Michigan Homestead Property Tax Credit Claim Information

On March 14, 2022   /   Michigan Taxes  
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Mar-14-2021 – Michigan.gov/taxes

Listed below is the Michigan Homestead Property Tax Credit Claim Information for the tax year of 2021.

Prior to sending additional information for review, verify the following information:

  • Was all taxable and nontaxable income included in total household resources?
    • Yes, continue to next topic.
    • No, recalculate your homestead property tax credit using the correct amount of income. If you still disagree with the adjustments made, submit documentation to verify your income and property tax statements for the year in question, to Michigan Department of Treasury for review. Be sure to include a daytime phone number.

See the chart below to determine if some income was omitted on the original return and what information to send for documenting all sources of income.
Income includes, but is not limited to, the following:

Income Type Supporting Documentation
Wages, salaries, tips, etc. W-2(s) and/Of 1099(s)
Business Income (from Federal Schedule C, C-EZ, E or F) Business records used to prepare your return and/or 1099 payment document
Interest and/or dividends 1099-INT, 1099-DIV, etc.
Capital Gains U.S. Schedule D
Social Security, Supplemental Security Income(SSI) and/ or Retirement, Survivors, and Disability Insurance (RSDI) payments Statement from the Social Security Administration indicating amounts for yourself, your spouse and any claimed dependents.
Pension benefits (including nontaxable pensions) 1099-R
Railroad retirement benefits 1099-R
Veteran’s benefits Letter from the regional Veteran’s affairs office
Worker’s compensation 1099-R and/or W-2
Child Support Statement showing amount of support received for the year
Foster Care payments W -2. 1099. or other Statement from MDHHS
Adoption subsidy payments Annual statement
Cancellation of Debt Income (CODI) 1099-A and/Of 1099-C
Nontaxable gain from sale of primary residence See IRS Publication 523
Student grants/ scholarships 1098-T
FIP/MDHHS payments (Do not include food assistance) Annual statement
Rent/Bills paid on your behalf Statement from each person who gave assistance; include the total dollar amount given for the year, name, signature, date & contact information
Gifts of cash over $300 Statement from each person who gave assistance; include the total dollar amount given for the year, name, signature, date & contact information
Personal Loans – Including loans from relatives and/or friends* Signed statement showing the original amount of the loan and the terms of repayment.
Inheritance or proceeds of life insurance policy from decedent other than spouse Statement showing amount received for the year
Inheritance or proceeds of life insurance policy from deceased spouse* Statement showing amount received for the year
Food Assistance* Statement showing amount of assistance received for the year
Credit card and/or savings account* Statements from financial institution(s) indicating dates and amounts of disbursements received for the year. Statements should be from the beginning, middle and end of the year.
Student Loans* Statement from financial institution/lender indicating dates and amounts of disbursements.

*Note: This is not included as income, but can be used to show how living expenses were covered.

  • If you live in a village you may receive a separate property tax statement from the village itself in addition to summer and winter tax statements. Village taxes may be included on the homestead property tax credit.
  • Verify the correct statements were used

Use summer and winter property tax statements for the tax year in question no matter when the taxes were paid. (example: for the 2020 tax year use the 2020 summer and the 2020 winter property tax statements)

  • If Correct statements were used continue to next topic.
  • If Incorrect statements were used re-calculate the MI-1040CR using the correct summer and winter property tax statements and corresponding amounts. If you still disagree with the corrections made, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct school district code was reported. (Line 4)

School District Code: If you are unsure of what your school district code is, please contact your county, city, township or village office. A list of school district codes can be found in the MI-1040 Instruction Booklet.

  • If Correct school district was reported continue to next topic.
  • If Incorrect school district was reported, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct taxable value of your homestead was reported if you did NOT buy/sell your home. (Line 9)

Taxable Value: This can be found on your property tax statements sent to you by your county, city, township or village office. Do not use the State Equalized Value (SEV) or Assessed Value.

  • If Correct taxable value was reported, continue to next topic.
  • If Incorrect taxable value was reported, recalculate your property tax credit using the summer and winter property tax statements for the year in question. If you still disagree with the adjustments made, submit your summer and winter property tax statements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the correct taxable value of your homestead was reported if you bought and/or sold your home. (Line 9)

Taxable Value: This can be found on your property tax statements sent to you by your county, city, township or village office. Do not use the State Equalized Value (SEV) or Assessed Value. NOTE: Homeowners who moved complete Part 3 (lines 45-51) of the MI-1040CR to determine the taxes that can be claimed.

  • If Correct taxable value was reported, verify your property taxes/rent was prorated correctly based on the time you occupied each home. If you still disagree with the adjustments made, submit your summer and winter property tax statements/lease agreements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • If Incorrect taxable value was reported, recalculate your homestead property tax credit using your prorated share of property taxes/rent based on the time you occupied each home. If you still disagree with the adjustments made, submit your summer and winter property tax statements/lease agreements to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Verify the taxes levied (billed) for the tax year in question were reported correctly. (Line 10)

Taxes Levied: You can only claim the amount of property taxes levied (billed) during the year in question, no matter when they were paid. Do not include special assessments or penalty/interest fees.

