The ‘child and dependent care” in the tax system are applicable if the taxpayer paid expenses for the qualifying dependents during a financial year.  The eligibility criteria are listed separately.  This tax credit can be claimed in tax filing by taxpayers under the applicable situations.  

If the taxpayer is a parent or caretaker of a disabled dependent or spouse, they can save the expenses while claiming in this tax filing 2021. For the tax year 2021, the credit is fully refundable. This means that an eligible family can get it, even if they owe no federal income tax. 

Eligibility of Child and Dependent Care Credit

• Taxpayer’s dependent who is under age 13 when the care is provided,
• The spouse who is physically or mentally incapable of self-care and lived with the taxpayer for more than half the year, or
• A person who is physically or mentally incapable of self-care, lived with the taxpayer for more than half the year and either: 

1. 1. is your dependent; or 
   2. Could have been your dependent except that 
      • he or she is over the gross income limit of $4300 
      • or files a joint return, 
      • or you (or your spouse, if filing jointly) could have been claimed on another taxpayer’s return.

Qualifying Claim Amount of Claim and Child and Dependent Care Credit

For 2021, taxpayers can claim the credit for up to $8,000 of expenses for one qualifying person or $16,000 for two or more people. The percentage of expenses you can claim ranges from 0% to 50%, depending on your adjusted gross income (AGI). You can claim the maximum percentage (50%) of expenses if your AGI is $125,000 or less. So, for example, if your AGI is $75,000 and you had $8,000 of expenses for one qualifying person, the tax credit would be worth $4,000 (50% of $8,000). The tax credit starts to phase out if your AGI is above $125,000 and disappears entirely at AGIs above $438,000. For more details, refer to IRS official website below

https://www.irs.gov/newsroom/irs-highlights-importance-of-child-and-dependent-care-credit-can-help-families-others

How to Claim Child and Dependent Care Credit

To claim the credit, taxpayers must fill out Form 2441 and include it with the federal tax return. Further, a valid taxpayer identification number (TIN) for each qualifying person, as well as the names, addresses, and TINs for the people and organizations that provided care for your child, spouse, or dependent must also be included.

According to the IRS, since the advance child tax credit payments cannot be counted as income, federal, state, or local agencies can’t use the amount when determining if you or your family are eligible for other benefits or assistance.

Advance Child Tax Credit payments

Advance Child Tax Credit payments provide an option to claim the credits early from the estimated amount of the Child Tax Credit. Taxpayers can claim up to 50% of the estimated credit that you may properly claim on your 2021 tax return during the 2022 tax filing season. 

Going through different forms and documents is always a hassle for taxpayers especially when the deadlines are nearing. IRS Audit Group in Los Angeles facilitates your tax filing through its certified IRS attorneys. Get a free consultation with one of our staff members to help us understand your needs. Call us on 1- -888-300-6670 or email us at [email protected].

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.

Stimulus Payments

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:

https://www.irs.gov/credits-deductions/individuals/child-and-dependent-care-credit-information

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:

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-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/

If you’ve requested a six-month extension to submit your taxes then your deadline is coming up quick! October 16, 2017 is the last day to file your individual or corporation return. This includes the 1040, 1040A and 1040EZ or 1120 tax forms. Beware of penalties for late payments or filing.

Don’t let this extra time go to waste. Be sure that you file your return immediately and see if you qualify for common credits and deductions. Low and moderate income families may be eligible for special tax benefits as well.

According to the IRS, you could also receive credit if you’ve paid college tuition or fees in the last year. Same goes for those that have made their homes energy efficient.

E-filing will reveal guides and tips to help you complete your return, but you can also call us for a one-on-one consultation with a tax professional. If you’ve missed important deadlines in the past or fear you won’t get the paperwork done in time for the upcoming deadline please give IRS Audit Group a call to learn how we can help resolve your tax issues ASAP.