 Internal Revenue Service IRS Tax News. IRS sending letters to over 9 million potentially eligible families who did not claim stimulus payments, EITC, child tax credits, and other benefits. Free file to stay open until November 17th. C says the IRS were the good guys, giving out money like Santa Claus on Christmas. But wait, aren't you guys the ones to take my money? I mean, you take my money every paycheck, and then you give a little bit of it back at your end acting like it's some kind of gift instead of a refund of the overpayment. No, says the IRS, it's your evil capitalistic employer that takes your money. Every paycheck, not us. We just give refunds over here. Yeah, but you're the one that makes my employer take my money, and then they give the money they took from me to you. Well, says the IRS, we do force the evil capitalistic employer to give us the money, the money they took from you, but that's just so we can give it back to you in the form of stimulus payments and stuff. Like we're like Robin Hood over here. What? I don't buy it. Robin Hood expressly took from the tax collector. I think you're taking my money, spending it like a cracked out Hunter Biden in Las Vegas after receiving an unexplicable bonus from a foreign oil and gas company. And when the people get upset, you print more money, money you don't have due to the cracked out spending spree, shotgun it out randomly to the public in a plan as well thought out as dropping it from a helicopter, which only causes inflation resulted in the helicopter money being near worthless after a short period of time. The IRS had me under their thumb. You may think you have a grasp on reality, but how can you even begin to explain this? But they weren't content. Yes, an ordinary opposable thumb connected by flesh, tendons and muscles. But what you're about to witness may very well pull the rug of empirical science from underneath your fate. They had to just keep smashing their thumb into my face. It's not that bad. But now, due in part to my bold choice of thin, wiry glasses, the squashing of the iris' thumb in my face has resulted in me getting under their skin. I broke my thumb. Your thumb? And nobody likes it when you're under their skin, even if it's just under, like, the thumb skin. My thumb is burning! Especially when their skin is so thin. Pesky, are their acts ahead? If they are, we all be dead. No more rhymes now, I mean it! Anybody want to feel it? Ah! Then the IRS was like, if you and those pesky, wiry glasses of yours stop getting under my skin, I'll stop squashing you under my thumb with taxes. And I was like, I don't believe you. Come, sir. We must get you to your ship. We are men of action. Lies do not become us. IRS responds, you'll regret this. And I put my smashed wiry glasses back on and was like, whatever. I could cope with torture. So it's to be tortured. I can cope with torture. IR 2022-178, October 13, 2022, Washington. Starting this week, the Internal Revenue Service is sending letters to more than 9 million individuals and families who appear to qualify for a variety of key tax benefits, but did not claim them by filing a 2021 federal income tax return. Many in this group may be eligible to claim some or all of the 2021 Recovery Rebate Credit, the Child Tax Credit, the Earned Income Tax Credit, and other tax credits depending on their personal and family situation. The special reminder letters, which will be arriving in mailboxes over the next few weeks, are being sent to people who appear to qualify for the Child Tax Credit, the CTC Recovery Rebate Credit, the RRC, or Earned Income Tax Credit, the EITC, but haven't yet filed a 2021 return to claim them. The letter, printed in both English and Spanish, provides a brief overview of each of these three credits. Quote, the IRS wants to remind potentially eligible people, especially families, that they may qualify for these valuable tax credits in quotes at IRS Commissioner Chuck Redick. Quote, we encourage people who haven't filed a tax return yet for 2021 to review these options, even if they aren't required to file a tax return, they may still qualify for several important credits. We don't want people to overlook these tax credits, and the letters will remind people of their potential eligibility and steps they can take in quote. So note that even if your income is below a certain threshold, it used to be that if your income was below a certain threshold, you might say, well, why would I file? Because I'm not going to get a refund at that point in time. If I'm not required to file, I'm not going to file generally, because there wouldn't be a point to it unless you're going to get some kind of benefit, even if you don't owe any taxes, for example. So for example, it used to be if your income is below a certain level, you may still have had withholdings coming out of your paycheck if you worked some hours, even if they weren't enough to be subject for taxes, where you might get that as a refund. But now, in addition to that, there's all these substantial amounts of credits that could be what we call refundable credits, meaning you might still get money, even if you don't owe any tax, even if the tax liability goes below zero. And these are some of the major kind of changes that have been happening to some of these credits, although some of them have been around for a while, like the earned income tax credit. The child tax credit, of course, have been here for a while. The recovery rebate credit is kind of tied to the stimulus