Do Not use property tax information from your mortgage statement, as this may contain taxes paid for a prior
tax year.

  • If Correct taxes levied amount was reported continue to next topic.
  • If Incorrect taxes levied (billed) amount was reported, recalculate your property tax credit using the correct
    taxes levied. If you still disagree with the adjustments made, submit your summer and winter property tax
    statements for the year in question to Michigan Department of Treasury for review. Be sure to include a
    daytime phone number.
  • Verify the taxes levied (billed) and reported for the tax year in question did not include special assessments and/or penalty/interest. (Line 10)

Special assessments and/or penalty/interest must be subtracted from the property taxes. Special assessments may include recycling, garbage/rubbish removal, street lights, sidewalks, drains, etc. These are not charged based on a millage rate; therefore they cannot be included in the credit computation.

  • If Special assessments and/or penalty/interest were not included, continue to next topic.
  • If Special assessments and/or penalty/interest were included, recalculate the homestead property tax credit using the correct amount of taxes levied by subtracting the special assessments and penalty/interest from total taxes. If you still disagree with the adjustments made, submit your summer and winter property tax statements for the year in question to Michigan Department of Treasury for review. Be sure to include a daytime phone number.
  • Did you move during the year?
  • If Yes, the property taxes for both homes must be prorated. Complete Part 3 (lines 45-51) of the MI-1040CR
    to determine the taxes that can be claimed. Use only taxes levied in the year of the claim, then prorate taxes
    based on days you owned and occupied the home as your principal residence. Do not include the taxes listed
    on your settlement statement. You may not claim more than 365 days total. If you sold a home, you must also include the capital gain from the sale of your home in total household resources even if the capital gains are not included in adjusted gross income.
  • If No, continue to next topic.
  • What was the principal residence exemption (P.R.E.) percentage on the property?
  • 100% P.R.E. means that your property is exempt from school operating tax.
  • Between 1% and 99% P.R.E. means that part of your property is not used as your principal residence and your property is subject to a portion of school operating tax.

For example, if you use 10% of your property as a business, then your principal residence exemption would be 90%. You cannot claim the school operating tax for the property tax credit because that is taxed to the business on your property. After subtracting the school operating tax from your property tax bill, you can claim 90% of the remaining property tax for the credit.

How to compute your homestead property tax credit, if your P.R.E is between 1% and 99% P.R.E.

Total taxes levied for tax year $1,348
Subtract School Operating Tax – $123
Total $1,225
Multiply by percentage declared as P.R.E. x 90%
Amount of taxes that can be claimed $1,102

 

  • 0% P.R.E. means that you have not claimed a principal residence exemption and all of your property is subject to school operating tax. If you own and occupy the property as your home, you should file a Principal Residence Exemption Affidavit (Form 2368) with your county, city, township or village and submit your summer and winter property tax statements to Michigan Department of Treasury for review. Please note that a second home or a vacation home does not meet the qualifications of a principal residence.
  • Do you share ownership of your home?

If two or more individuals share ownership and occupy the homestead each may file a homestead property tax credit.  The
claim must be based only on his/her prorated share of the taxable value and property taxes and his/her own total household
resources. Property taxes levied must be divided equally between each individual.
Note: Any gifts of cash or expenses paid on your behalf must be included in total household resources.
If you still disagree with the adjustment, respond in writing, along with a copy of your summer and winter property tax statements for the year in question, a daytime phone number and a copy of the adjustment message/letter you received to:

Michigan Department of Treasury
P O Box 30058
Lansing MI 48909

Allow up to 90 days after your correspondence has been imaged onto our system for review. You will be notified in writing upon completion.

For the status of correspondence visit e-Services.

 

Contact Us with any questions regarding the Michigan Homestead Tax credit

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In person IRS Assistance

On March 8, 2022   /   IRS  
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In person IRS Assistance available in more than 30 cities on Saturday, March 12

WASHINGTON — (In person IRS Assistance) The Internal Revenue Service today announced that many Taxpayer Assistance Centers (TACs) will offer face-to-face Saturday help without an appointment from 9 a.m. to 4 p.m. on Saturday, March 12. Normally TACs are only open weekdays.

“Being open on select Saturdays is offered for people to get the help they need when they need it,” said IRS Wage and Investment Division Commissioner and Taxpayer Experience Officer Ken Corbin. “We know that many taxpayers work during the week or have other obligations that make it difficult to get away to take care of their taxes during our routine business hours. We’re here to help, and people don’t need an appointment during these special Saturday hours.”

People can also ask about reconciling advance Child Tax Credit payments, receive help resolving a tax problem, a tax bill or an IRS audit. If assistance from IRS employees specializing in these services is not available, the individual will receive a referral for these services. IRS staff will schedule appointments for a later date for Deaf or Hard of Hearing individuals who need sign language interpreter services. Foreign language interpreters will be available.

