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IRS Wants Taxpayers to Save ACTC and EIP Letters

IRS Wants Taxpayers to Save ACTC and EIP Letters

If taxpayers get a letter from the Internal Revenue Service relating to either the Advance Child Tax Credit or Economic Impact Payments, they need to file the letters for safekeeping.

Those taxpayers will need the letters when they file their 2021 income taxes next year. The IRS is urging letter recipients to hold onto the letters because their information can help reduce errors and speed up processing of their returns.

Letters will be mailed soon

They IRS says it will mail out Letter 6419, 2021 Advance CTC, starting this month and continuing into January. The letter includes the total advance Child Tax Credit payments the taxpayer received in 2021 and the number of qualifying children the taxpayer used to figure their advance payments.

Here’s why it’s important that taxpayers retain these letters: families who got the advance payments will have to use this information when they file their 2021 returns in order to claim the remaining half of the credit.

The return will basically have them compare the advance payments they received with the remaining amount of the credit they’re still eligible to get. Using the letter makes preparing tax returns easier. It also speeds things up at the IRS.

Taxpayers who got the advance payments can also use the CTC Update Portal on the IRS website to check the amount of their payments.

Families who are eligible for the credit but didn’t get the advance payments can still claim the full amount of the credit on their 2021 tax return—even if they don’t normally need to file.

EIP recipients to get their own letters

Taxpayers should start getting Letter 6475, Your Third Economic Impact Payment, in late January.

This letter goes out to those who received the third Economic Impact Payment (EIP), to help them determine if they qualify for any remaining Recovery Rebate Credit on their 2021 tax return.

The third EIP was an advance payment of the Recovery Rebate Credit that would be claimed on the 2021 tax return.

Most eligible individuals have already gotten their payments, but those who are still missing stimulus payments need to look over the IRS letter to determine if they’re eligible and if the need to claim the credit for either the 2020 or 2021 tax years.

Note that Letter 6475 will also go out to recipients of “plus-up” payments, which were extra payments the IRS sent out to certain taxpayers. “Plus-up” recipients received a third EIP based on:

  • A 2019 income tax return; or
  • Information from the Social Security Administration, Railroad Retirement Board, or Veterans’ Administration; or
  • A 2020 income tax return that showed the taxpayer was eligible for a larger amount.

These EIP letters—like the letters for the Child Tax Credit—should be retained for use when the payment recipients file their 2021 income tax returns.

Visit the IRS website for more information on the advance Child Tax Credit, Economic Impact Payments or other COVID-19-related tax relief.

Source: IR-2021-255

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Deferred Social Security Payments Due in 2022

Deferred Social Security Payments Due in 2022

Taxpayers who took advantage of some tax-relief measures during the dark days of the COVID-19 pandemic are being reminded that’s it’s now time to pay up.

For some taxpayers, the part of their 2020 Social Security tax bill they were able to delay to 2022 will be due for payment January 3.

COVID relief measures in 2020 gave employers and self-employed taxpayers the option to delay paying the employer’s share of their Social Security tax—which is normally 6.2% of their wages. Half of that is now due January 3, and the other half on Jan. 3, 2023.

Most of the taxpayers affected by the January 3 deadline have already gotten notices from the Internal Revenue Service, reminding them of the impending deadline.

Be warned, however, that the IRS says the new deadline will apply even if an affected employer or individual didn’t get the IRS notice; the payment is still due on time.

Separate COVID relief legislation allowed employers to choose whether to skip withholding Social Security taxes from eligible employees; instead, they could withhold tax this year and pay those amounts to the IRS.

Find details on What employers need to know about repayment of deferred payroll taxes on the IRS website.

How to repay

One of the easiest and quickest ways to make the payment is through the Electronic Federal Tax Payment System (EFTPS). This system allows payment by credit or debit cards, checks, or even money orders. Remember that these payments cannot be combined with any other payment in order for them to be credited properly.

Here’s how to use the EFTPS to make a deferral payment:

  • Go to the Tax Type Selection screen;
  • Select Deferred Social Security Tax;
  • Change the on-screen date to the correct tax period (usually, the calendar quarter in 2020 for which tax was deferred).

If there are problems, check out the EFTPS website at EFTPS.gov, or call 800.555.4477 or 800.733.4829.

Another method to pay deferred tax is through Direct Pay, which is a service only available on the IRS website, IRS.gov.

To use Direct Pay, select “balance due” as the reason for payment. Select “installment agreement” if paying with a debit or credit card. Finally, apply the payment to the 2020 tax year, where the payment was deferred.