payments. But in any case, that means that anybody who hasn't really filed a tax return, even if they don't usually file a tax return, even if they're not required to file a tax return, would probably want to check out and see whether or not it would be beneficial to file a tax return. And if any benefits that you can get that they're basically given out at this point, if you qualify for them, you should get them because you're going to be paying the inflation tax. That's going to happen. So you might as well be getting the good side, meaning the stimulus payments, the CTCs and all that kind of stuff in order to pay the inflation tax. So and the free file tax software will help people out to be able to file for these tax, file the tax return and be able to these credits actually get quite complex because you have the advanced payments for the child tax credit, for example, and the earned income tax credit has always been complex. And now it's even more complex because they tweak that a little bit as well. So tax software really helps. There's free file available tax software to check it out. So if you know anyone that hasn't filed, then and they're saying, well, I didn't have much money, earned much money. I'm probably not required to file. You probably still want to check it out. It's possibly free generally to check it out if you can get access to the free file software. So claiming the credits, these and other tax benefits were expanded under last year's American Rescue Plan Act and other recent legislation. Even so, the only way to get the valuable benefits is to file a 2021 tax return. Often individuals and families can get these expanded tax benefits, even if they have little or no income from a job, business or other source. This means that people that many people who don't normally need to file a tax return should do so this year, even if they've been required to file in recent years, even if they haven't been required to file, meaning if your income is below a certain threshold, you might not be required to file. The IRS isn't going to come after you if you don't file a tax return and you don't owe any taxes. They're not going to arrest you for not, you know, taking the stimulus payment or something like that. But so, but you still want to file is the point because then you might get the stimulus payment or whatever other credits are available, earned income tax, credit, child tax credit and so on. So for this mailing Treasury Office of Tax Analysis identified individuals who don't typically have a tax return filing requirement because they appear to have very low incomes based on forms W2, 1099s and other third party statements available to the IRS. Now, the kind of the sad thing about this whole situation, the fact that they're basically increasing these kind of refundable credits to low income individuals is the fact that this kind of information, the low income individual information becomes more valuable because obviously now they can target, the IRS can clearly see if anybody else has this information, they can kind of see who might be qualifying for these credits who might not be taking them for whatever reason. And you know, then that's when the frauds, that's why the frauds kind of stuff has, has come into play because these are more likely vulnerable people that now have a price tag on their head because there's these, all these credits that could be applied to them, even if they don't want them or anything like that. So in any case, but you know, whatever, they're going to give those, those out. So the letters are similar to a special IRS mailing made in September, 2020, encouraging 9 million potential non-filers to submit a tax return for the first economic impact payment. This is part of an ongoing effort to encourage people who aren't normally required to file, to look into possible benefits available to them under the tax law. Every year, people can overlook filing a tax return when they may be entitled to tax credits and a refund. People can file a tax return. Even if they haven't yet received their letter, the IRS reminds people that there's no penalty for a refund claimed on tax return filed after the regular April 2022 tax deadline. The fastest and easiest way to get a refund is to file an accurate return electronically and choose direct deposit. So there's links to those items here. You got the free file to stay open until November 17th. Now this is, this is good because normally the free file software, this is third party software that somehow the IRS has kind of, kind of strangled them into being able to give their software for free if you meet certain requirements, typically AGI requirements and so on, which is great because you almost have to have some help to fill out the tax return, even low income tax returns, which at one time were easy, which are now possibly more difficult than middle income tax returns, right? Because these refundable credits are getting quite complex. So you kind of have to have software or some kind of help, I would think for most people to properly fill out the CTC credit and the foreign and the earned income credits, a mess, you know, right? And all that kind of stuff at their good, I mean, the earned income credit, I like the theory behind it, but it's complicated to fill out. So they had it until the October deadline. So now you've got the October deadline. If you're on extension, you want to file by October, but now they've extended it to November. So remember, you still want to file