K & B Bookkeeping & Tax Services

New Tax Bill to Make Changes for This Tax Season

With 12 days until the official start of tax season, Congress has unveiled a bipartisan tax bill that, if passed, would include retroactive provisions that will affect how you prepare returns this year.

Proposed changes include:

1. Expansion of the child tax credit, including a larger refundable portion of the credit
2. Election of using prior year income for determining earned income for purposes of the child tax credit
3. Extension of the disaster-related personal casualty losses
4. Increase in threshold reporting for forms 1099-NEC and 1099-MISC
5. Deduction for research and experimental expenditures
6. Extension of 100% bonus deprecation
7. End of the employee retention credit program as well increase in due diligence requirements and penalties for ERTC promoters/material advisors

I am closely monitoring the details of this news and will be in communication with you as the proposed legislation becomes law, and how the IRS implements these changes during tax season.

Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments
The IRS started sending Letter 6419, 2021 advance Child Tax Credit, in late December 2021 and continues to do so into January. The letter contains important information that can help ensure the return is accurate. People who received the advance CTC payments can also check the amount of the payments they received by using the CTC Update Portal available on IRS.gov.

Eligible taxpayers who received advance Child Tax Credit payments should file a 2021 tax return to receive the second half of the credit. Eligible taxpayers who did not receive advance Child Tax Credit payments can claim the full credit by filing a tax return.

The IRS will begin issuing Letter 6475, Your Third Economic Impact Payment, to individuals who received a third payment in 2021 in late January. While most eligible people already received their stimulus payments, this letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim their remaining stimulus amount. People can also use IRS online account to view their Economic Impact Payment amounts.

Both letters include important information that can help people file an accurate 2021 tax return. If the return includes errors or is incomplete, it may require further review while the IRS corrects the error, which may slow the tax refund. Using this information when preparing a tax return electronically can reduce errors and avoid delays in processing.

The fastest way for eligible individuals to get their 2021 tax refund that will include their allowable Child Tax Credit and Recovery Rebate Credit is by filing electronically and choosing direct deposit.