Welcome to the craziness that is the 2020 tax filing season!

Because the IRS is still playing catch-up from last year, in addition to new tax laws passed in the middle of this year’s tax filing season, the April 15 individual tax return deadline was moved to May 17. Read about how these new tax laws affect both your 2020 and 2021 tax returns.

Also read about extended tax breaks for businesses, along with creative ways to do something nice and unexpected for someone else.

Please call if you would like to discuss how this information could impact your situation.

 

ALERT! Late Tax Legislation Creating Havoc

Individual tax return deadline moved to May 17

Congress’ recent move to retroactively make a portion of 2020 unemployment income tax-free is creating havoc during this year’s tax filing season. Here is what you need to know.

ALERT Some Unemployment Income Now Tax Free for 2020 image

Background

Unemployment compensation was received by millions of Americans during 2020 because of the pandemic. While unemployment income was necessary for many who lost a job, it’s also normally classified as taxable income to be reported on your tax return. Recently-passed legislation now makes the first $10,200 ($20,400 for married filing joint tax returns) of 2020 unemployment compensation tax-free. This tax-free unemployment income is available for those with adjusted gross income under $150,000.

The problem

The new legislation which contains this tax break didn’t become law until March of 2021, a full three months after the end of the tax year and after millions of Americans had already filed their 2020 tax return!

Understanding your situation

  • If you’ve already filed your 2020 tax return: The IRS recently announced it is going to automatically process refunds for unemployment earnings that should not be taxed beginning in May. It will start with unmarried tax returns and finish with married filing joint tax returns that qualify to exclude unemployment income. This will avoid the need to file an amended tax return for most taxpayers unless the reduced income allows you to qualify for other tax benefits like the earned income tax credit. So there is no need for most taxpayers to file an amended tax return.
  • If you HAVE NOT filed your 2020 tax return: The IRS now has guidance on how to report this tax break on your 2020 tax return if you have not already filed.
  • Tax deadline moved to May 17. Because of all this havoc, the April 15 deadline for individual tax returns is now May 17. This extension applies only to Form 1040s. First quarter estimated tax payments for the 2021 tax year are still due by April 15.

Be assured you will be informed once the IRS issues further instruction on how to claim your tax break. In the meantime, enjoy the extra tax savings you’ll get sometime in the near future!

New Tax Breaks Benefit Millions

What you need to know

The recently-passed American Rescue Plan Act contains several tax breaks for you and your family. Here are the major provisions of the bill that could mean more money in your pocket during the 2021 tax year.

Get More Money For You and Your Family in 2021 image

Child tax credit (CTC)

  • The CTC for 2021 increases from $2,000 to $3,000 for kids ages 6 to 17 and $3,600 for kids ages 5 and under.
  • To receive the full tax credit your adjusted gross income must be under $75,000 (Single); $150,000 (Joint); or $112,500 (Head of Household).
  • If your income is above the aforementioned thresholds, you can still receive $2,000 per child if your income is less than $200,000 (Single, Head of Household); or $400,000 (Joint).
  • You can receive up to 50% of your 2021 child tax credit in 6 monthly payments starting July 2021. The IRS is warning, however, that this July start date may be delayed because a computer system still has to be built to handle these monthly payments.

Child and dependent care credit (DCC)

If you and your spouse work and have children in daycare, or have an adult that you care for, you may be eligible for a larger tax credit in 2021.

  • You can now spend up to $8,000 in dependent care expenses for one qualifying dependent and get a 50% tax credit. This results in a maximum credit of $4,000 (up from $1,050).
  • If you have more than one qualifying dependent, you can spend up to $16,000 in dependent care expenses and get a 50% credit. This results in a maximum credit of $8,000 (up from $2,100).
  • To receive the full tax credit, your adjusted gross income must not exceed $125,000.
  • Dependents can include people of all ages, not just kids, as long as they meet the dependent qualifications.

Earned income tax credit

  • If you’re a household with no kids, the maximum earned income tax credit increases from $543 to $1,502.
  • More taxpayers qualify for the credit. The lower age limit for receiving the credit decreases from age 25 to age 19. The upper limit of 65 for receiving the credit is eliminated. There is no upper age limit for 2021.
  • You may use either your 2019 income or your 2021 income when calculating your credit to obtain the maximum credit.

Stimulus checks

  • A third round of stimulus payments in the amount of $1,400 is being sent to qualified taxpayers.
  • The payment phases out for income over $75,000 for single taxpayers, $112,500 for head of household taxpayers and $150,000 for married couples.

