 1, 2022. What's new? Part 1. Get ready to get refunds to the max. Diving into income tax. 2021, 2022. This information can be found on the instructions to form 1040, found on the IRS website, irs.gov, irs.gov, due date of return. File form 1040 or 1040-SR by April 18th, 2022. That's April 18th, 2022. The due date is April 18th, instead of April 15th, because of the Emancipation Day holiday in the District of Columbia. Even if you don't live in the District of Columbia. If you live in Maine or Massachusetts, you have until April 19th, 2022. That is because of the Patriots' Day holiday in those states. Tuition and fees deduction not available. So the tuition and fees deduction is not available after 2020. Instead, the income limits for the lifetime learning credit have been increased. You can see form 8863 and its instructions. We might look at that in the future, in our future presentations. Here's a quick look to form 8863 Education Credits, American Opportunity, and Lifetime Learning Credits. You can find it on the IRS website irs.gov, as well as the related instructions. Economic Impact Payment. In other words, EIP3, we're talking about the third one. There's three that went out. We're looking at the third one specifically here. Any economic impact payment you received is not taxable for federal income tax purposes. So in other words, the general idea, the general rule for income is basically anything is income, unless it's stated otherwise by the IRS. They are stating otherwise here. When you've received the economic impact payments, they're not going to be generally counted as income on the top line of the income tax formula, which would basically, of course, increase or possibly increase the tax. So they're not included in income. Note that whenever that's the case with income taxes, that's a good thing because everything is flipped on its head. Everything is backwards. Income is bad. And so if you have income, it could lead to more taxes. So if you're not including the income, that would typically be a good thing for the tax calculation. So it will reduce your recovery rebate credits. So the EIP, the economic impact payments, you might hear them called the stimulus payments is going to be connected to the recovery rebate credits in a similar way as you might understand more easily, even though it's a newer thing, the advanced child tax credit is related to the child tax credit. And that's because we've seen the child tax credit in the past, although they've changed it or they've had some differences to the calculation at this time and they named the advanced payment the advanced child tax credits. We didn't do quite the same thing with the recovery rebate credit, but it is in essence the same concept, meaning the recovery rebate credit is tied to the actual tax return as a credit, which normally you would not get the credit until you file the tax return, but they gave an advanced payment and instead of calling it an advanced recovery rebate credit, they called it an economic impact payment, most likely because they came up with that name first and then tied it to the tax return. But in any case, the other reason it's a little bit more confusing is because you get the full thing in advance as opposed to the child tax credit. So also just note that there's three economic impact payments that have gone out. The first two are not tied to the 2021 tax return, they're tied to 2020. So you have the same issue of the advanced payment tied to the recovery rebate credit, but it's in the prior tax year. So if you have any issues with it, you got to file the 2020 tax return in 2021, we're concerned with EIP3, which is tied to the recovery rebate credit tied to the tax return for 2021 tax year, which we're going to be filing by April 18 of 2022 in general. 2021 recovery rebate credit, this credit is figured like last year's economic impact payment, EIP3, economic impact payment three, except eligibility and the amount of the credit are based on your tax year 2021 information. So it's the same concept, just remember EIP1 and 2 are tied to last year's return. This last one, the EIP3, went out in the current year. So see the instructions for line 30 and the recovery rebate credit worksheet to figure your credit amount. We might take a look at that later. Standard deduction amount increased. So this is the standard deduction, the one that everyone would be getting if they don't have a larger amount of itemized deductions and therefore would be taking the itemized instead of the standard deduction for 2021. The standard deduction amount has been increased for all filers. The amounts are single or married filing separately, 12,550, married filing jointly or qualifying widow, widower 25,100. You can see of course the difference between the two in essence doubling the amount as we go up from a single or married filing separately to the married return, which would make sense. And then we've got the head of household like in between the 1800. So we'll talk more about those later. Virtual currency, if in 2021 you engaged in a transaction involving virtual currency, you will need to answer yes to the question on page one of form 1040 and 1040 SR. The IRS is very skeptical of virtual currency because they think it might be a way that you could get income or something and not report it on the tax return. And so they're trying to lock that down. They're trying to strangle hold, you know, the government wants to choke out virtual currency until it's dead on the floor. So in any case, if you have virtual currency, that could be a kind of an issue that they're concerned about in these in these days, see virtual currency later for information on transactions involving virtual currency, do not leave this field blank. And then the questions must