Charitable tax deduction available through Dec. 31

Special rule helps most people get a Charitable tax deduction of up to $300 per individual, $600 for couples for gifts to charity; National Council of Nonprofits and Independent Sector highlight how donations can help the nation’s charitable community

IR-2021-247, December 13, 2021

WASHINGTON — The Internal Revenue Service joined today with several leading nonprofit groups to highlight a special tax provision that allows more people to deduct donations to qualifying charities on their 2021 federal income tax return.

The Independent Sector and National Council of Nonprofits joined with the IRS to highlight this pandemic-related provision where married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations.

Under the temporary law, taxpayers don’t need to itemize deductions on their tax returns to take advantage of this, which creates tax-favorable donation options not normally available to about 90 percent of tax filers. Ordinarily, people who choose to take the standard deduction cannot claim a deduction for their charitable contributions. But this special provision permits them to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to qualifying charitable organizations by year’s end, December 31, 2021.

At a time when many charitable groups are struggling during the pandemic, the IRS highlights the new provision and urges people to make sure they donate to a qualifying charity. The special Tax Exempt Organization Search tool on IRS.gov can help people make sure they donate to a qualified charity.

“The pandemic has created unique challenges for tax-exempt organizations, and we want to make sure people don’t overlook this special tax deduction that’s available this year,” said Sunita Lough, IRS Commissioner of the Tax Exempt and Government Entities division. “Donations to qualifying charities can reduce people’s tax bill when they file in 2022.”

Leaders from the National Council of Nonprofits and the Independent Sector, two prominent organizations representing the nation’s charitable groups, highlighted that the special tax provision can provide additional assistance to organizations hit hard by the pandemic. Some groups have seen reduced charitable donations and others have seen increased demand for their services during this unprecedented period.

“At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services–every donation counts,” said David L. Thompson, Vice President of Public Policy at National Council of Nonprofits. “We’re thankful that the universal (or non-itemizer) deduction is available through the end of the year to encourage every taxpayer give a little bit more to the missions they care about.”

“Over the past two years, charities have helped America confront generational health, economic and social crises. They have answered the call to serve their communities despite facing lost revenue, disrupted operations and dramatically increased need,” said Daniel J. Cardinali, president and CEO of Independent Sector. “Congress has sent a powerful message that everyone – not just those who itemize on their taxes – has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years.”

Included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, a more limited version of this temporary tax benefit originally only applied to tax-year 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, generally extended it through the end of 2021.

Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify. Under this provision, tax year 2021 individual tax filers, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with their volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property.

The IRS reminds taxpayers that to receive a deduction, they must donate to a qualified charity. To check the status of a charity, they can use the IRS Tax Exempt Organization Search tool.

Cash contributions to most charitable organizations qualify for a deduction. But contributions made either to supporting organizations or to establish or maintain a donor advised fund do not. Contributions carried forward from prior years do not qualify, nor do contributions to most private foundations and most cash contributions to charitable remainder trusts.

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of their donor status, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities.

The IRS encourages all donors to be wary of scams masked as charitable solicitations. Criminals create fake charities to take advantage of the public’s generosity. Fake charities once again made the IRS’s Dirty Dozen list of tax scams for 2021. In October, the IRS also joined international organizations and other regulators in highlighting the fight against charity fraud.

Keep good records

Special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining an acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt for contributions of cash.

For details on the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.

How To Prepare For 2022 Taxes

How To Prepare For 2022 Taxes – December 1, 2021

There are steps people, including those who received stimulus payments or advance child tax credit payments, can take now to make sure their tax filing experience goes smoothly in 2022. They can start by visiting the Get Ready page on IRS.gov. Here are some other things they should do to prepare to file their tax return.

Gather and organize tax records

Organized tax records make preparing a complete and accurate tax return easier. They help avoid errors that lead to processing delays that slow refunds. Having all needed documents on hand before taxpayers prepare their return helps them file it completely and accurately. This includes:

Taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.

Income documents can help taxpayers determine if they’re eligible for deductions or credits. People who need to reconcile their advance payments of the child tax credit and premium tax credit will need their related 2021 information. Those who did not receive their full third Economic Impact Payments will need their third payment amounts to figure and claim the 2021 recovery rebate credit.

Taxpayers should also keep end of year documents including:

  • Letter 6419, 2021 Total Advance Child Tax Credit Payments, to reconcile advance child tax credit payments
  • Letter 6475, Your 2021 Economic Impact Payment, to determine eligibility to claim the recovery rebate credit
  • Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance premium tax credits for Marketplace coverage

Confirm mailing and email addresses and report name changes

To make sure forms make it to the them on time, taxpayers should confirm now that each employer, bank and other payer has their current mailing address or email address. People can report address changes by completing Form 8822, Change of Address and sending it to the IRS. Taxpayers should also notify the postal service to forward their mail by going online at USPS.com or their local post office. They should also notify the Social Security Administration of a legal name change.