The IRS follows Centers for Disease Control social distancing guidelines for COVID-19, and availability may change without notice. People are required to wear face masks and social distance at these events.

Please come prepared

The IRS urges individuals to bring the following information:

  • Current government-issued photo identification
  • Social Security cards and/or ITINs for members of their household, including spouse and dependents (if applicable)
  • Any IRS letters or notices received and related documents

During the visit, IRS staff may also request the following information:

  • A current mailing address, and
  • Bank account information, to receive payments or refunds by Direct Deposit.

No tax return preparation will be available at any IRS TAC. The IRS.gov webpage, Contact Your Local IRS Office, lists all services provided at specific TACs.

Free tax preparation help

While tax return preparation is not a service offered at IRS TACs during regular hours or during these Saturday hours, the following free resources are available to help most taxpayers prepare and file their 2021 federal tax returns anytime:

Any individual or family earning $73,000 or less in 2021 can use tax software from providers who make their online products available through IRS Free File at no cost. There are products in English and Spanish.

Free help preparing tax returns is available at a Volunteer Income Tax Assistance Center (VITA) or Tax Counseling for the Elderly location (TCE) sites. The income limit for VITA assistance is $58,000. To find the closest free tax return preparation help, use the VITA Locator Tool or call 800-906-9887. To find a TCE AARP Tax-Aide site, use the AARP Site Locator Tool or call 888-227-7669.

More information:

 

 

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Interest rates increase for the second quarter of 2022

On March 1, 2022   /   IRS  
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Interest rates increase for the second quarter of 2022 – IR-2022-42, February 23, 2022

WASHINGTON — The Internal Revenue Service today announced that interest rates will increase for the calendar quarter beginning April 1, 2022. The rates will be:

  • 4% for overpayments (3% in the case of a corporation);
  • 1.5% for the portion of a corporate overpayment exceeding $10,000;
  • 4% for underpayments; and
  • 6% for large corporate underpayments.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during January 2022 to take effect February 1, 2022, based on daily compounding.

Revenue Ruling 2022-05 PDF announcing the rates of interest, will appear in Internal Revenue Bulletin 2022-10, dated March 7, 2022.

 

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Michigan Tax Exempt Forms Info

On February 21, 2022   /   Michigan Taxes  
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Common Sales and Use Tax Exemptions and Requirements

Information regarding Michigan Tax Exempt Forms via:

www.michigan.gov/taxes

Michigan Tax Exempt Forms

501(c)(3) and 501(c)(4) Organizations – 501(c)(3) and 501(c)(4) organizations must provide proof that they are exempt under these codes by the Internal Revenue Service. In addition to this they must provide a certificate of exemption stating that the property will be used or consumed in carrying out the operations of the organization. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Wholesalers purchasing for resale should provide the seller with a completed form 3372 Michigan Sales and Use Tax Certificate of Exemption and check the box for Resale at Wholesale. Sales tax licenses are not issued to wholesalers.

Retailers – Retailers purchasing for resale should provide a signed exemption certificate by completing form 3372 Michigan Sales and Use Tax Certificate of Exemption and check box 1. For Resale at Retail in Section 3, Basis for Exemption Claim. Their sales tax license number must be included in the blank provided on the exemption claim. However, a seller should not accept the sales tax license number alone as a claim of exemption. The department does not issue tax-exempt numbers.

Industrial Processors – An industrial processing exemption is allowed for property which is used or consumed in transforming, altering, or modifying tangible personal property by changing the form, composition, or character of the property for ultimate sale at retail or for sale to another processor for further processing and ultimate sale at retail. The industrial processing exemption does not include property which is or becomes affixed to real estate, office supplies, administrative office equipment, or vehicles licensed for public highway use, except when the vehicle is used to mix and agitate materials added at the plant or job site in the concrete manufacturing process. Industrial processing also does not include the receipt or storage of raw materials extracted by the user or consumer or the preparation of food or beverages by a retailer for retail sale. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption .

Churches – Sales to organized churches or houses of religious worship are exempt from sales tax. These exempt sales must not involve property used in commercial enterprises. Vans or buses may be purchased exempt if the manufacturer’s rated seating capacity is 10 or more and it is used primarily for transportation of persons for religious purposes. Churches may not purchase any other type of vehicle exempt. Anyone who is directly engaged in the business of constructing, altering, repairing, or improving real estate for a church or a house of religious worship is liable for the sales tax on the inventory value of the materials affixed to the property, even if the church purchases the materials. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Hospitals – Sales to hospitals are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Schools – Sales to schools and parent cooperative preschools are exempt from sales tax when the organization is not operated for profit. The income or benefit from the operation must not inure to any individual or private shareholder, directly or indirectly. PTA, PTO, and all other groups and organizations must qualify separately for exemption when making purchases for their organizations. Sales to teachers are subject to tax. Revenue Administrative Bulletin 1995-3 and 2002-15 has more information on this topic.