Action to take

  • Look for updates on the advance payments for the child tax credit. The IRS is sorting out how to get half of your child tax credit to you in 2021. Stay tuned for updates as to whether the payments will begin in July or if they will be delayed. You may also opt out of this early payment, but will need to wait for instructions on how to do so.
  • Consider increasing dependent care expenses. Look ahead to the rest of 2021 and consider if you should increase your dependent care expenses to take advantage of the significant increase in this credit. If you increase your dependent care expenses in 2021, remember you won’t be able to include the same amount of expenses when calculating your credit in 2022, as this tax credit increase is currently for 2021 only.
  • Conduct a tax forecast. With the dramatic increase in these credits, you may want to estimate next year’s tax bill. It may make sense to adjust your withholdings to account for a lower tax obligation.
  • Be conservative when forecasting your earned income tax credit. It is uncertain how the expanded earned income tax credit will impact those over 65 when you have no children. For example, are Social Security benefits considered earned income when calculating the earned income tax credit? Does the larger standard deduction for those over 65 affect the earned income tax credit calculation? Until clarification is issued by the IRS, you may wish to be conservative about the credit amount you’ll receive.

The Gift of Grace

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After living under the weight of the pandemic for more than a year and listening every day to the bad news around us, why not look for ways to change the conversation by doing something nice and unexpected for someone else.

Here are some creative ideas:

  • Pay it forward. The next time you are in a drive-through line to pick up food, pay the bill for the car behind you. This unexpected act of kindness is sure to bring a smile.
  • Become a tutor. Many students find virtual classrooms to be challenging and could use some extra help. And you don’t need to be an expert! Even with students re-entering the classroom, your local school may be in need of assistance.
  • Look to your neighborhood. Every neighborhood has someone who could use help. From single parents to seniors, simple everyday chores could be a real chore for them. It might mean mowing the grass or offering to go shopping to pick up items for them while you are out. And if you’re up for it, consider offering free babysitting services for an hour or two so parents can take a well-deserved break.
  • Make an elderly friend. Call a local nursing home or assisted care facility and ask if they have a friendship program that connects you with a resident that could use a pen pal. Get your kids to create a card with a picture to go with a short letter they write themselves. When it’s appropriate after the pandemic, consider regular, in-person visits to say hi to your new pen pals.
  • Do a good deed daily. This is a great way to create the habit of undertaking daily, random acts of kindness. By doing a good deed every day, your vision will change and you’ll see more opportunities to help. Opening a door, picking up trash or helping a single parent who is juggling different tasks are all great examples of this.
  • Bring back forgiveness. When someone makes a mistake, provide an environment to accept an apology and leave room to genuinely forgive. Continue to be a role model in displaying the act of forgiveness.

Giving the gift of grace is not only rewarding for you, but is also contagious to everyone around you.

Businesses Get More Time to Apply For PPP Loans

Legislation provides other business relief provisions

Here’s what you need to know about the Paycheck Protection Program (PPP) loans and other business relief provisions of the recently-passed American Rescue Plan Act.

Businesses Get More Time to Apply For PPP Loan image

PPP loan application deadline extended. The deadline to apply for PPP loans is now May 31, 2021.

Sick leave extended. If your business provides sick leave for COVID-related reasons, you might get reimbursed for the sick pay through a tax credit.

  • Businesses which voluntarily provide sick leave through September 30, 2021 qualify for the credit. There are limits for each employee. However, for employees who took 10 days of sick leave in 2020 using this same provision, they can take another 10 days beginning April 1, 2021.
  • Refundable tax credits are available through September 30, 2021.
  • Covered reasons to get the tax credit now include sick leave taken to get COVID testing and vaccination, and to recover from the vaccination.
  • These benefits are also extended to self-employed workers.

Family Medical Leave Act Provisions extended.

  • Additional coverage is now available through September 30, 2021.
  • Qualified wages for this provision move to $12,000 (up from $10,000) however the credit was not increased.
  • The Family Medical Leave Act also applies to the self-employed.

Big increase in Employee Retention Credit.

  • Businesses can get up to a $28,000 tax credit per employee in 2021, up from a $5,000 maximum credit in 2020. This credit can be claimed through Dec. 31, 2021.

There are many more provisions in the close to $2 trillion dollar spending package, including money given to states. As everyone digests this new 500-plus page piece of legislation, more clarifications will be forthcoming from the IRS and other sources.

As always, should you have any questions or concerns regarding your tax situation please feel free to call, 717-393-7366!

 

The adoption process can be expensive. Fortunately, the adoption tax credit can help offset some those expenses Taxpayers who adopted or started the adoption process in 2020 should review the rules for this credit.