View account information online

Individuals who have not set up an Online Account yet should do so soon. People who have already set up an Online Account should make sure they can still log in successfully. Taxpayers can use Online Account to securely access the latest available information about their federal tax account.

Review proper tax withholding and make adjustments if needed

Taxpayers may want to consider adjusting their withholding if they owed taxes or received a large refund in 2021. Changing withholding can help avoid a tax bill or let individuals keep more money each payday. Life changes – getting married or divorced, welcoming a child or taking on a second job – may also be reasons to change withholding. Taxpayers might think about completing a new Form W-4, Employee’s Withholding Certificate, each year and when personal or financial situations change.

People also need to consider estimated tax payments. Individuals who receive a substantial amount of non-wage income like self-employment income, investment income, taxable Social Security benefits and in some instances, pension and annuity income should make quarterly estimated tax payments. The last payment for 2021 is due on Jan. 18, 2022.

 

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Interest rates remain the same for the first quarter of 2022

2022 Interest Rates – IR-2021-234

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

  • 3% for overpayments (two (2) percent in the case of a corporation),
  • 0.5% for the portion of a corporate overpayment exceeding $10,000,
  • 3% for underpayments, and
  • 5% 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 October 2021 to take effect November 1, 2021, based on daily compounding.

Revenue Ruling 2021-24 PDF, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2021-50, dated December 13, 2021.

 

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House passes Build Back Better Act with universal paid leave

BBB Act, Universal Paid Leave – Journal Of Accountancy

The nearly $2 trillion Build Back Better (BBB) Act, passed Friday by the U.S. House of Representatives, contains many items of interest to CPAs, their clients, and their employers.

This article examines nontax provisions in the bill, H.R. 5376. A separate article covers the myriad tax-related items in the bill.

The vote passing the bill was 220-213.

The House’s passage of the BBB Act came after months of negotiations between moderate and progressive Democrats in the House and the U.S. Senate. House Speaker Nancy Pelosi, D-Calif., had hoped to have the House vote on the bill on Nov. 5, but those plans were scrapped when several moderate Democrats said they would not vote on the bill until the Congressional Budget Office released its official estimate of the impact on the U.S. deficit.

The CBO’s estimate on the bill adding $160 billion to the deficit over 10 years was finalized on Thursday.

The bill now goes to the U.S. Senate, where it is expected to undergo a couple of weeks of assessment to determine if all provisions of the bill qualify to be passed through the budget reconciliation process. Reconciliation allows certain budget-related bills to be passed by as few as 51 votes and avoid being stopped by a filibuster, which requires 60 votes to end.

The 100 Senate seats are split 50-50 between Democrats and Republicans, with the chamber’s president, Vice President Kamala Harris, representing the tie-breaking vote. Republicans have been unified against the BBB Act, leaving Democrats with the chore of crafting legislation that adheres to reconciliation rules and is palatable to all 50 of their senators. The legislation looks unlikely to escape the Senate chambers in its current form, with Sen. Joe Manchin, D-W.Va., telling CNN on Thursday that he has not yet decided whether to support the bill.

BUSINESS ITEMS OF NOTE IN H.R 5376

Universal paid leave

In one of its most significant and contentious provisions, the BBB Act would provide all U.S. workers with paid leave for the first time. Specifically, the bill guarantees four weeks of paid leave to all workers who are:

  • New parents;
  • Dealing with their own serious medical conditions; or
  • In need of leave to care for a loved one with a serious medical issue.

The benefits would be provided to workers in one of three ways:

  • Via a public program run by the Social Security Administration that would cover all public- and private-sector workers without regard to employer size, including part-time and self-employed individuals.
  • An already-enacted “legacy state” paid leave program that provides benefits equivalent to, or better than, the federal benefit, and for which the state would be reimbursed up to what it would have cost to cover their workers in the federal program.
  • A plan (self-insured or via an insurer) from an employer that voluntarily chose to offer 100% of employees paid leave equal to or better than the public benefit in every respect. The leave policy must include job reinstatement protection even if a worker is not covered by the Family and Medical Leave Act. Employers whose plans meet these conditions would be reimbursed for the lesser of 90% of the national average cost of paid leave benefits or 90% of their insurance premium.

Small business investments

The BBB Act includes around $5 billion in funding to support small businesses.

