It is that time of the year when the tax return is due. The deadline for submitting tax return for the year 2021 is April 18, 2022. Those who requested an extension will have until October 17, 2022, to file their full 2021 tax return. Filing a tax return sometimes turns out to be a confusing process for quite a few. It happens mostly if the rules and deadlines have changed slightly over the previous year. It’s a good idea to get it straight so you know exactly what to file and when.
Now, there is a reminder from the IRS for those who have yet to file under several provisions of the American Rescue Plan, and it will have an impact on their 2021 tax return. More than two-thirds of the tax cuts and direct payments go to families earning less than $90,000 a year, making it one of the most progressive pieces of legislation in history.
How the American Rescue Plan affect taxes in 2021
The ARPA’s (American Rescue Plan Act of 2021) impact will be felt primarily on the 2021 tax return, as many of the provisions were designed to provide tax relief to taxpayers dealing with the effects of COVID-19 in 2021. The tax provisions primarily expand on current Tax Code provisions, with few exceptions.
Families will get payments from the government for every qualified dependent child listed on their tax returns, not just those under the age of 17. Importantly, Stimulus funds are available to the US residents and Green Card holders living abroad. The first two installments can be claimed as a refund in the 2020 federal tax return. The third payment can be claimed on the 2021 federal tax return if they are not received automatically. For expats, this is excellent news.
Child and Dependent Care Credit
For 2021, ARPA made significant changes to the child and dependent care credit. The credit will be a refundable credit on the 2021 tax return, which will benefit low-income taxpayers significantly. For more details visit:
Earned Income Tax Credit
For low-income individuals, there is an extension of the Earned Income Tax Credit. As well as raising the income cap and expanding the beneficiary age bracket, it hopes to raise the credit limit for childless adults from around $530 to close to $1,500. Check if you qualify using IRS virtual assistant:
Unemployment Benefits Exclusion
The American Rescue Plan improves unemployment insurance to make it easier for workers to receive benefits. Unemployment compensation is available for periods ranging from 24 to 53 weeks, while unemployment assistance is available for periods ranging from 50 to 73 weeks.
Forgiven Student Loans are Excluded
The legislation includes a broader exclusion for forgiven student loans that apply to loans discharged after 2020 but before 2026.
It is important that you file your tax return 2021 before the deadline. It means you will not face financial penalties for late filing and that you will be able to keep up with payments. Even if you do not feel you have enough money to pay your entire tax return, filing early and paying as much as you can afford will save you money in the long run.
IRS Audit Group can assist you in filing your tax return by analyzing all the eligibility criteria to your benefits in reducing tax payable. Contact us for a free consultation: https://irsauditgroup.com/contact/