Todd's Tax Service LLC
Todd's Tax Service LLC
Covid Relief - American Rescue Plan of 2021
The "American Rescue Plan" is over 600 pages in length. Major changes to the taxation of unemployment (2020) and calculation of premium subsidies for taxpayers who purchase health insurance on the "exchange" are included in the new law.
Taxpayers with incomes below new thresholds ($80,000 Single , 120,000 Head of Household, and $160,000 Married Filing Joint) can expect a new stimulus payment of up to $1,400 per taxpayer.
Dependents up to age 18 may now qualify as well. Students may now qualify. Taxpayers who do not receive the $1,400 stimulus payment in 2021 may potentially include it on their 2021 tax return when they file in 2022.
The American Rescue Plan modifies the child tax credit for 2021. The fully refundable credit has been increased to $3,000 for children ages 6-17 and $3,600 for children under age 6. The credit applies for children who turn 17 in 2021 (the previous credit did not). For 2022, the child tax credit reverts back to $2,000 with the previous rules in place. (Build Back Better did not get passed into law.)
Follow the link to irs.gov for detailed information soon to be released regarding the advance payment of the credit in monthly payments and options for opting out of advance payments as well as info on how to update your info with the IRS.
Up to $10,200 of unemployment benefits received in 2020 may be excluded from income. For taxpayers who have already filed their 2020 tax return and not taken the exclusion, the IRS will automatically adjust the return and send a refund due to this change in tax law which occurred after many taxpayers filed their 2020 returns.
Minnesota has conformed to Federal changes regarding the $10,200 unemployment exclusion for 2020 only. MN will calculate tax refunds automatically for those taxpayers who did NOT take the exclusion. WI has not modified it's unemployment taxation rules. Unemployment benefits are fully taxable again starting in 2021.
Business owners and farmers should contact their bankers for information on low interest loan programs for owners who have been adversely affected by the pandemic. In many cases, forgiven loans will not be counted as income on the federal or MN tax return.
Business owners with employees should contact a CPA about various changes to payroll tax laws and payroll retention credits.
The new legislation places extraordinary demands on an already stressed IRS. Long delays are possible in processing certain returns and issuing refunds. These delays could be a few days or 6-12 weeks or longer.
Calling the IRS is not usually a good idea. Most questions can be answered by reviewing information already posted at irs.gov or this website.