Most of that money, $3.385 billion, is designated to improve the ability of small employers and entrepreneurs to access capital. Specifically, the bill allocates:

  • Almost $2 billion in total funding over a 10-year period to fund direct loans for the smallest businesses and government contractors under the 7(a) lending program administered by the U.S. Small Business Administration (SBA).
  • $950 million in immediate, direct fee relief for new borrowers of the SBA 7(a) and 504 loans. The funding will be available until Sept. 30, 2026, to reduce or waive fees for loans of $2 million or less.
  • $60 million to diversify and create equity within the Small Business Investment Company (SBIC) program.
  • $275.9 million to enhance and improve the Community Advantage program and also provide the SBA with authority to partner with not-for-profit lenders to deliver capital through the 7(a) loan program.
  • $100 million to establish a pilot program for providing capital for cooperatives.

Other small business-related investments include:

  • $1 billion over a 10-year period to establish a national network of “uplift incubators” to assist new businesses and small government contractors, with the goal of sparking economic development in underrepresented communities.
  • $200 million over 10 years to provide cash grants of at least $100,000 to growth accelerators to expand their capabilities to assists small businesses focused on technology.

Other business-related provisions

The BBB Act invests about $390 billion to fund universal pre-kindergarten programs for all 3- and 4-year-olds and to improve access to affordable child care. Democrats assert that child care costs are too expensive for many families, forcing millions of Americans out of the workforce and contributing to the labor shortage that has affected millions of employers. The BBB Act would ensure that nearly all families of four earning up to $300,000 would pay no more than 7% of their income on child care. In addition, the act would provide funding for child care providers to raise wages for their workers and add staff to serve more families.

Other business-related allocations scattered through the 2,100-page bill include:

  • $5 billion for the Department of Commerce to identify and monitor critical vulnerabilities in the manufacturing supply chain.
  • $1 billion in grants to help minority-owned businesses launch and expand their operations. The bill provides another $400 million to expand the Minority Business Development Agency and $200 million to establish rural business centers that primarily serve rural minority-owned businesses.
  • $500 million for the Federal Trade Commission to create and operate a new bureau dedicated to stopping unfair and deceptive acts and practices related to privacy violations, data security incidents, identity theft, and other data abuses.

 

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IRS provides tax inflation adjustments for tax year 2022

Inflation Adjustments: IR-2021-219, November 10, 2021

WASHINGTON — The Internal Revenue Service today announced the tax year 2022 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2021-45 PDF provides details about these annual adjustments.

Highlights of changes in Revenue Procedure 2021-45:

The tax year 2022 adjustments described below generally apply to tax returns filed in 2023.

The tax items for tax year 2022 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married couples filing jointly for tax year 2022 rises to $25,900 up $800 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,950 for 2022, up $400, and for heads of households, the standard deduction will be $19,400 for tax year 2022, up $600.
  • The personal exemption for tax year 2022 remains at 0, as it was for 2021, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • Marginal Rates: For tax year 2022, the top tax rate remains 37% for individual single taxpayers with incomes greater than $539,900 ($647,850 for married couples filing jointly).The other rates are:
    35%, for incomes over $215,950 ($431,900 for married couples filing jointly);
    32% for incomes over $170,050 ($340,100 for married couples filing jointly);
    24% for incomes over $89,075 ($178,150 for married couples filing jointly);
    22% for incomes over $41,775 ($83,550 for married couples filing jointly);
    12% for incomes over $10,275 ($20,550 for married couples filing jointly).
    The lowest rate is 10% for incomes of single individuals with incomes of $10,275 or less ($20,550 for married couples filing jointly).
  • For 2022, as in 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for tax year 2022 is $75,900 and begins to phase out at $539,900 ($118,100 for married couples filing jointly for whom the exemption begins to phase out at $1,079,800). The 2021 exemption amount was $73,600 and began to phase out at $523,600 ($114,600 for married couples filing jointly for whom the exemption began to phase out at $1,047,200).
  • The tax year 2022 maximum Earned Income Tax Credit amount is $6,935 for qualifying taxpayers who have three or more qualifying children, up from $6,728 for tax year 2021. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
  • For tax year 2022, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $280.
  • For the taxable years beginning in 2022, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $2,850. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $570, an increase of $20 from taxable years beginning in 2021.
  • For tax year 2022, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,450, up $50 from tax year 2021; but not more than $3,700, an increase of $100 from tax year 2021. For self-only coverage, the maximum out-of-pocket expense amount is $4,950, up $150 from 2021. For tax year 2022, for family coverage, the annual deductible is not less than $4,950, up from $4,800 in 2021; however, the deductible cannot be more than $7,400, up $250 from the limit for tax year 2021. For family coverage, the out-of-pocket expense limit is $9,050 for tax year 2022, an increase of $300 from tax year 2021.
  • The modified adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after December 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).
  • For tax year 2022, the foreign earned income exclusion is $112,000 up from $108,700 for tax year 2021.
  • Estates of decedents who die during 2022 have a basic exclusion amount of $12,060,000, up from a total of $11,700,000 for estates of decedents who died in 2021.
  • The annual exclusion for gifts increases to $16,000 for calendar year 2022, up from $15,000 for calendar year 2021.
  • The maximum credit allowed for adoptions for tax year 2022 is the amount of qualified adoption expenses up to $14,890, up from $14,440 for 2021.