Government – Sales to the United States government, the State of Michigan and its political subdivisions, departments and institutions are not subject to tax, if the sales are ordered on the government form or purchase order and are paid for directly to the seller by warrant on government funds. Sales to the American Red Cross, and its chapters and branches are exempt. All sales to other states or countries are subject to Michigan sales tax. Sales to employees of the government for their own use are subject to tax. The exemption certificate is 3372 Michigan Sales and Use Tax Certificate of Exemption

 

If you have any questions about Michigan Tax Exempt Forms, Please Contact Us today to speak with an experienced CPA.

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IRS launches special tax season alerts page

On February 16, 2022   /   IRS  
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IRS launches special tax season alerts page – IR-2022-32, February 14, 2022

WASHINGTON — To help taxpayers and tax professionals, the Internal Revenue Service today announced a special tax season alerts page on IRS.gov to provide the latest details and information affecting the 2022 filing season and ongoing efforts by the agency to address the inventory of previously filed tax returns.

During this tax season, taxpayers face a number of issues due to critical tax law changes that took place in 2021 and ongoing challenges related to the pandemic. To raise awareness about these issues and provide people with the latest timely information, the IRS has created a special tax season web page. This page will provide people with a quick overview of information to help people filing tax returns as well as those who have previous year tax returns awaiting processing by the IRS.

“The IRS is taking numerous steps to keep this tax season going smoothly while also taking additional action to address the inventory of tax returns filed last year,” said IRS Commissioner Chuck Rettig. “We’re off to a good start processing tax returns and issuing refunds. But we want people to have an easy way to see the latest information. This new page provides a one-stop shop for the latest key information people and the tax community may need.”

The “special tax season alerts” page will be available through the IRS.gov home page and shared through social media and other channels.

The page will include the latest filing season updates. The IRS began tax season on January 24, and in less than two weeks more than 4 million tax refunds have gone out worth nearly $10 billon. Millions more will go out in the weeks ahead as the IRS enters an important period of the tax season.

The page also includes links to important information related to ongoing efforts by the IRS to address the inventory of unprocessed tax returns filed before this year. This includes steps to stop more than a dozen common letters to taxpayers, and updates on IRS operations and the number of unprocessed tax returns.

“The combination of the pandemic, new tax laws and numerous other factors led to an unprecedented amount of unprocessed tax returns and correspondence remaining in the IRS inventory during 2021,” Rettig said. “We must continue pursuing innovative strategies while supporting the hard work and dedication of our employees to fulfill our commitment to return inventories to a healthy level before entering the 2023 filing season. These steps are making a difference. Refunds for tax returns and amended tax returns in the inventory continue to flow out to taxpayers.”

The IRS continues to urge taxpayers to carefully review their tax filings for accuracy and file electronically with direct deposit to speed refunds. Special tips are available in several places on IRS.gov, including these top 5 tips; basics on the 2022 tax season and IRS Tax Time Guide.

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Your Tax Specialist Plymouth MI

On February 7, 2022   /   ATS Advisors  
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Tax Specialist Plymouth MI

Tax Specialist Plymouth MI –

ATS Advisors is not just another CPA firm. As your partner we understand your desire to save time and money. We work with you, not just for you, to find effective solutions for your needs whether they are tax, accounting, finance, business or personal.

We build and maintain long-lasting relationships. Nearly 100% of our business was built on referrals and we take great pride in this fact. Your financial well-being is of paramount importance to us and we take that responsibility very seriously.

Our philosophy is simple: we only work with clients we respect and believe have the tools, and drive, to succeed. You will never receive an unexpected bill for services. We discuss all our fees up front and do not have any hidden costs.

Please take a look at our business and individual services to find more detailed information as to how we may serve you.

Tax advisory services go beyond just the preparation of a tax return. Our aim is to resolve tax issues before they become tax nightmares. Therefore, our comprehensive tax service begins long before returns are due or financial decisions are made. Our tax advisors rely on the combination of dedicated client involvement, vast technical knowledge, and extensive experience when helping clients achieve their financial goals. We focus on helping clients turn business strengths into tax saving advantages.

If it’s tax-related, we can help you with it.

Whether you want us to handle the filings or just give you some advice, we can help you with personal income tax returns, trusts and estate-planning, and retirement-planning.

We’ll probably never convince you that doing your taxes is fun, but at least we can make life easier when it’s time to file.

Give us a call today at (734) 454-4100

ATS Advisors – Tax Specialist Plymouth MI

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Earned Income Tax Credit Michigan: IRS releases changes mean more people qualify for credit that helps millions of Americans

On January 31, 2022   /   IRS  
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Earned Income Tax Credit Michigan – IR-2022-20, January 28, 2022
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IRS YouTube Video:

WASHINGTON – More people without children now qualify for the Earned Income Tax Credit (EITC), the federal government’s largest refundable tax credit for low- to moderate-income families.

In addition, families can use pre-pandemic income levels to qualify if it results in a larger credit. The Internal Revenue Service and partners across the nation highlight those changes today as they mark the 16th annual EITC Awareness Day.

