Every tax filing season comes with its own set of challenges and questions. For tax year 2021, some of these include providing documentation for an advance payment of Child Tax Credit, Economic Impact Payments, as well as changes to some tax credits and deductions. This page features some of our top priorities we’re asking clients to double check this year. If you have a question but you don’t see information about it on this page, click the button below to submit it.
Individual Returns
Economic Impact Payment (EIP) #3
A 3rd stimlulus payment was sent out in March to the tune of $1,400 per qualified taxpayer. If you qualified & didn't get it, it will be part of your refund. But watch out! We've already noticed several taxpayers who forgot they got the payment and you aren't allowed to double-dip.
EIP 3 Guidelines
Child Tax Credit (CTC) Advance Payments
Families who received advance payments must report the accurate amount received by EACH spouse. Though you may have received Letter 6419 stating the amounts, we recommend double checking your data in the IRS portal.
Read Our CTC Blog
IRS Portal
The best way to get accurate numbers for your EIP and CTC are to either provide bank statements, or get the information from an IRS portal. The portal is called an "ID.me account". You'll need to provide a photo of an identity document such as a driver's license, state ID, or passport to gain access.
Go to the IRS Portal
Charitable Contribution Deduction Added
Taxpayers who don't itemize are able to take a deduction for CASH donations in 2021. The limit is up to $600 for married taxpayers filing joint returns and up to $300 for all other filers for cash contributions made in 2021 to qualifying organizations. You must provide a receipt for the donation.
Child & Dependent Care Credit Increased
This credit is a federal tax benefit that helps families pay expenses for child care needed to work or to look for work. The credit is up to $8,000 for one qualifying individual* and up to $16,000 for two or more.
*Qualifying Individual
Tuition Deduction Eliminated
The tuition and fees deduction is no longer available starting in 2021. Instead, the income limitations for the lifetime learning credit have been increased.
Virtual Currency
This year, all taxpayers are required to report any dealings they've had with cryptocurrency. This includes buying, selling, exchanging, "mining", donating, and holding interest in a cryptocurrency trust or fund. Your accountant can't assume the answer, so you will be required to give a response on our questionnaire.
Self Employed Sick Leave Credits
Certain self-employed individuals can claim credits for up to 10 days of "paid sick leave" and up to 60 days of "paid family leave" if they are unable to work or telework due to circumstances related to coronavirus.
Medical Deduction Limitation
Over the past several years, the limitation for deducting medical expenses for taxpayers who itemize has fluctuated between 7.5% and 10% of adjusted gross income (AGI). For 2021, the limitation amount is back to 7.5% of a taxpayer's AGI.
Backdoor ROTH
If you earn above the income limits to contribute to a Roth IRA ($214,000 MFJ or $144,000 single in 2022), you can put money in a traditional IRA and then convert your contributed funds into a Roth IRA. The benefit is that you'll pay some taxes now, and your money grows tax-free! If interested, this is something we can help you do.
Avizo Wealth Management
Schedules K2 & K3
New in 2021, taxpayers with pass through entities will need to look out for K2 and K3 forms. These forms disclose international activities. If a partner has even $1 of foreign income on their personal brokerage statement, their partners in a business or partnership must receive a K2 or K3 disclosing this information.
K2 and K3 Information
Individual Filing Deadline
This year, the deadline is April 18, 2022. Our firm anticipates maintaining an April 15th deadline for our clients to ensure all returns are filed or extended on time.
Business Returns
Meals
Certain business meals are 100% deductible for 2021 and 2022. Click the link to see what is included and what documentation to provide.
Rules for Deduction
PPP Documentation
We're required to document PPP loans and forgiveness on your 2021 Federal tax return.
K-2 & K-3 Forms
Just like pass-through entities, S corporations with international tax relevance, as well as certain Form 8865 filers, will have Schedules K-2 and K-3 filing obligations for tax years beginning in 2021.
2021 Mileage Rate
There is a slight increase in most of the standard mileage rates this year. Business miles increased to 58.8¢, medical purposes and qualified military moves each increased to 18¢ per mile, and charitable organization miles remain unchanged at 14¢ per mile.
Mileage Rates Graphic
Business Filing Deadline
As usual, the filing deadline for (most) business returns is March 15th.
Avizo Tax Team