Source: IR-2021-256

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2022 Tax Calendar

Self-Employed Individuals Pay Half of Deferred 2020 Social Security Taxes

January 18
Estimated Tax Payment for 4th Quarter of 2021 (Form 1040-ES)

Farmers and Fishermen Pay Estimated Tax for 2021 (Form 1040-ES)

January 31

File 2021 Tax Return (Form 1040) to Avoid Penalty if Last Installment of Estimated Tax Not Paid by January 18

January 31

File 1099-NEC to report nonemployee compensation

February 2022

February 15

File Form W-4 to Reclaim Exemption from Withholding for 2022

March 2022

March 1

Farmers and Fishermen File 2021 Tax Return (Form 1040) to Avoid Penalty if Estimated Tax Not Paid by January 18

March 15, 2022

If a calendar-year multi-person partnership or S corporation, file or extend your 2021 tax return. If the return isn’t extended, this is also the last day to make 2021 contributions to pension and profit-sharing plans.

April 2022

April 1

First Required Minimum Distribution (RMD) by Individuals Who Turned 72 in 2021

April 18

File 2021 Tax Return (Form 1040) and Pay Tax Due (except for residents of Maine and Massachusetts)

April 18

File Form 4868 to Request 6-Month Income Tax Return Filing Extension (payment of tax not extended)

April 18

File Schedule H (1040) and Pay Employment Taxes for Household Employees (file separately if Form 1040 is not filed)

April 18

Estimated Tax Payment for 1st Quarter of 2022 (Form 1040-ES)

April 18

Contribute to Individual Retirement Account (IRA) for 2021

April 18

Withdraw Excess IRA Contributions in 2021 to Avoid Penalty if Filing of Form 1040 Was Not Extended

April 18

Contribute to Health Savings Account (HSA) for 2021

April 18

Contribute to Solo 401(k) Plan or Simplified Employee Pension (SEP) Plan for 2021 by Self-Employed if Filing of Form 1040 Was Not Extended

April 19

File 2021 Tax Return (Form 1040) and Pay Tax Due for residents of Maine and Massachusetts

June 2022

June 15

Estimated Tax Payment for 2nd Quarter of 2022 (Form 1040-ES)

June 15

U.S. Taxpayers Living and Working Abroad File 2021 Tax Return (Form 1040)

June 15

U.S. Taxpayers Living and Working Abroad File Form 4868 to Request 4-Month Income Tax Return Filing Extension (payment of tax not extended)

June 15

Military Personnel on Duty Outside the U.S. File 2021 Tax Return (Form 1040)

June 15

Military Personnel on Duty Outside the U.S. File Form 4868 to Request 4-Month Income Tax Return Filing Extension (payment of tax not extended)

September 2022

September 15

Estimated Tax Payment for 3rd Quarter of 2022 (Form 1040-ES)

File Extended 2021 Tax Return (S-Corp and multi-person LLC’s)

October 2022

October 17

File Extended 2021 Tax Return (Form 1040) and Pay Tax Due

October 17

Withdraw Excess IRA Contributions in 2021 to Avoid Penalty if Filing of Form 1040 Was Extended

October 17

Contribute to Solo 401(k) Plan or Simplified Employee Pension (SEP) Plan for 2021 by Self-Employed if Filing of Form 1040 Was Extended

December 2022

December 31

Contribution to Employer-Sponsored Retirement Plan for 2022 (401(k), 403(b), 457 or federal thrift savings plans)

IRS Relief Now Covers Kentucky, Parts of Illinois and Tennessee

IRS Relief Now Covers Kentucky, Parts of Illinois and Tennessee

As recovery efforts spread across parts of the south in the wake of the December 10 tornadoes, the Internal Revenue Service is expanding its effort to give affected taxpayers in the region a helping hand.

The IRS has expanded its previously issued relief package to now encompass affected taxpayers not only in Kentucky, but also in Tennessee and Illinois.

This means taxpayers within the federal disaster area as declared by the Federal Emergency Management Agency (FEMA)—whether they were hit by tornadoes, severe thunderstorms or floods—can receive the same tax breaks and revised deadlines as Kentucky storm victims.

Those who live or own a business in specified counties in Illinois and Tennessee are due the same relief measures as affected taxpayers in Kentucky.

Illinois:

  • Bond
  • Cass
  • Coles
  • Effingham
  • Fayette
  • Jersey
  • Macoupin
  • Madison
  • Montgomery
  • Morgan
  • Moultrie
  • Pike
  • Shelby

Tennessee:

  • Cheatham
  • Decatur
  • Dickson
  • Dyer
  • Gibson
  • Lake
  • Obion
  • Stewart
  • Weakley

The IRS says it will provide the same measure of relief to any taxpayer once their county is added to the federal disaster declaration.

To access a complete up-to-date list of eligible counties and other locations, see the IRS disaster relief webpage on the IRS site.