by October, if you are on extension to avoid penalties and whatnot for late filing, but you might still have access to the software past that point up until November. You really want to use the software. So if you know anyone that doesn't, like I said, if they haven't filed, they say they don't need to file, they might be eligible to get a benefit, use the software to help you to kind of check that out. It might be kind of a tedious process to do, but it should be free. And so check it out. So to help people claim these benefits without charge, free file, there's a link to that here will remain open for an extra month this year until November 17, 2022, available only at irs.gov forward slash free file. There's a link to it here. Free file enables people whose incomes are $73,000 or less to file a return online for free using a brand name software. So there's not all the brand name softwares are there and the thresholds are different. I think there's one called tax slayer. I've never used it before, but in any case, it should be, it should be proprietary software. So hopefully it's good stuff. So free file is sponsored by free file alliance, a partnership between the IRS and the tax software industry partnership where the, where the IRS probably strangles the tax industry. I don't know. People can also visit child tax credit dot gov forward slash file to file a 2021 income tax return individuals whose income are below 12,500 and couples whose income are below 25,000 may be eligible to file a simple tax return to claim the 2021 recovery rebate credit, which covers only stimulus payment amounts from 2021 they may have missed. So that might be an easier thing to do and the child tax credit, but I would probably still want to file the normal return because you might be eligible for the earned income tax credit to possibly. And so, so you, I mean, you might as well do the full tax return. I would think, even though it might be a little harder, I guess to do individuals do not need to have children in order to use the child tax credit dot gov forward slash file to find the right filing solution for them. Further details on these expanded tax benefits, the three credits include and expanded child tax credit. There's a link to that here. Families can claim this credit, even if they received a monthly advanced payment during the last half of 2021. So the child tax credit for whatever reason, they totally expanded, you know, they changed the child tax credit. We've all probably, if you have a child, you're probably aware of it prior years, but they made it larger and then they took half of it. They tried to cut in half, predict what the child tax credit would be in essence and then send out prepayments. So you might be saying, well, I already got my child tax credit because I got my prepayments, but that was only, I believe, half of what they predict your child tax credit to actually be. So when you file, you should still get a benefit from the child tax credit, even if you got the prepayments generally. So the total credit can be as much as 3,600 per child. Then you got a more generous earned income tax credit. So that's been around for a long time. It's always been a bit complicated to calculate, but they've adjusted the earned income tax credit as well. That's the one where the problem with most benefit programs is it actually incentivizes people not to work. So it actually makes people dependent, you know, over time. And that's not the point. You're trying to get people back on their feet to be independent. And the child tax credit is trying to say, well, if your income goes up to a certain threshold, your credit will actually go up trying to incentivize people to work more. And then it goes back down gradually, which makes sense, but that makes the calculation quite complex. It's also tied into how many children someone has as well, which further makes more complexity to the credit. So you kind of need software to do that calculation. So the law boosted the EITC for childless workers. There are also changes that can help low and moderate income families with children. The credits can be as much as $1,502 for workers with no qualifying children, $3,618 for those with one child, $5,980 for those with two children and $6,728 for those with at least three children. Then you got the recovery rebate credit. There's a link to that here. Those who's missed out on last year's third round of economic impact payments. That's EIP3 for short. If you're like cool IRS slaying in it, may be eligible for to claim the RRC. That's the recovery rebate credit, often referred to as stimulus payments. This credits can also help eligible peoples whose EIP3 was less than the full amount, including those who welcome a child in 2021. The maximum credit is $1,400 for qualifying adult plus $1,400 for each eligible child or adult dependent. So this one obviously is a little confusing because one, we haven't seen it before the last couple of years because it's this recovery rebate credit thing to because it's a prepayment of the stimulus payments or the economic impact payments and their names aren't related at all. So it's kind of confusing because the economic impact payment is the prepayment of the recovery rebate credit and three, because if everything went well, you shouldn't have to be doing the recovery rebate credit at all because you would have already got the EIP3. So the fact that it's only kind of a backup plan generally in case the actual stimulus payment was incorrect to