Pandemic-Related Changes Behind Latest 2021 Tax News
We’ve been dealing with an unprecedented pandemic, and Congress and the IRS are showing uncharacteristic kindness towards taxpayers in response. In case you haven’t kept up on the 2021 tax news, we are offering a few of the changes happening this year. But bear in mind – these measures are only for this filing season.
New Deadline is Biggest News of 2021 Tax Season
After a late start to the 2021 tax season (and desperate pleas from accountants across the land), the IRS announced a new tax filing deadline. Taxes and payments are due May 17, 2021 now instead of April 15. Some deadlines haven’t changed, though. For instance, most – but not all – of the states have changed their deadlines to match the federal one. If you file a state income tax return in a state outside Washington, be sure to check with that state.
You can still file an extension, but the later deadline you get hasn’t changed. You still must file by October 15. However, if you think you’ll owe, you need to submit your payment by May 17.
At least one other important deadline hasn’t changed. The first estimated tax payment for 2021 is still due on April 15.
No Tax on First $10.2K of Unemployment Benefits
The American Rescue Plan made the first $10,200 of unemployment benefits tax-free. The bill became law on March 11, after many Americans already filed their tax returns. Those filers are now due for a refund, but the IRS says, PLEASE do not file an amended return. The agency says it will spend the spring and summer examining the returns that paid tax on unemployment benefits. The plan is to start issuing the first refunds in May. The IRS will check over the returns of single filers in the first phase of examinations, followed those of married filers.
Expanded Child Tax Credit to Start July 1
Another provision of the American Rescue Plan expands the Child Tax Credit beyond the previous $2,000 amount. Each child between the ages of 6 and 17 will now generate a $3,000 annual tax credit. Each child under 6 will bring a $3,600 annual credit. The expanded credit will be phased out for a parent who makes more than $75,000 ($150,000 for married filers). But the existing $2,000 credit will still be available to a parent making less than $200,000 annually.
What’s more, the IRS is paying out the credit in advance on a monthly basis. The agency announced this week that the first installments ($250 per older child, $300 each for younger) will go out July 1.
Advance Health Insurance Premium Credit Overpay Forgiven
Did you use the government marketplace to buy your medical insurance? Did you get an advanced tax credit to help pay the cost? Did you forget to tell them when your income came in higher than you said it would be when you applied?
If you answered yes to all those questions, you’re in luck. For this year only, the IRS is going to forgive excess Advanced Premium Tax Credit. That means you won’t have to pay back the unwarranted subsidy on your tax return. You can breathe easier (which has to be good for your health)!
The government has an IRS news Twitter feed to keep you on top of things.
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