announcer. The man clawed the bear striking with the man's right bare hand. But the bear jabbed back at the man with the bear's left man hand. IR2022-153 August 18, 2022, Washington. The Internal Revenue Service reminds taxpayers who've yet to file their 2021 federal income tax return. That's right. I'm looking at you to make sure they take advantage of the deductions and credits for which they're entitled and to file electronically as soon as possible. Quote, each year eligible taxpayers overlook money saving deductions and credits. They can help them with the cost of raising a family, daycare, paying for college, saving for retirement, making a donation to charity, end quotes that IRS commissioner Chuck Reddick. You see they're helping you out. They're not going to hit you. They're just going to slap you in the face. And so that'll give you some capacity still to get daycare and take care of college and stuff. So any case, quote, we want to ensure they're aware of all the tax benefits for which they may qualify. End quote, this year the IRS received about 19 million requests for extensions to file until October 17th. So if you're on extension, that's an extension to file, not an extension to pay. And the deadline's coming up here at October 17th. Those who qualify can prepare and file their return with free file IRS free file. There's a link to that here. This is third party software that has a free option. If your income is below a certain threshold, that software is very important. I think for many taxpayers these days, because the tax code has changed a lot, it's become more complex, especially on the low income side of things. Oftentimes with things like refundable credits changes to the earned income tax credit and so on and so forth. Very useful if you're doing your taxes yourself to have software. I don't think that software will be available after the cutoff date of October 17th after the extension filing date. So I would highly recommend using it before that time if you if you're planning to do so. So electronically filing and choosing direct deposit can help taxpayers get the refund faster if they owe sending the tax return with full payment prevents additional interest and penalties. So if you don't pay the IRS, then of course they hit you with their sticks. The penalties and interest because they're helping you out. They're helping you go to college so you want to pay it on time so that you could jump through the hoops. So you get you they don't hit you in the face as often. So there's no penalty for failure to file if the taxpayer is due a refund. So filing tips for taxpayers who haven't filed their 2021 tax return. There's a link to that here are available on IRS.gov. So you got the taxpayers should consider the following tax benefits when filing their tax return. We got the earned income tax credit huge credit for incomes below a certain threshold. One of the most complex credits to actually calculate. I highly recommend using tax software if you think you're going to be applicable to the earned income tax credit to help you kind of figure that credit out. Qualified low to moderate income workers and families may get a tax break. That credit's going to be dependent in part on how many dependents you have or qualifying children. And it actually goes up as your income goes up and then it'll go back down. So you actually might have a higher credit if you have more earned income in some cases and you may be able to use earned income from a prior year to calculate this credit. If it's there's a tax benefit again beneficial things typically or in theory but kind of complex things software can help. You got that. There's also a refundable portion to it. So if your liability goes below zero you can still possibly get a benefit from it. You got the child tax credit. Families can claim this credit even if they've received monthly advanced payments during the last half of 2021. So you might be thinking hey I already got my child tax credit. They've been sending me a check in the mail for like six months or something. But that's only half of it even though because they increased the credit. And so you still want to file and again it's confusing to file because now the credit's been changed. It's got refundable differences and so on. And now you got this advanced thing to deal with. The tax software can help you to figure that out. Child and dependent care credit. Families who pay expenses for the care of a qualifying individual so they can work or look for work can get a tax credit worth up to $4,000 for one qualified person and $8,000 for two or more qualifying persons. So this is different than the child tax credit. This is the child and dependent care credit if you're spending money for dependent care for you to be able to work freeing up your time so you can earn the cash so you can pay the IRS and hopefully have a little bit over to feed the kids and whatnot. So just kidding. So we got the recovery rebate credit the RRC. There's a link to that here. So those who missed out on last year's third round of economic impacts payment, they called out the EIP3, also known as stimulus payments. So obviously you're repaying that these days in the form of interest. But if you haven't got that so you want to make sure that you got that because you know that's the plus side that you get. You know if you're going to be paying the loan back, you want to make sure you got the loan in the first place, right? So in any case maybe eligible to claim the RRC. So the recovery rebate credit is linked to the stimulus payments. So if you didn't get the stimulus payments or there are problems with the stimulus payments, you then recover that by basically filing the tax return. And so the EIP3 was the one tied to tax year 2021 where you filed the tax return in 2022. EIP or the stimulus payments one and two were in the prior year. And if you didn't get those, you'll have to deal with that in the prior year, tax return, same kind of process. So this credit can also help eligible people, people whose EIP3 was less than full amount, including those who welcomed a child in 2021. Even if you didn't welcome the child, you know, if you had a child come in and they were your dependent, whether welcomed or not, you could probably get the credit. But hopefully they were welcomed. Hopefully they're welcome child. So deduction for gifts to charity, the majority of taxpayers who take the standard deduction can deduct eligible cash contributions they made to charity during 2021. Married couples finally jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations. So in other words, even if you're not itemizing, used to be or still is that deductions for charity are itemized deductions. You don't usually get a benefit for them