Enacted in 1975, EITC is regarded as one of the government’s largest antipoverty programs helping millions of American families every year. The IRS and partners nationwide urge people to check to see if they qualify for this important credit, and also urge people who don’t normally file a tax return to review whether they qualify for EITC and other valuable credits like the Child Tax Credit or the Recovery Rebate Credit, also referred to as stimulus payments.

“There are important changes to EITC that will help this credit reach more hard-working families this year,” said IRS Commissioner Chuck Rettig. “We urge people potentially eligible for this valuable credit to review the guidelines; many people each year overlook this and leave money on the table. On this EITC Awareness Day, we want to make sure everyone who qualifies for the credit knows about it and has the information they need to get it.”

The IRS began accepting 2021 tax returns on January 24, 2022. Taxpayers can ensure they’re getting all the credits and deductions for which they qualify, including EITC, by filing their taxes electronically, using a trusted tax professional or using an IRS Free File partner’s name-brand software. Taxpayers whose adjusted gross income (or AGI) is $73,000 or less qualify for Free File partner offers.

The IRS also reminds taxpayers that the quickest way to get a tax refund is by filing an accurate tax return electronically and choosing direct deposit for their refund. Tax software, tax professionals and other free options can help people see if they qualify for the EITC.

What’s new?

Childless EITC expanded for 2021

For 2021 only, more childless workers and couples can qualify for the EITC, and the maximum credit is nearly tripled for these taxpayers. For the first time, the credit is now available to both younger workers and senior citizens.

For 2021, the EITC is generally available to filers without qualifying children who are at least 19 years old with earned income below $21,430; $27,380 for spouses filing a joint return. The maximum EITC for filers with no qualifying children is $1,502, up from $538 in 2020. There are also special exceptions for people who are 18 years old and were formerly in foster care or are experiencing homelessness. Full-time students under age 24 don’t qualify. There is no upper age limit for claiming the credit if taxpayers have earned income. In the past, the EITC for those with no dependents was only available to people ages 25 to 64.

Income from 2019

Another change for 2021 allows individuals to figure the EITC using their 2019 earned income if it was higher than their 2021 earned income. To qualify for the EITC, people must have earned income through employment or other sources, so this option may help workers get a larger credit if they earned less in 2021 or received unemployment income instead of their regular wages. See the instructions for Form 1040 PDF, line 27 c.

Phase out and credit limits

For 2021, the amount of the credit has been increased and the phaseout income limits at which taxpayers can claim the credit have been expanded. For instance, the maximum EITC for a married couple filing jointly with three or more children is $6,728 and the upper-income level for that same family is $57,414. In 2020, the maximum EITC for a family in that situation was $6,660 and the upper-income level was $56,844.

Taxpayers should also note that any Economic Impact Payments or Child Tax Credit payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of their Economic Impact Payments may claim the Recovery Rebate Credit on their 2021 tax return. See IRS.gov/rrc for more information.

2021 and beyond

New law changes expand the EITC for 2021 and future years. These changes include:

  • More workers and working families who also have investment income can get the credit. Starting in 2021, the amount of investment income they can receive and still be eligible for the EITC increases to $10,000. In 2020, the limit was $3,650. After 2021, the $10,000 limit is indexed for inflation.
  • Married but separated spouses can choose to be treated as not married for EITC purposes. To qualify, the spouse claiming the credit cannot file jointly with the other spouse, must have a qualifying child living with them for more than half the year and either:
    • Do not have the same principal residence as the other spouse for at least the last six months out of the year.
    • Are legally separated according to their state law under a written separation agreement or a decree of separate maintenance and not live in the same household as their spouse at the end of the tax year for which the EITC is being claimed.
      • Taxpayers should file Schedule EIC (Form 1040) and check the box showing them as married filing separately with a qualifying child.
      • In the past, married taxpayers had to file with their spouse to claim the EITC.
  • Single people and couples with children who have Social Security numbers can claim the credit, even if their children do not have SSNs. In this instance, they would get the smaller credit available to childless workers. In the past, these filers didn’t qualify for the credit.
    • Taxpayers should file Schedule EIC (Form 1040) if they have a qualifying child. If they have at least one child who meets the conditions to be their qualifying child for purposes of claiming the EITC, they should complete and attach Schedule EIC to their Form 1040 or 1040-SR even if that child doesn’t have a valid SSN. For more information, including how to complete Schedule EIC if your qualifying child doesn’t have a valid SSN, see the instructions for Form 1040 PDF, line 27a, and Schedule EIC.

Vital refund boost

The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. For those who qualify, and if the credit is larger than the amount of tax they owe, they will receive a refund for the difference. While the majority of those eligible claim the EITC every year, IRS estimates that one of five eligible taxpayers do not claim the credit.

Nationwide last year, almost 25 million eligible workers and families received over $60 billion in EITC allowing for the payment of necessities, housing, and educational training, with an average EITC nationwide of $2,411. For 2021, the EITC is worth as much as $6,728 for a family with three or more children or up to $1,502 for taxpayers who do not have a qualifying child.

