There are many changes to the Child Tax Credit, exclusively for 2021. For your convenience we are offering this downloadable fact sheet, which summarizes the pertinent figures to consider when deciding whether to opt out of (or opt in, if you haven't been automatically) the advance payments.
Friendly reminders: third quarter estimated payments are due Thursday, September 15, and the extended filing deadline (for those who previously requested it) is Monday, October 17.
For those of you have procrastinated filing your 2019 and 2020 income tax returns – presumably because you owe tax; if you're due a refund you've just been sitting on your own money – now is the golden opportunity to file them: if you do so by Sept. 30 the IRS will waive the very substantial late-filing penalty (late-payment and interest still apply, although there is some potential for relief there also). What makes this so unprecedented is that in the eyes of the IRS not filing a return is a sin ten times greater than not being able to pay the tax: the failure-to-file penalty is 5% of the tax due per month, to a maximum of 25%, but with a minimum, after 60 days, of $435 (or 100% of the tax if it is less than that amount), while the failure-to-pay (after you have filed) is 1/2% per month, again to a maximum of 25% (there is also interest, which over the course of this year will have increased from 3% to 6% annually).
If you are among the 1.6 million taxpayers who has already late-filed for one or both of those years, the IRS intends to automatically issue a total of $1.2 billion in penalty refunds; there should be no action required on your part. And sorry, this relief does not apply to the most recent returns for 2021.
Sincerest thanks to our wonderful clients who made this our best regular season yet (even in spite of having to move our office in the middle of it)! Although we may now be in the office reduced hours, we remain available to assist you, as always, throughout the year. Please call or text 413-210-0102 anytime, and we will reply promptly.
There are good reasons to file a 2021 tax return, if you haven't already. Probably chief among them, for those with children, is that for 2021 only, the Child Tax Credit has been increased from $2000 to $3000 ($3600 if under age six), and is fully refundable, meaning zero income is required to qualify for the full amount.
Not only that, but it is now also available to residents of Puerto Rico who ordinarily only file with El Departamento de Hacienda; to receive the credit Form 1040-PR needs to be filed with the U.S. Treasury (IRS). Of course so many of us know people on the island, so please please spread the word to them.
Despite the Commissioner's best efforts, simply, as the National Taxpayer Advocate writes, “There is no way to sugarcoat the year 2021 in tax administration: From the perspective of tens of millions of taxpayers, tax administration did not work for them.” We at Holyoke Tax Service couldn't agree more with that statement, and deeply regret that some of our clients have been waiting over half a year for refunds, while others have received nerve-racking computer-generated notices demanding that they pay up in twenty days “or else,” when there is only a one in nine chance of getting through to customer service representative by phone to respond, and written replies will go unopened for, on average, ten times that long.
While the IRS certainly had many commendable accomplishments last year – processing 269 million “routine” returns, issuing 478 million Economic Impact “stimulus” payments, worth over $812 billion, and more than 36 million Advance Child Tax Credit payments, worth over $93 billion, and even recovering billions of dollars through its Criminal Investigation Service – it fell far short when it came to anything requiring manual processing (as is to be expected, considering that over the past decade its workforce has decreased by 17%, while its workload has increased by 19%). As of the end of last year there remained unprocessed about 6,000,000 original individual returns, 2,300,000 amended returns, and 5 million pieces of correspondence; some of these submissions date as far back as last April.
The Taxpayer Advocate also expresses concern about the current year. She emphasizes, as do we, the critical importance of providing accurate amounts for the “stimulus” – for the Recovery Rebate Credit, which was the leading cause of delays last year – and AdvCTC payments; if they are incorrect that will necessitate the dreaded manual processing.
At Holyoke Tax Service we strive to do everything we can to help you avoid these unfortunate delays, and stand by you in situations where they do become unavoidable. Please consider us for all your income tax-related needs.