be answered by all taxpayers, not just taxpayers who engage in a transaction involving virtual currency. Credits for sick and family leave for certain self employed individuals. The family's first Coronavirus Response Act, the FFCRA, helped self employed individuals affected by Coronavirus by providing paid sick leave and paid family leave credits equivalent to those that employers are required to provide their employees for qualified sick leave wages and qualified family leave wages. So in other words, we had some responses that were going into the law that we're attempting to help employers and their employees, possibly attempting to keep the employees basically employed through the pandemic and the problem. And they did that in part through credits related to payroll taxes. The problem with that, of course, is that when you look at the self employment types of taxes for people like a Schedule C type of business, they're also paying those same types of taxes, which is basically Social Security and Medicare and the form of self employment tax as opposed to payroll taxes, but they're in essence the same thing. So then whenever they do something like that to the payroll taxes, it generally makes sense that they have to do something for the self employed individuals who are paying the self employment tax. We might get into that in more detail in future presentations. The COVID related tax relief act of 2020 extended the period during which individuals can claim these credits. Now, of course, again, note that these credits would generally be involved that we're talking about here if they had self employment tax. So that would be someone for the most common example would be like a Schedule C type of income subject to self employment where that could come into play. Might talk more about that later. So for more information, see the instructions for Form 7202 and Schedule 3, Line 13B. You can find those in the IRS website, irs.gov, extension and expansion of credits for sick and family leave. The American Rescue Plan Act of 2021 enacted in March 11, 2021. ARP provides that certain self employed individuals can claim credits for up to 10 days of quote paid sick leave and quote and up to 60 days of quote paid family leave and quote if they are unable to work or telework due to circumstances related to coronavirus. Self employed individuals may claim these credits for the period beginning April 1, 2021 and indeed September 30, 2021. For more information, see the instructions for Form 7202 and Schedule 3, Line 13H. Form 9000, alternative media preference beginning in 2021, taxpayers with print disabilities can use Form 9000, alternative media preference to elect to receive notices from the IRS in alternative format including Braille, large print, audio and electronic. You can attach Form 9000 to your Form 1040 or 1040SR or you can mail it separately. For more information, you can see Form 9000 on IRS website irs.gov. All taxpayers now eligible for Identity Protection PIN beginning in 2021. The IRS Identity Protection PIN, IPPIN opt-in program has been expanded to all taxpayers who can properly verify their identity. So the PIN is going to be kind of like a safeguard against someone trying to steal your identity, the capacity or the desire for people to try to steal people's identity specifically to file fraudulent returns has been going up and up these days given the fact that we have more and more like refundable credits and money that's going out through the IRS in the format of things like child tax credits, advanced child tax credits, the refundable credits, the economic impact payments, the recovery rebate credits. This is a lot of money going out typically on the more basic or lower in types of tax returns that don't require a lot of information and therefore the desire to kind of steal that information has going up. The capacity or ability to do that would be dependent upon having in essence your social security number and your name for example at the minimum in order to file the tax return and obviously the social security number being something that we've had since birth and we've given it to every financial institution since that time every medical institution and so on it might be compromised at some point in time so usually they set up this kind of PIN situation as a response to someone who's who's already going through the pain of having their identity stolen and a fraudulent return filed on their behalf and the response to that would be okay let's clean that up let's identify it as a fraudulent return and then how are we going to stop it from happening in the future we're going to set up a PIN which kind of acts in essence like a separate social security number now they're saying i'm not going to wait till the fraud happens you can actually set up your PIN in a proactive sense and this would might be something that you would want to do especially if you know that your credentials have been compromised for example if someone someone stole your identity for unemployment purposes and basically got unemployment on your behalf or something like that if you experienced that kind of problem they might be able to use that same information to try to get in get file a fraudulent tax return and so you could try to preemptively stop that with a PIN which is a little bit more of a problem to file but it gives you the added security with the PIN the PIN makes more sense than a social security number these days i kind of feel like we're going to have to update this whole social security number system at some point because the PIN is going to change you know from year to year and they'll give you a new PIN each year so that so that it's less likely that that it'll be a problem in that shorter period of time but in any case an