Wednesday, November 3, 2021
Friday, September 10, 2021
CAMBIOS AL CREDITO POR TRABAJO -DEPT. DE HACIENDA DE PR
A partir del 2021, personas cuyo ingreso ganado provenga de una industria o negocio por cuenta propia cualificarán. La persona debe estar registrada como comerciante y que dicho ingreso este sujeto a Self Employment Tax (1040SS u 1040PR) para cualificar. Los ingresos deben estar informados en una declaración informativa 480 y reportados en la planilla de PR.
Friday, July 23, 2021
Top Questions About the 2021 Child Tax Credit
The American Rescue Plan Act included changes to the child tax credit that were designed to benefit certain taxpayers; however, some of these changes are now causing confusion and anxiety for many. The American Institute of CPAs (AICPA) recognizes the stress many taxpayers and tax professionals are experiencing and is providing useful information and tips to help ease the burden, reduce the complexity and clarify details.
What Are the Big Changes Taxpayers Need to Be Aware Of?
Among the many changes to the child tax credit, AICPA recommends that taxpayers be aware of the following:
- The age of qualifying children was raised from 16 to 17.
- The tax credit amount has increased for certain taxpayers.
- It is fully refundable (meaning you can receive it even if you don’t owe the IRS).
- Up to half of the credit may be received in monthly payments unless taxpayers opt out.
- The IRS will pay half the credit in the form of advance monthly payments beginning July 15, 2021 as a prepayment of the refund taxpayers would normally receive when they file their 2021 income tax returns. Taxpayers will then claim the other half when they file their 2021 return.
- How Might the Tax Credit Impact 2021 Tax Returns?
Taxpayers should also understand that these changes are temporary and only apply to the 2021 tax year, and the decision to have the child tax credit payments received in advance will affect a taxpayer’s refund or amount due when that return is filed.
This means for those who choose to receive advance monthly payments now, they will either receive a lower refund next year or potentially owe tax (and maybe interest and penalties) that they wouldn’t ordinarily owe. To avoid any surprises, it’s important for taxpayers to contact a CPA to discuss their situation and make any necessary plans.
Should Taxpayers Opt Out of Receiving the Tax Credit?
Many taxpayers remain confused about whether they should opt out of receiving advance monthly payments. Here are some of the instances where taxpayers may want to opt out:
- If a
taxpayer expects to owe taxes when they file their return next year, they
might not want the advance payments now (as it would add to the amount
they owe later).
- If a
taxpayer is paying estimated taxes (e.g., the taxpayer is self-employed),
they likely do not want to receive advance child tax credit payments. This
is because the estimated tax the taxpayer is paying the IRS and the
advance child tax credit payments that the IRS is giving the taxpayer are
essentially netting each other out and can result in more tax (and
potentially interest and penalties) owed when the taxpayer files their
return.
- If taxpayers
are divorced or separated and alternate claiming dependents.
- If a
taxpayer’s income has increased from the prior years.
“Deciding whether or not to opt out of the child tax credit is a personal and individual decision that each qualifying taxpayer needs to make,” said AICPA Director for Tax Practice & Ethics, Cari Weston, CPA, CGMA. “Accepting the credit now can be a lifeline for many, but it’s important that taxpayers know how this will affect them during next year’s tax filing season as well. The AICPA is providing resources to our members to allow them to help their clients navigate the consequences and challenges they face.”
- If a
taxpayer expects to owe taxes when they file their return next year, they
might not want the advance payments now (as it would add to the amount
they owe later).
Wednesday, June 30, 2021
Advance Child Tax Care Credit Payments in 2021
The IRS
has released new information regarding the Advance Child Tax Credit Payments in 2021.
Important changes to the Child
Tax Credit will help many families get Advance Child Tax Credit Payments
starting this summer. The IRS will pay half the total credit amount in
advance monthly payments beginning Thursday, July 15, 2021. Your client will
claim the other half when you file their 2021 Individual Income Tax Return.
These changes only apply to tax year 2021.
These
Advance Payments will reduce the Child Tax Credit your client will receive with
their 2021 tax refund. Your clients have the option to Unenroll From Advance Payments
if they would prefer to receive the credit with their tax refund.
Below are
two examples for you to consider:
1.)
Taxpayer is married with 2 kids, 10 and 14 years old. The taxpayer’s taxable
income is $35,000, the taxpayer typically receives a refund of $2,000 to $3,000
due to the Child Tax Credit and the Earned Income Credit.
If the taxpayer does not Unenroll from Advance Payments, the potential Child Tax Credit of $3,000 (for two children) will be spread out over the rest of this year. The taxpayer will receive Advance Payments of $500 a month until December.
The
taxpayer’s 2021 return the refund will be reduced by the total amount of
Advance Child Tax Credit Payments received. Your client might only receive a
$1,000 refund or less.
2.) The
taxpayer is Head of Household with 3 kids, 15, 11, and 8 years old. The
taxpayer’s taxable income is $100,000. The taxpayer typically receives a refund
of $200 because the taxpayer minimizes the amount of tax withheld from their
paycheck to cover the tax owed.
If the taxpayer does not Unenroll
from Advance Payments, the potential Advanced Payments will be
$750 a month through December. The advanced payment will be $4,500. The
taxpayer’s 2021 return the refund will be reduced by the total amount of
Advance Child Tax Credit Payments received. The taxpayer will owe the IRS
$1,500.
Your
clients will need to Unenroll if they don’t want to get advance payments or
visit the IRS website to check if they are enrolled to receive payments.
Below is a
link to the IRS 2021 Child Tax Credit and Advance Child Tax Credit Payments —
Topic J: Unenrolling from Advance Payments FAQs.
https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-j-unenrolling-from-advance-payments
Please
note that Married Filing Jointly taxpayers will need to unenroll individually.
Please see Q J6 and Q J7 in the link above.