What are the terms of the relief?

The IRS relief package basically gives qualified taxpayers within the now-expanded federal disaster area until May 16, 2022, to file and pay a whole array of federal taxes. The relief applies to individuals and businesses alike.

Some of the taxes that now have a May 16 deadline for taxpayers within the disaster area include:

  • 2021 individual income tax returns that would otherwise be due April 18;
  • 2021 business returns that are normally due in March and April;
  • Quarterly estimated income tax payments that would ordinarily be due January 18 and April 18 (individuals can skip their January fourth-quarter estimated tax payment and simply include it with their 2021 return when they file);
  • Quarterly payroll and excise tax returns otherwise due on January 31 and May 16.

For a complete list of returns, payments and other tax-related actions that qualify for additional time to file or pay, see the IRS disaster relief webpage.

No action is required to receive the tax relief

The terms of the IRS relief package are automatic; that is, they are in force for any qualified taxpayers who live or work within the bounds of the federal disaster area. As counties are added to the disaster area, so are they added to the IRS relief package.

No need for taxpayers to call the IRS and ask if they qualify for relief; IRS systems are programmed to check the taxpayer’s address on record and automatically apply the terms of relief if the address is within the disaster area.

Taxpayers who are within the disaster area, however, and get a notice of late filing or late payment with a due date that falls within the December 10—May 16 time frame, should call the number printed on the notice to have the penalty abated.

Individual taxpayers and businesses who suffered uninsured or unreimbursed losses in the disaster can choose to claim their losses one of two ways: taxpayers can either claim these losses in the year they occurred (the 2021 return filed next year) or on the return for the prior year—in this case, 2020.

No matter which way the losses are claimed, Illinois taxpayers should write the FEMA declaration number 3577EM on their return making a claim. Tennessee taxpayers should use declaration number 3576EM.

Publication 547, Casualties, Disasters and Thefts, has additional information on how to claim a loss from natural disasters.

For more information on disaster recovery and the federal government’s coordinated response to the storms, visit DisasterAssistance.gov.

Source: IR-2021-252

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IRS Says December ACTC Payments Coming

IRS Says December ACTC Payments Coming

As the phrase goes, all good things come to an end, and the Internal Revenue Service is saying just that about the advance payments of the Child Tax Credit, or CTC.

In December, families who have qualified for the advance payments of the credit will get their final installment of the advance payments.

The party, however, is only half over.

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Qualified taxpayers get to claim the other half of the total tax credit on their 2021 income tax return that’s filed in the new year. Since it’s a refundable credit, they’ll get the refund even if they don’t owe any tax due.

The advance payments of the CTC are ending

The last batch of advance payments—most of them arriving via direct deposit—are going out to more than 36 million American families and total some $16 billion.

The advance payments of the credit were made possible by the American Rescue Plan legislation, which allowed more than 200 million payments worth a total of $93 billion. For those families that qualified, each advance payment could be up to $300 per month for each child under age 6, and up to $250 per month for each child age 6 through 17.

Some details on the December payments include:

  • Families will see the direct deposit payments in their accounts starting December 15. Like the prior payments, the vast majority of families will receive them by direct deposit.
  • For those receiving payments by paper check, be sure to allow extra time, through the end of December, for delivery by mail.
  • Payments are going to eligible families who filed a 2019 or 2020 federal income tax return. Returns processed by December 1 are reflected in these payments. This includes people who don’t typically file a return but either during 2020 successfully filed a return to register for Economic Impact Payments using the IRS Non-Filers tool on IRS.gov, or in 2021 successfully filed a return by using the Non-filer Sign-up Tool for advance CTC.
  • Families who did not get a July, August, September, October or November payment and are getting their first monthly payment this month will still receive their total advance payment amount for the year (which is half of their total Child Tax Credit). This means that the total advance payment amount will be made in one December payment.

File to get the rest of the credit

Qualified taxpayers who didn’t get any advance payments of the Child Tax Credit can still claim the full amount of the credit by filing a 2021 federal income tax return, which is due in April.

Those taxpayers who received advance CTC payments have to file a 2021 income tax return to claim the remaining half of the credit. In so doing, they’ll compare the advance Child Tax Credit payments they got in 2021 with the total amount of the CTC the are qualified to claim. 

The IRS says it will send out Letter 6419 in January, telling taxpayers the total amount of advance Child Tax Credit payments they received and the number of qualified children that were claimed to get the credit.

Taxpayers should keep this letter and file it with their other tax records.

For more information, visit Reconciling Your Advance Child Tax Credit Payments on Your 2021 Tax Return on the IRS website. Other resources can be found on the IRS special advance CTC 2021 page, also on IRS.gov.

Source: IR-2021-249

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