Here are some facts to help people understand the credit and if they can claim it when filing their taxes:

  • The maximum adoption credit taxpayers can claim on their 2020 tax return is $14,300 per eligible child.
  • There are income limits that could affect the amount of the credit
  • Taxpayers should complete Form 8839, Qualified Adoption Expenses. They use this form to figure how much credit they can claim on their tax return.
  • An eligible child must be younger than 18. If the adopted person is older, they must be physically or mentally unable to take care of themselves.
  • This credit is non-refundable. This means the amount of the credit is limited to the taxpayer’s taxes due for 2020. Any credit leftover from their owed 2020 taxes can be carried forward for up to five years. 
  • Qualified expenses include:
    • Reasonable and necessary adoption fees.
    • Court costs and legal fees.
    • Adoption related travel expenses like meals and lodging.
  • Other expenses directly related to the legal adoption of an eligible child.
  • If the taxpayer and someone other than a spouse each paid qualified adoption expenses to adopt the same child, the $14,300 credit must be divided between the two of them.
  • Expenses may also qualify even if the taxpayer pays them before an eligible child is identified. For example, some future adoptive parents pay for a home study at the beginning of the adoption process. These parents can claim the fees as qualified adoption expenses.
  • Qualified adoption expenses don’t include costs paid by a taxpayer to adopt their spouse’s child.

 

Have additional questions? We’re here to help!  Contact Loeffler Financial Group today at 717-393-7366, or email info@loefflerfinancial.com with any questions you may have.  Our tax experts and accountants can help break down the steps in order to one, understand the tax credit, and two see if the tax credit will benefit you for your 2020 tax return.

 

The Internal Revenue Service, the U.S. Department of the Treasury and the Bureau of the Fiscal Service announced they are disbursing approximately 37 million payments in the second batch of Economic Impact Payments from the American Rescue Plan. This brings the total disbursed payments from the American Rescue Plan to approximately 127 million payments worth approximately $325 billion.

As announced on March 12, Economic Impact Payments will continue to roll out in batches to millions of Americans in the coming weeks.

The second batch of payments includes direct deposits, as well as paper checks and debit cards being sent through the mail. Here is additional information on the second batch of payments:

  • Like the first batch of payments, the payments announced today primarily were sent to eligible taxpayers who filed 2019 or 2020 returns. People who don’t typically file a return but who successfully used the Non-Filers tool on IRS.gov last year were sent payments in this batch.
  • In total, this second batch includes approximately 37 million payments, with a total value of nearly $83 billion.
  • As part of that, this batch of payments includes approximately 17 million direct deposit payments, with a total value of more than $38 billion. These payments began processing on Friday, March 19, and some Americans saw the direct deposit payments as pending or as provisional payments in their accounts before today’s official payment date.
  • In addition, this batch of payments includes nearly 15 million paper checks (with a total value of nearly $34 billion) and approximately 5 million prepaid debit cards (with a total value of around $11 billion).
  • Paper checks and debit cards – known as EIP cards –began processing on Friday, March 19, and will continue to be sent by mail over the next few weeks.

As announced last week, the first batch of payments was mostly sent by direct deposit. Here is additional information on the first batch of payments:

  • The first batch of payments began processing on Friday, March 12, and some Americans saw the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.
  • The first batch of payments primarily was sent to eligible taxpayers who provided direct deposit information on their 2019 or 2020 returns, including people who don’t typically file a return but who successfully used the Non-Filers tool on IRS.gov last year.
  • In total, the first batch included approximately 90 million payments, with a total value of more than $242 billion.
  • The use of direct deposit to issue these payments means that they were disbursed remarkably faster than would otherwise be possible.
  • While most payments were disbursed by direct deposit, Treasury mailed roughly 150,000 checks worth approximately $442 million.

Additional batches of payments will be sent in the coming weeks as direct deposits and through the mail as paper checks or debit cards. The vast majority of all Economic Impact Payments will be issued by direct deposit. No action is needed by most taxpayers.

Many federal beneficiaries who filed 2019 or 2020 returns or used the Non-Filers tool were included in these first two batches of payments, if eligible. For federal beneficiaries who did not file a 2019 or 2020 tax return or did not use the Non-Filers tool, the IRS is working directly with the Social Security Administration, the Railroad Retirement Board, and the Veterans Administration to obtain updated 2021 information to ensure that as many people as possible are sent fast, automatic payments. More information about when these payments will be made will be provided on IRS. gov as soon as it becomes available.

Individuals can check the “Get My Payment” tool on IRS.gov to see the payment status of these payments.

 

Learn more about the third round of the Stimulus payment and see who is eligible for the Economic Impact Payment check out our blog post here.

Need to still schedule a tax appointment? Book online, or call Loeffler Financial Group today at 717-393-7366.