Look for EITC Refunds by early March if no issues with tax return

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with the EITC or ACTC and the Recovery Rebate Credit if applicable. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

Where’s My Refund? on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by February 19. Therefore, EITC/ACTC filers will not see an update to their refund status for several days after February 15. Due to weekends and other factors, the IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.

Workers who can claim the EITC

Workers at risk for overlooking this important credit include taxpayers:

  • Without children, including those workers who are at least 19 years old and older than 64
  • Living in non-traditional families, such as a grandparent raising a grandchild
  • Whose earnings declined or whose marital or parental status changed
  • With limited English language skills
  • Who are members of the armed forces
  • Living in rural areas
  • Who are Native Americans
  • With disabilities or who provide care for a disabled dependent

How to claim the EITC

To get the EITC, workers must file a tax return and claim the credit. Eligible taxpayers should claim the credit even if their earnings were below the income requirement to file a tax return. Free tax preparation help is available online and through volunteer organizations.

Those eligible for the EITC have these options:

  • Find a trusted tax professional. The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. Tips for choosing a return preparer, including certified public accountants, enrolled agents, attorneys and many others who don’t have a professional credential, and details about national tax professional groups are available on IRS.gov. EITC recipients should be careful not to be duped by an unscrupulous return preparer.
  • Free File on IRS.gov. Free brand-name tax software is available that leads taxpayers through a question-and-answer format to help prepare the tax return and claim credits and deductions if they’re eligible. Free File also provides online versions of IRS paper forms, an option called Free File Fillable Forms, best suited for taxpayers comfortable preparing their own returns.
  • Free tax preparation sites. EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, use the search tool on IRS.gov, the IRS2Go smartphone application, or call toll-free 800-906-9887. Taxpayers should bring all required documents and information.

The IRS reminds taxpayers to be sure they have valid Social Security numbers for themselves, their spouse if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.

Avoid errors

Taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them. Since the rules for claiming the EITC can be complex, the IRS urges taxpayers to understand all of them. People can find help to make sure they’re eligible by visiting a free tax return preparation site, or using Free File software or by using a paid tax professional.

Beware of scams

Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.

Visit IRS online

IRS.gov is a valuable first stop to help taxpayers get it right this filing season. Information on other tax credits, such as the Child Tax Credit, is also available.

Related items

 

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Top 5 things to remember when filing income tax returns in 2022 – Your Plymouth Accountants

On January 24, 2022   /   IRS  
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Your Plymouth Accountants – ATS Advisors
IR-2022-16, January 20, 2022

ATS Advisors

WASHINGTON — With filing season beginning January 24, the Internal Revenue Service reminded taxpayers about several key items to keep in mind when filing their federal income tax returns this year.

Given the unprecedented circumstances around the pandemic and unique challenges for this tax season, the IRS offers a 5-point checklist that can help many people speed tax return processing and refund delivery while avoiding delays.

1. File an accurate return and use e-file and direct deposit to avoid delays. Taxpayers should electronically file and choose direct deposit as soon as they have everything they need to file an accurate return. Taxpayers have many choices, including using a trusted tax professional. For those using e-file, the software helps individuals avoid mistakes by doing the math. It guides people through each section of their tax return using a question-and-answer format.

2. For an accurate return, collect all documents before preparing a tax return; make sure stimulus payment and advance Child Tax Credit information is accurate. In addition to collecting W-2s, Form 1099s and other income-related statements, it is important people have their advance Child Tax Credit and Economic Impact Payment information on hand when filing.

  • Advance CTC letter 6419: In late December 2021, and continuing into January, the IRS started sending letters to people who received advance CTC payments. The letter says, “2021 Total Advance Child Tax Credit (AdvCTC) Payments” near the top and, “Letter 6419” on the bottom righthand side of the page. Here’s what people need to know:
    • The letter contains important information that can help ensure the tax return is accurate.
    • People who received 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.
  • Third Economic Impact Payment letter 6475: In late January 2022, the IRS will begin issuing letters to people who received a third payment in late January 2021. The letter says, “Your Third Economic Impact Payment” near the top and, “Letter 6475” on the bottom righthand side of the page. Here’s what people need to know:
    • Most eligible people already received their stimulus payments. This letter will help individuals determine if they are eligible to claim the Recovery Rebate Credit (RRC) for missing stimulus payments.
    • People who are eligible for RRC 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 – 6419 and 6475 – include important information that can help people file an accurate 2021 tax return. If a 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.

3. Avoid lengthy phone delays; use online resources before calling the IRS. Phone demand on IRS assistance lines remains at record highs. To avoid lengthy delays, the IRS urges people to use IRS.gov to get answers to tax questions, check a refund status or pay taxes. There’s no wait time or appointment needed — online tools and resources are available 24 hours a day.

