The year 2020 was full of tax and financial changes. 2021 has to followed suit, and we expect more to come. We have put together some updates that we feel can’t wait until our monthly newsletter.
The IRS extends the filing deadline to May 17, 2021, for individuals
Taxpayers do not need to do anything to qualify for the extended period. The extension is automatic. The extension applies to the federal tax filing and payments due. Individual taxpayers can file an extension by May 17, 2021, to delay their tax return filing until October 15, 2021. However, this does not extend any payments due.
Please keep in mind the following:
- The extension does not apply to the 2021 IRS first quarter estimated tax payment that is due on April 15, 2021.
- Governor Pritzker recently also announced that the state of Illinois has also extended the Illinois individual tax filing deadline to May 17, 2021. However, like the IRS, the 2021 Illinois first quarter estimated tax payments have not been extended and are still due on April 15, 2021. Please keep in mind that other states may not extend their tax return or estimated tax payment due dates.
- The extension does not currently apply to corporations.
You can see more here:
Taxpayers can get access to their online account to get ready for their tax return
Taxpayers can use their online accounts to get access to the economic impact payments they received. If you did not receive notice from the IRS on your two economic payments or you can’t locate what you received, you can access your online account and get the payments that you received. You will need to set up an account and answer the security questions. You will need these payments when you file your 2020 tax return.
In addition, through your online account, you can access your federal estimated tax payments. This would be useful if you are having issues determining the amounts you paid or if you are unable to find your record of payments.
You can find more information here:
The American Rescue Plan
President Biden signed the $1.9 Trillion American Rescue Plan Act of 2021 into law on March 11, 2021. The law provides for $1,400 recovery rebates along with other tax changes. Here is a summary:
- $1,400 per person stimulus payments for taxpayers. The payment will be reduced for married taxpayers with adjusted gross income over $150,000. ($75,000 for singles filers and $112,500 for heads of households) Married taxpayers with an adjusted gross income of $160,000 will not receive a payment. ($80,000 for single taxpayers and $120,000 for heads of households)
- The first $10,200 in unemployment income is not taxable in 2020. This applies to married taxpayers with adjusted gross income less than $150,000. If you have already filed for 2020, the IRS has suggested waiting to amend your return. They are working on a way to properly account for the change. In addition, if you qualify for this benefit, you will want to wait to file your 2020 tax return. It will take time for tax software to get updated.
- Increased child tax credit for 2021. The new law will allow for an additional child credit of $1,000, increasing the child credit from $2,000 to $3,000. The credit increases to $3,600 for children under the age of 6. However, the additional credit phases out faster than the base child credit which begins to phase out at $400,000 for married taxpayers and $200,000 for other taxpayers. The additional child credit will be reduced for married taxpayers with adjusted gross income over $150,000. ($75,000 for singles filers and $112,500 for heads of households)
- Increases in the 2021 earned income tax credit.
- Increase in the 2021 dependent care credit from 30% to 50% of qualified expenses and an increase in qualified expenses from $3,000 for one individual and $6,000 for two or more individuals to $8,000 for one individual and $16,000 for two or more individuals. The maximum employer-provided care assistance also increases for 2021 from $5,250 to $10,500.
- Expanded exclusion of forgiveness of student loan amounts for loans discharged in 2021 through 2025.
- The paid sick and family leave credits were ending on March 31, 2021. It was extended to September 30, 2021. The wages eligible for the family leave credit increased from $10,000 to $12,000.
- The employee retention credit was set to end on June 30, 2021. It was extended through the end of 2021. Companies can qualify for this credit if their revenue in 2021 is 20% below their 2019 revenue for each quarter.
- Expansion of EIDL loans.
- Establishes the Restaurant Revitalization Fund for providing grants to restaurants. Restaurants will be eligible for grants on the difference between 2020 and 2019 revenue. The eligible amount will be reduced by any amounts received through the 1st and 2nd Paycheck Protection Plans. Funds can be used for payroll; principal or interest (not including prepayments); rent payments (not including prepayments); utilities, maintenance expenses, including construction to accommodate outdoor seating and walls, floors, deck surfaces, furniture, fixtures, and equipment; supplies; food and beverage expenses; covered supplier costs; operational expenses; paid sick leave; and any other expenses the administrator determines to be essential. This grant is tax-free and the expenses are deductible. Any amounts of money not utilized will need to be returned.
- Additional funding for Paycheck Protection Plan loans.
If you have any questions about the information above, please feel free to reach out to us.
Scot, Matt, and Dari
Summit CPA Group, P.C.