unless you're itemizing, meaning your deductions are greater than the standard deduction. But they put an above the line or schedule one deduction of like 300 to 600, depending on married or single, for example, that you can get some benefit from, from giving to charity, which is nice. So in addition, itemizers who make large cash donations often qualify to deduct the full amount in 2021. So American Opportunity Tax Credit, the Lifetime Learning Credits. So you got the tax credits for higher education can help offset taxpayer tuition and other costs by reducing the amount of tax owed on their tax return. So if you're going to school post-secondary school traditionally, you might have a credit helping you out there. Retirement Saving Contribution Credits, the Savers Credit. A tax credit is available for making the eligible contributions to an individual retirement account or employer sponsored retirement plan. So you got that too. Again, software can help you to figure out if you qualify for it. Helpful Reminders, the IRS urges taxpayers to ensure they have all their year-end statements in hand before filing the 2021 tax return. Besides the W-2s and 1099s, this includes two statements issued by the IRS. That's letter 6419 showing their total advanced child tax credits and letter 6475 showing their total EIP payments. If you don't have these, you might try to go on to your account online at IRS and make sure that you have that information because it's going to be necessary information to complete your tax return. Individuals can also use their IRS online account. There's a link to that here. I highly recommend getting logged into your online account because the IRS is tiptoeing its way, taking the baby steps into the 21st century here into modern times and actually using their account kind of like banks have for like forever now and whatnot. So you might want to log into those things. To see the total amounts of their third round economic impact payments or advanced child tax credit payments, married spouses who receive joint payments will each need to sign into their own account to retrieve their separate amounts. Taxpayers can find answers to questions, forms, and instructions not by talking to the IRS, I would imagine, but because they don't typically like that, although they did hire a bunch more people or about to, I think, which I'm not sure if that's good or not, but they're trying to get you to go to their IRS website, of course, irs.gov, irs.gov, irs.gov, v, for victory over tax questions, that resource is available 24-7. So they can use the resources to get help when it's needed at home, at work, or on the go. You just go to their website. All the answers are there somehow, somewhere. It's not the easiest searching capacity of it, but they're getting better at it. Adjust 2022 withholding now to avoid tax surprises next year. Summer is a great time for taxpayers to check their 2022 withholding to avoid surprises when they file next year. So what's your summertime for? Obviously, you've got to do your tax planning. That's what it's for. So life events like marriage, divorce, having a child, a change in income can affect taxes. So any of these big life events, marriage, divorce, having a child or something, first you do the tax projection and see if it becomes a beneficial endeavor and then you proceed from there. I'm just kidding. You probably, but if you do those things, when those things happen, you want to make sure that you are aware that there will be tax implications for them and plan accordingly. So too little tax withhold withheld can lead to a tax bill or penalty. Too much can mean the taxpayer won't have use of the money until they get their tax refund in 2023. The IRS tax withholding estimator tool, there's a link to that here on irs.gov, irs.gov. Helps employees assess their income tax credits, adjustments and deductions and determines whether they need to change their withholdings. And I think almost everyone should kind of do this at this point. This tool is actually getting better and better because the tax code has changed a lot in the last few years and so you can't really just depend on the prior couple of years and people's circumstances have changed a lot. So that means that your withholdings aren't going to be standard because the tax code is already way too complex to get the withholdings correct in the first place. That's why we have a refund because in a perfect world, if the tax code was simple, then we would just be paying the taxes and we wouldn't owe any money or get a refund. We would just be paying them as we go and it would be an easy thing, kind of similar to payroll taxes, for example. But the tax code is quite complex and therefore we try to overshoot in order to avoid penalties. That's why we're trying to get a refund to avoid the penalties. We're not trying to get a windfall refund because it makes us feel good. I mean, you might try to do that but there's other ways to feel good. That's not the way to do it because you're actually wasting money if you're doing it that way. You're trying to do it so that you can avoid penalties and interest. So that means that you might want to use your estimator here to change your withholdings, change your W-4 or change your payments if you are a sole proprietor and if you're doing more gig work or some side work and you have some Schedule C income, then people are often unaware of their tax obligations because they've basically been W-2 employees so they might not be fully aware of social security, Medicare, self-employment tax in other words and the federal income taxes. So you want to be aware of that because even if you're doing good in your business, if you get behind on the taxes it could be very devastating and disheartening. So if a change is recommended, the estimator will provide instructions to update their withholding with their employer either online or by submitting a new form W-4 employees withholding allowance certificate. Find a taxpayer assistance center. The taxpayer assistance center locator tool, there's a link to that here, has a new look and feel. Features a dynamic map. So you got maps which is dynamic directions button and new tabs for entering search criteria. It's important to remember that taxpayer assistance centers operate by appointment only. Taxpayers must make an appointment by calling the number for the office they want to visit. Read information in other languages. Many pages on irs.gov are not available in Spanish, Vietnamese, Korean, Russian, Hayton, Crayoli and Chinese. Some of the multi resources include taxpayer bill of rights, e-filing resources and many tax forms and publications. So there's links to all this wonderful stuff here. There'll be a link to this in the description.