Additionally, the IRS has several ways for taxpayers to stay up to date on important tax information:

4. Waiting on a 2020 tax return to be processed? Special tip to help with e-filing a 2021 tax return: In order to validate and successfully submit an electronically filed tax return to the IRS, taxpayers need their Adjusted Gross Income, or AGI, from their most recent tax return. For those waiting on their 2020 tax return to be processed, here’s a special tip to ensure the tax return is accepted by the IRS for processing. Make sure to enter $0 (zero dollars) for last year’s AGI on the 2021 tax return. For those who used a Non-Filer tool in 2021 to register for an advance Child Tax Credit or third Economic Impact Payment in 2021, they should enter $1 as their prior year AGI. Everyone else should enter their prior year’s AGI from last year’s return. Remember, if using the same tax preparation software as last year, this field will auto-populate.

5. Free resources are available to help taxpayers file. During this challenging year, the IRS reminds taxpayers there are many options for free help, including many resources on IRS.gov. For those looking to avoid the delays with a paper tax return, IRS Free File is an option. With Free File, leading tax software providers make their online products available for free as part of a 20-year partnership with the Internal Revenue Service. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021. Qualified taxpayers can also find free one-on-one tax preparation help around the nation through the Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs.

 

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IRS Free File Taxes available today; filers can claim important tax benefits

On January 17, 2022   /   IRS  
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IR-2022-14, January 14, 2022

ATS Advisors

WASHINGTON — The IRS today announced the availability of Free File, providing taxpayers online tax preparation products available at no charge. Today’s launch of IRS Free File, available only through IRS.gov, provides people an early opportunity to file their taxes and claim the 2021 Recovery Rebate Credit, the enhanced Child Tax Credit, the Earned Income Tax Credit, and other important credits. Taxpayers can use Free File to claim the remaining amount of their Child Tax Credit and claim any advance payments of the Child Tax Credit they did not receive in 2021.

Leading tax software providers make their online products available for free as part of a 20-year partnership with the Internal Revenue Service. This year, there are eight products in English and two in Spanish. IRS Free File is available to any person or family who earned $73,000 or less in 2021.

“Free File is part of a wide selection of services available on IRS.gov to help people file taxes during this challenging period,” said IRS Commissioner Chuck Rettig. “IRS Free File offers taxpayers an easy, free way to do their taxes from the safety of their own home. Free File also provides electronic filing with direct deposit, which is the best way to avoid delays and receive refunds quickly and securely.”

Because the filing season starts on January 24, 2022, IRS Free File providers will accept completed tax returns and hold them until they can be filed electronically on that date. The Free File Fillable Forms, the electronic version of IRS paper forms, will be available on January 24, 2022. Free File Fillable Forms is available for use by everyone, regardless of income, but should be used only by people who are comfortable preparing their own taxes.

Other important information related to the January 24 start of tax season is available on IRS.gov, including important filing tips.

How IRS Free File works

Each IRS Free File provider sets its own eligibility rules for products based on age, income, and state residency. However, for those who make $73,000 or less, they will find at least one product that matches their needs, and usually more. Some providers also offer free state income tax return preparation. [Some state tax benefits, such as state Earned Income Tax Credits, are based on information contained on the taxpayer’s federal income tax return. Taxpayers are encouraged to check with their state tax agency about state tax benefits and requirements to file a state income tax return.] Active-duty military can use any IRS Free File product if their income was $73,000 or less.

Here’s a step-by-step overview of how to find the right Free File product:

  1. Go to IRS.gov/freefile.
  2. Use the “Choose an IRS Free File Offer” tool for help in finding the right product, or
  3. Review each offer by a provider using the “Browse All” tool.
  4. Select a product.
  5. Follow links to the provider’s website to begin a tax return.

No computer? No problem. Taxpayers can complete and file their tax return using IRS Free File products through smart phones or tablets.

Child Tax Credit, 2021 Recovery Rebate Credit and other tax benefits

IRS Free File is all taxpayers need to claim the Child Tax Credit (CTC), 2021 Recovery Rebate Credit, and other tax benefits such as the Earned Income Tax Credit (EITC).

The IRS also continues to urge people who received one or more advance Child Tax Credit payments in 2021 to carefully review their taxes before filing. Families who received advance payments will need to compare the advance Child Tax Credit payments they received in 2021 with the amount of the Child Tax Credit they can properly claim on their 2021 tax return. To help taxpayers who received an advance Child Tax Credit payment, the IRS started sending Letter 6419, 2021 Advance CTC, in late December 2021.

The letter contains important information on advance Child Tax Credit payments that can help ensure the tax return is accurate. People who received the advance CTC payments can also check the amount of their payments by using the CTC Update Portal available on IRS.gov.

In late January, the IRS will begin sending Letter 6475, Your Third Economic Impact Payment, to individuals who received a third stimulus payment in 2021, including initial and “plus-up” payments. While most eligible people already received their Economic Impact Payments, or stimulus payments, this letter will help them determine if they are eligible to claim the 2021 Recovery Rebate Credit for missing stimulus payments. If so, they must file a 2021 tax return to claim this credit. People can also use IRS online account to view both payment amounts.

IRS Free File also can be used by workers to claim the EITC, which provides a refundable tax credit based on a filer’s income and family size.

