It seems as though 2021 went by in the blink of an eye, which means that tax season is almost upon us! Understandably, many individuals are feeling a bit nervous about the upcoming tax season because it was another weird year that involved stimulus checks, child income credits, and other changes. Taking action now can help alleviate some of the stress you feel when tax filing in 2022.
To help you become a confident taxpayer, AA Tax & Accounting Services, LLC has outlined some important actions for you to take, including answers to common questions related to Economic Impact Payments and advance Child Tax Credits.
As we close out 2021 and head into the new year, keep these key factors in mind so you can feel less stress about the upcoming tax season.
Advance Child Tax Credits
If you have children under 18 and earn less than $75,000 annually or $150,000 for a married couple filing jointly, you are eligible to receive the advance Child Tax Credit payments this year. A benefit of this tax credit was that you did not need to wait until you filed your 2021 taxes to receive it — advance payments were sent to eligible households every month starting in July through December 2021 on the 15th of each month. Then the remainder of the tax credit will be claimed once the taxpayer files their 2021 taxes.
Before filing your 2021 taxes, take a look at the amount you’ve received from the advance payments so far and compare it to the total amount of the Child Tax Credit that can be claimed on your tax return. This allows you to determine if you will be able to claim the remaining tax credit or repay some if you received more than you’re eligible for. Understanding where you stand before filing your taxes allows you to set aside the payment in preparation for any amount you may need to repay.
If you are eligible for the Child Tax Credit and did not receive the monthly payments beginning in July 2021, you can opt to receive the payment when filing your tax return.
Economic impact payments
At the beginning of 2021, eligible taxpayers received a third Economic Impact Payment, also referred to as a stimulus check. If you were eligible and received a stimulus check, you will not be required to pay taxes on the payment when you file your tax return this year. Additionally, your stimulus payment will not be counted as income used to determine your eligibility for government assistance.
If you did not qualify for the third Economic Impact Payment or didn’t receive the full amount you were owed, you may be eligible for the Recovery Rebate Credit when filing your 2021 taxes as it is based on your 2021 tax information.
To receive the Recovery Rebate Credit, you must file a 2021 tax return.
Payment plan installment options
Filing your taxes can be a stressful time — especially if you’re expecting to owe money. If it is determined that you owe money to the Internal Revenue Service, you have the option to pay back the taxes through an IRS payment plan over time through short-term or long-term payments.
In most cases, you can determine the amount you want to pay directly to the IRS each month to pay off your tax bill. The only stipulation is that the payment amount needs to ensure that you will back off the debt within 72 months.
Tax consulting services in Cedar City, Utah
The past few tax seasons have been complicated, and this upcoming tax season isn’t any different.
Do you still have questions regarding the upcoming tax season?
Not sure if a payment plan is the right option for you?
AA Tax & Accounting Services can help you better understand the stimulus check process, child tax credits, and other variables and how they impact your tax returns. AA Tax & Accounting Services understands how pandemics, natural disasters, and legislative developments impact your tax return and are prepared to give you the answers you need.
No one should go into tax season with their questions unanswered. Our team of tax consultants has the experience of navigating the most effective strategies for maximizing their deductions and tax credits with our tax consulting services.
The AA Tax & Accounting Services team can help you execute the right tax strategies to save you money. Contact us to schedule an appointment.