 

The IRS started issuing the third round of Economic Impact Payments. No action is needed by most taxpayers. The IRS will issue payments automatically to you by direct deposit and through the mail as a check or debit card.

Many people will receive the third payment the same way they received the first and second Economic Impact Payments. Because these payments are automatic for most eligible people, there’s no need to contact Loeffler Financial Group, or the IRS. Individuals can check the Get My Payment tool on IRS.gov for status of their third stimulus payment.

Highlights of the third Economic Impact Payments

In general, most people will get $1,400 for themselves and $1,400 for each qualifying dependent claimed on their tax return. As with the first two Economic Impact Payments, most people will receive their third payment without having to take any action.

The third Economic Impact Payment is based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered at IRS.gov using the agency’s Non-Filers tool last year or submitted a simplified tax return. If the IRS received and processed a taxpayer’s 2020 return before issuing someone’s third Economic Impact Payment, the amount is based on the 2020 return.

Those who received the first or second payment but don’t receive a payment by direct deposit will generally receive a check or a prepaid debit card, referred to as an EIP Card. The IRS will not add the third payment to an existing EIP card that people received for the first or second round of stimulus payments.

Please note: Under the new law, the IRS can’t apply the third Economic Impact Payment to past-due federal debts or back taxes.

Who is eligible for the third Economic Impact Payment

Generally, U.S. citizens or U.S. resident aliens are eligible for the full amount of the third Economic Impact Payment if they and their spouse, if they’re filing jointly, are not a dependent of another taxpayer and have a valid Social Security number and their adjusted gross income on their tax return does not exceed:

  • $150,000, if married and filing a joint return or if filing as a qualifying widow or widower.
  • $112,500, if filing as head of household.
  • $75,000 for eligible individuals using any other filing statuses, such as single filers and married people filing separate returns.

The payments phase out — or reduce — above those AGI amounts. This means taxpayers will not receive a third payment if their AGI exceeds:

  • $160,000, if married and filing a joint return or if filing as a qualifying widow or widower.
  • $120,000, if filing as head of household.
  • $80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns.

 

Looking for more information on tax tips and strategies? Check out our 10 Tax Tips for Individuals, and Tax Strategies for Homeowners!

To schedule an appointment, call us today at 717-393-7366 or book online (virtual appointments and in-person appointments daily). Loeffler Financial Group is here for you!

 

FEDERAL INCOME TAX DEADLINE EXTENDED

The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through Loeffler Financial Group. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

TAX REFUND

The IRS, and Loeffler Financial Group recommend individuals who are expected to receive a refund, to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days. You can follow your refund status at WHERE’S MY REFUND?

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

STATE TAX RETURNS

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Contact Loeffler Financial Group today to file your tax return, or schedule your in-person or virtual appointment here.

Want to learn more helpful tips on taxes, tax planning, and your financial future? Head to our blog to learn more!

 

It’s that time of year again. TAX SEASON.

Loeffler Financial Group is celebrating their 20th Tax Season this year! That’s right 20 years! What first started out in Craig Loeffler’s living room, has now become a successful full service accounting, wealth management and tax preparation!

TAX PREPARER.

Many individuals and small businesses question if they should do their own taxes or seek a tax accountant.  You can certainly do your own taxes, however, 2020 brought a lot of change, and experts said a preparer is the way to go.

If someone, for example, got laid off, and they went and started their own business, there are deductions they may not be aware of.  Software is good, but you have to know what to put in and where to put things.

Loeffler Financial has experienced tax preparers that take continual education courses to stay up-to-date with the latest tax laws and changes.

TAXES DURING A PANDEMIC.

2020 was a challenging year with the COVID-19 pandemic. Our firm keeps it easy and simple to file your taxes on time, YOUR way.  We offer in person appointments, virtual zoom appointments, and our streamlined drop-off services that we have offered for numerous years! We have proper safety protocol to keep our clients, and staff as healthy and safe as possible. We sanitize and wipe down in between each tax appointment. We also provide glass shields and work at a 50% capacity which includes staff and clients in the building.

TAXPAYER CHECKLISTS AND FORM DOCUMENTS.

To help make things easier for you this tax season we have provided our Taxpayer Checklist, along with our Engagement Letter, so you can easily download these forms and fill them out before your scheduled appointment, and/or before you drop off your tax files. This also helps to make sure you have included all necessary documents to keep your tax return moving without any delays!

RENTAL PROPERTIES AND/OR SMALL BUSINESS TAX DOCUMENTS.

Have rental properties or small businesses? Those forms are included below for you as well! 

Rental Property Checklist

Small Business Checklist

WORK SMARTER, NOT HARDER.

This tax season we have you ready and prepared to make your tax filing smooth and easy!

 

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