Better late than never update for 2021 taxes
I’m a bit lax in my communications on my website. Am I bad!? Oh well. I have been quite busy for the past few years growing my business, dealing with COVID and all the tax-related issues, which were many and intense.
Now, I hope that I can keep up a bit more with my communications with anyone interested and who has landed on my website.
A few things to keep in mind for 2021:
When you are ready to get your taxes prepared by a tax professional - or even if you self-prepare - make sure you know how much you received for the third stimulus payment ( max amount was $1400 per person). For 2020, the lack of correct information by many taxpayers held up their returns - some of which are still held up. Most tax payers should have received letter 6475 stating how much and how they received their third COVID stimulus payment.
In July 2021, those with children under the age of six began to receive advance child tax credit payments of $300 for 6 months for a total of $1800; those with children over the age of 5 received $250 for 6 months or $1500. These amounts have been reported by IRS to taxpayers who received the advance payments through letter 6419 - very important information to bring to your tax professional or report on your self-prepared return. The increase to the Child Tax Credit is good for 2021 only, so far = $3600 for children under age 6 and $3000 for those 6 and over. The advance goes again the total credit. For example, if you have a 4-year old child and received $1800 in advance, your credit on your tax return will net to $1800, for a total of $3600.
Business meals, when purchased from a restaurant, food truck, or any other place where food is prepared for retail sale (not a grocery store) are 100% deductible (50% in past ) - good through tax year 2022.
The child care credit has increased significantly- 50% of $8,000 expenses for one child - $4,000 maximum credit ; 50% of $16,000 for two or more children - up to $8,000 credit. And it is what is referred to as a refundable credit, which you can receive even if you don’t have a tax liability. The income phase-out to receive no credit is up to $440,000. This is good for 2021 only, so far.
The earned income credit (EIC) is now good for those without children, aged 19 (18 if foster children or homeless) with no age limit (used to be 65). This is also good for 2021 only, so far.
The Premium Tax Credit for health insurance purchased in the Marketplace no longer (for 2021 and 2022) has an income limit (400% of Federal Poverty Level). For those without insurance, you may want to consider checking out getting some through the Marketplace for 2022 as there would be no penalty for underestimating your income, and you may end up with a tax credit on your 2022 income tax return.
For partnerships and S-Corporations, there is a new form 7202, which will calculate basis annually that will need to be filed every year you remain a partner/shareholder. For those of you who haven’t been so good at tracking your basis, figure this out now! Hopefully you have some past partnership/S-Corp tax returns that you can refer to to come up with a basis to start reporting. Gains and additional funds added to business add to basis; losses and distributions decrease basis.
For those of you who live in Portland, Oregon or the tri-county area - Washington, Clackamas, and Multnomah counties - there are two new taxes that the majority of us voted for last year. For single people making more than $125,000, the City of Portland free-preschool tax is 1.5% of Oregon taxable income (line 19 on 2021 OR-40) over $125,000 and an additional 1.5% over $250,000; for Married Filing Joint returns those income limits are $200,000 and $400,000. For Metro’s low income housing tax, there’s a 1% tax for single people with Oregon taxable income over $125,000 and Married Filing Joint over $200,000. Anyone with a wage of $200,000 or more has to have withholding and those who owe over $1,000 have to pay estimated quarterly payments in 2022. Be prepared.
More oversight on cryptocurrency. Need to respond, honestly, if you have disposed of any cryptocurrency during the tax year, and if have, report correctly as to ordinary or capital gain or loss. This isn’t going away, and the block chain technology underlying cryptocurrency is very robust and can be used for so many other aspects of our lives.
Taxes due April 18, 2022 for tax year 2021.
There are so many changes for just 2021, for 2021 and 2022, and permanent changes going beyond 2022. I can’t discuss them all here, but I hope I have provided a bit of guidance for you to help in preparation of your 2021 returns. Here’s to tax benefits for you all! At least those of you who have low enough incomes.
Hopefully I will be better at updating - at least more often than every 4 years. LOL