get the credit makes it a little bit confusing because that's the only time that really comes into play. And four, because this is the third EIP, which happened to be the one that's related to 2021 tax year, which we're filing the tax return for by in 2022, hopefully by the extension date October 17, although you have the extension for the free file, but not for the filing deadline. So you can get access to the software and the other two stimulus payments that you might be thinking about that also went out were in the prior year. So there's been three stimulus payments. We're now thinking about the last one that went out in 2021 and that therefore is tied to the 2021 tax return. If you didn't get the full amount of it or not it at all, the the recourse on that would be to have the recovery rebate credit. One reason you might not get the full amount is because you had a child in the tax year, which they didn't know about. And so they so they didn't include that amount in the payment. OK, you also might have an issue if your income was higher than the threshold and your actual income was lower. So they phased it out. That's another thing that can happen custody issues between a kid being on one return versus another return can mess that up as well. But we won't get into that anymore. Stop. Just stop. Besides these three credits, many filers may also qualify for two other benefits with a tax return filed for 2021 and increased child and dependent care credit. There's a link to that here families who pay for daycare so they can work or look for work can get a tax credit worth up to $4000 for one qualified person and $8000 for two or more qualified persons. A deduction for gifts to charity most tax filers who take the standard deduction can deduct eligible cash contributions they made during 2021. Married couples filing jointly can deduct up to $600 in cash donations and individuals can deduct up to $300 in donations. So the charitable donations are used to be solely on the schedule a itemized deductions where you have much higher thresholds in terms of how much you can donate. But for those that don't have a schedule a because you're using the standard deduction, which is most people, then you don't get a benefit from the charitable deductions. Now you got this smaller benefit that you can get, which is the $300 or the $600. So in addition, itemizers who make large cash donations often qualify to deduct the full amount in 2021. So further details on all these benefits are available in a fact sheet this FS 2021 10. There's a link to that here. Poster earlier this year on IRS dot gov. Helpful reminders. Helpful reminders here. More help from the IRS. The IRS urges everyone to make sure they have all their year in 2021 tax statements in hand before filing their 2021 return. So if you don't have your W2 in your hand and you start to file your tax return, it's going to be hard. So you want you want to have it besides all W2s and 10 99s. This includes two statements issued by the IRS. You got letters 6419 showing the total advanced child tax credit payments and letter 6475 showing their total EIP three payments. You might be able to find that on your online account as well. People can also use the online account. There's a link to that here to see the total amounts of their third round of economic impact payments or advanced child tax credit payments. So it's becoming more and more important to kind of have these letters and possibly to access your online account to get this information as the IRS does more of this kind of pre payment stuff where I mean advanced credit gifts and whatnot like the advanced child tax credit that earned income tax credit is some kind of advanced kind of payment. The more the IRS does that the more complex it's going to make the tax return process and the more useful it will be to be to be using your online account which hopefully they're getting better and better at. You would think everybody would be using an iris dot gov online account as easily as you could do with like a financial institution. For example, so for married couples who receive joint payments each spouse will need to sign into their own account to retrieve their separate amounts. Whether or not they use free file, anyone can find answers to their tax questions, forms and instructions and easy to use tools online at irs.gov. They can use these resources to get help when they need it at home at work or on the go. Claiming these credits has no effect on the ability of someone to be eligible for federal benefits like supplemental security income SSI supplemental nutrition assistance program snap temporary assistance for needy families T. A. N. F. And the special supplemental nutrition program for women infants and children W I C claiming these credits also has no effect on an individual's immigration status or their ability to get a green card or immigration benefits. So again sometimes when you have these kind of benefit programs, they can kind of overlap and if income goes above a certain threshold, there's often going to be a problem because then they're going to be removed completely off of whatever program that is in place, which they're dependent on, which can further make people more dependent and instead of trying to get people into a status of independent. So hopefully these credits, the idea would be that they're not going to impact, you know, the impact status is and so on for these other programs is the thought process. I believe the general idea and intent.