Stuff that is New for Tax Year 2021
(last updated 01-26-2022)
01-26-22 - The Franchise Tax Board (state) has NOT sent any acknowledgements for electronically filed returns as of today. Usually they are more prompt. State refunds may be delayed for a little while....
01-26-22 Did you get a notice CP-80 from the IRS, saying you have a credit on your account and have not received your 2020 tax return? WHAT HAPPENED - Your tax return and check were mailed together, so they got both. Either (a) they "lost" your return or (b - and more likely) it's sitting in a pile somewhere STILL waiting to be processed. Bring that notice to me and we'll send them another copy just to be safe. I've seen dozens of these already....
12-30-21 - Why should you use cash (whenever possible) for your personal expenses? Here is why...
12-27-21 - The child tax credit is increased to $3000, the age limit is increased to 17 years old, and increased to $3600 for children 5 and under.
The investment income test (which can disqualify low income earners from the Earned Income Credit) is increased from $3,650 to $10,000
The Dependent Care Credit limit of $3,000 in expenses (per child) is increased to $8,000. The credit rates and AGI limitations are also substantially increased.
10-31-21 - An insightful long-term perspective on the new, expanded child tax credit - click here.
And reminders of the big changes that started in
2019 (In case you are still getting used to them...)
6) Delayed Refunds - Same as in 2017. Congress passed a new law that requires the IRS to delay tax refunds which include the Additional Child Tax Credit (ACTC) and the Earned Income Tax Credit (EITC). If your return claims these credits the IRS will hold your refund until February 15, 2021. Supposedly the delay is to give the IRS additional time to spot fraudulent returns.
7) Moving Expenses (Form 3903) will only be allowed for active duty military personnel.
8) The Child Tax Credit (CTC) for children under 17 is doubled from $1K to $2K and the income range where the credit is allowed is greatly increased.
9) Overall tax rates are reduced 3% to 4% for all taxpayers.
10) For taxpayers who buy a house in 2018 (or later) the deduction for mortgage interest is limited to $750K of mortgage debt.
11) Alimony payments for divorces finalized after Jan 1, 2019 are NOT deductible to the payer nor taxable to the recipient. Prior to Jan 1, 2019 they were. Child support continues to be the same as always (not deductible if you pay it and not taxable if you receive it).
12) For taxpayers who itemize, the deduction for state and local taxes is limited to $10K. While many taxpayers were very concerned about this provision last year, I think its impact will be minimal. WHY? - because most higher-income taxpayers ALREADY had this deduction limited as part of the AMT (Alternative Minimum Tax). You just didn't realize it. And the AMT has been significantly changed, the income levels required to be subject to the AMT (almost) doubled this year.
13) The following items which were deductible on schedule "A" if they exceeded 2% of adjusted gross income are no longer a deduction - investment expenses, tax prep fees, unreimbursed employee expenses, and repayment of SSA benefits.
14) Taxpayers who have income from self-employment pass-through entities (sole proprietorships, partnerships, and S-corporations) are entitled to an additional deduction of 20% of their total business income. This affects income tax only, not self-employment tax, and is phased out for higher-income taxpayers.
15) The business deduction for entertainment is eliminated. Deductions for business meals (where you meet with associated and clients to discuss matters related to your business) are still allowed at the 50% rate.