Please remember that unemployment benefits paid by states are taxable income. States should send Forms 1099-G to those who received jobless benefits.

IRS Free File participants

For 2022, these providers are participating in IRS Free File:

  • 1040Now.NET
  • ezTaxReturn.com (available in Spanish)
  • FreeTaxReturn.com INC
  • FileYourTaxes.com
  • On-Line Taxes at OLT.com
  • TaxAct
  • FreeTaxUSA ®
  • TaxSlayer (coming soon in Spanish)
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IRS releases its 2021 Progress Update detailing challenging year

On January 10, 2022   /   IRS  
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IR-2022-07, January 7, 2022

WASHINGTON — The Internal Revenue Service today released its 2021 annual report describing the agency’s work delivering taxpayer service and compliance efforts during the pandemic while highlighting efforts taken by IRS employees to help people during the year.

Internal Revenue Service Progress Update / Fiscal Year 2021 – Putting Taxpayers First PDF outlines how the agency continued to work through difficulties related to the pandemic while delivering two rounds of Economic Impact Payments and millions of advance Child Tax Credit payments, all in record time. Meanwhile, IRS employees continued to make adjustments to deliver the filing season despite office closures, social distancing mandates and an extended tax filing deadline.

“This has been an unprecedented period facing the IRS and the nation,” said IRS Commissioner Chuck Rettig. “IRS employees worked hard during the pandemic, repeatedly delivering for taxpayers under tight timeframes and difficult circumstances. As the 2022 filing season approaches, more work remains for us to help taxpayers as well as tax professionals. We will continue to make progress on critical areas thanks to the hard work of so many people. I’m incredibly proud of what our employees have been able to accomplish during this period, and we also appreciate the efforts taking place by our partners inside and outside the tax system to help people struggling during COVID-19.”

Since the pandemic began, the IRS has successfully delivered more than $1.5 trillion to people across the nation through Economic Impact Payments, tax refunds and advance Child Tax Credit payments.

A large portion of that amount was distributed during Fiscal Year 2021, which is the focal point of this year’s Progress Update. The 56-page report highlights accomplishments around the agency’s six strategic goals and identifies ongoing modernization efforts. This year’s edition also discusses work related to implementing the various new pieces of legislation related to the pandemic, including the American Rescue Plan.

In his opening comments in the Progress Update, Rettig explained that each year the IRS collects more than $3 trillion in taxes and generates approximately 96% of the funding that supports the federal government’s operations.

“The 2021 Progress Update is not just a report, it’s the story of a dedicated group of public servants who continued to deliver for the nation, as they do every year, even in challenging times and while overcoming concerns for themselves, their families and their communities during the pandemic,” he said.

The document gives numerous examples of how IRS employees helped taxpayers, including:

  • Expanded information and assistance available to taxpayers in additional languages and underserved communities to help deliver Economic Impact Payments, advance Child Tax Credit payments and other services.
  • Developed new online portals for individuals to check on their pandemic-related relief payments and make updates to their personal information.
  • Offered a new online option for tax professionals to obtain signatures from individual and business clients and submit authorization forms electronically. Tax pros also now have an online account option, with new features being added.
  • Served their communities outside official duties through charitable work and service projects.

The report also shows ways IRS employees worked to maintain the tax system through a strong, visible and robust tax enforcement presence.

“We’ve continued to develop innovative approaches to understanding, detecting and resolving potential noncompliance to maintain taxpayer confidence in the tax system. We have expanded use of data, analytics and artificial intelligence across all lanes from selection to examination,” Rettig said.

“A few of our recent notable accomplishments include the creation of an Office of Fraud Enforcement in 2020 as well as an Office of Promoter Investigations in 2021,” he said. “These and other steps will help us do a better job of rooting out tax fraud, especially shutting down abusive tax avoidance transactions, including syndicated conservation easements and micro-captive insurance arrangements, as well as abusive transactions involving virtual currencies.”

The new Progress Update also highlights IRS work partnering on landmark criminal investigative cases that brought down child pornography, drug and terrorist organizations. In 2021, IRS Criminal Investigation’s conviction rate remained the highest among federal law enforcement at nearly 93% overall, and 96% for tax cases in particular.

“I’m especially proud of our Criminal Investigation Division’s efforts overall and in conjunction with the dark web illicit marketplace known as Silk Road,” Rettig said.

In January 2021, the IRS delivered the Taxpayer First Act Report to Congress PDF, a comprehensive set of recommendations to re-imagine the taxpayer experience, enhance employee training and restructure the organization to increase collaboration and innovation. The report introduced three integrated sets of recommendations required by the law and recognized as major improvement strategies.

“We appointed the first-ever Chief Taxpayer Experience Officer,” Rettig explained. “And, while outlining the design for the new Taxpayer Experience Office, we initiated several activities toward implementing the Taxpayer Experience Strategy.”

The IRS will remain focused on making progress and serving the nation as the 2022 filing season begins later this month.

“We remain confident the IRS will continue to deliver for our country, just as we have during other times of national urgency,” Rettig said.

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