IPPIN helps prevent your social security number from being used to file a fraudulent federal income tax return you can use the get an IPPIN tool on irs.gov to request an IPPIN file form 15227 if your income is $72,000 or less or make an appointment to visit a taxpayer assistance center direct deposit now available for returns filed late so you can now receive a direct deposit of your refunds even if you file your 2021 return after november 30th 2022 so it used to be you had the capacity to get the direct deposit if you file basically you know on time or before a certain date so you might say hey why isn't it april 18th because you got you know you got the extension that would be involved in there as well but in any case they extended it out now they're trying to get as many things electronically deposited as possible in part because they're short staffed and they don't want people to have to physically work on things because you know they have this whole covid thing and the restrictions and distancing has fallen i believe more heavily on the federal workers because that's where you know they have the most control over some of these things and that made the need for automation even more heavy you would think in places like the internal revenue service which means they're backed up on anything that causes actual manual labor over there instead of electronic things so expanded dependent care assistance arp expanded the child and dependent care tax credit for 2021 by making it refundable for certain taxpayers and making it larger for 2021 the dollar limit on qualifying expenses increases to eight thousand dollars for one qualifying person and sixteen thousand dollars for two or more qualifying persons the rules for calculating the credit have also changed the percent of qualifying expenses eligible for the credit has increased along with income limit at which the credit begins phasing out additionally the taxpayers who receive dependent care benefits from their employer the dollar limit of the exclusion amount increases for 2021 for more information see the instructions for form 2441 publication 503 you can find the form and that publication on the irs website irs.gov the child tax credit under arp the child tax credit has been enhanced for 2021 substantial changes here the child tax credit has been extended to qualifying children under age 18 depending on modified adjusted gross income you may receive an enhanced credit amount of up to three thousand six hundred dollars for a qualifying child under age six so now we've got this age requirement age six up to three thousand dollars for a qualifying child age five and under age 18 so you got this kind of two tiered structure in terms of the ages that are taking place and then of course we also had the advanced child tax credit which i believe basically said we're going to try to figure out what your child tax credit would be under these new calculations it's all i believe uh refundable at this point to make kind of that calculation or advanced calculation easier in some instances or that might be part of the rationale and then they're going to give the advanced payment of half of it in advance so you got to deal with those advanced payments that have already been received to try to figure out how much you would still get in the child tax credit so we got a change to the calculation of the credit new rules on that and we got the advanced credits that have already going out that we'll need to know in order to calculate the proper child tax credit still uh applicable or still being able to take the portion you'd get a benefit from when filing the enhanced credit amount begins to phase out where modified adjusted gross income exceeds one hundred fifty thousand in the case of a joint return or surviving spouse one hundred twelve thousand five hundred in the case of a head of household and seventy five thousand in all other cases child tax credit if you or your spouse is filing jointly lived in the united states for more than half the year the child tax credit will be fully refundable even if you don't have earned income so what that means is a big term these days and they keep their the refundable credits have been a you know bigger issue these days that means that your tax liability goes below zero and you still get a quote refund in quote but it's not really a refund at that case or not that point it's really a program to benefit people at that point in time because at that point you're not paying taxes you're not getting the money back that you were going to pay taxes back in the form of a refund you're getting kind of a benefit a benefit kind of program at that point so when we talk about the refundable portion of a credit we're talking about the benefit the amount of money that you would get back even if you go below zero in the fact that you don't you're not paying any taxes at that point in time and still getting a benefit in the in the case basically a refund that's not really a refund of benefit so if you don't meet the residency requirements your child tax credit will be a combination of the non-refundable child tax credit and a refundable additional child tax credit as was the case in 2020 so the credit for other dependents has not been enhanced and is figured as it was in 2020 so when we talk about dependents basically we got the two two kind of tiers that are on there you've got a dependent the major benefits you currently have at this point in time is going to be the child tax credit if they qualify as a child or the other dependent if they do not they've made changes to the child tax credit component not not much change no change really to the other dependents component of it so we'll dive more into those credits later these are just kind of the changes at this point