More Information

 

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IRS announces 401(k) limit increases to $20,500

IRS Increases 401k Limit – IR-2021-216, November 4, 2021

WASHINGTON — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020. The IRS today also issued technical guidance regarding all of the cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2022 in Notice 2021-61 PDF, posted today on IRS.gov.

Highlights of changes for 2022

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500, up from $19,500.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2022.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2022:

  • For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.
  • For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.
  • For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
  • For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000.

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500.

Key employee contribution limits that remain unchanged

The limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Details on these and other retirement-related cost-of-living adjustments for 2022 are in Notice 2021-61 PDF, available on IRS.gov.

IRS Increases 401k Limit

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Child Tax Credit: Families with income changes must enter them in IRS online portal on Monday to impact Nov. 15 payment

IR-2021-211, October 29, 2021

WASHINGTON — On Monday, November 1, the Internal Revenue Service will launch a new feature allowing any family receiving monthly Child Tax Credit payments to update their income using the Child Tax Credit Update Portal (CTC UP), found exclusively on IRS.gov.

To help families plan ahead, the IRS also announced today that in late November it will launch a new Spanish-language version of the CTC UP.

The IRS urges families to enter any significant income changes by midnight on November 1 in order for them to be reflected in their November payment, scheduled for November 15. If a family is unable to make the changes on November 1, enter them by November 29 so they are reflected in the December payment. Once the update is made, the IRS will adjust the remaining payment amounts to ensure people receive the total advance payment for the year. For married couples, if one spouse makes the income update, it will apply to both spouses and could impact both spouses’ future monthly advance payments of the Child Tax Credit.

Income feature right for some

The new income feature can help families make sure they are getting the right amount of advance Child Tax Credit payments during 2021. For that reason, it will be especially useful to any family who wants to raise or lower their monthly payments because their 2021 income has risen or fallen substantially, compared to 2020.

In many, but not all, cases a big income swing can either raise or lower a family’s monthly payments. Normally, this means that small changes in income will not impact the payment amount and need not be entered into the CTC UP.

Any change to the monthly payment amount will be reflected in both the November 15 and December 15 payments, but only if a person completes their updated income request before midnight Eastern Time on Monday, November 1. Changes made after that date, but before midnight on November 29, will only impact the December 15 payment, which is the last scheduled monthly payment for 2021. The IRS will adjust the payment amount to reflect these changes and ensure people receive their total advance payment for the year of up to $1,800 for each child under age 6 and up to $1,500 for each child ages 6 through 17.

Who qualifies for a bigger payment

In some cases, families who are currently receiving monthly payments that are below the maximum may qualify to have their payments increased. This could happen if, for example, they experienced job loss during 2021, or for some other reason are receiving substantially less income this year. If the reduction in income is large enough, reporting that change now may increase the amount of their advance CTC payments for the rest of this year.

For any family already receiving the maximum payment, a drop in income will not increase the payment amount. Normally, the maximum CTC payment is $300 per month for each qualifying child, under the age of 6, and $250 per month for each child, ages 6 to 17.

Most families are receiving half of the total CTC through monthly payments. This means that any changes entered into the CTC UP will increase or decrease their monthly payments to ensure they receive half of their total expected credit before the end of 2021. They will claim the remaining portion on their 2021 tax return.

Who should have their payments reduced

Any family whose income rose substantially in 2021 should consider having their payments reduced. This is especially true if they are now receiving the maximum monthly payment, and they expect to qualify for less than the full credit when they file their 2021 federal income tax return. For more information on calculating the CTC, see Topic C of the agency’s Frequently Asked Questions. In particular, where a family qualifies to receive less than the full amount, see QC 4 &  QC 5.

Using the portal to report income changes

Only families who are already eligible for and receiving advance CTC payments based on their 2020 tax return can use the CTC UP to update their income. Note that someone who filed a joint return for 2020 can only update their income if they plan to file a joint return for 2021 with the same spouse. IRS representatives cannot process income changes over the phone or at Taxpayer Assistance Centers.

After an income update is completed, the Update Portal will acknowledge a change was made but will not display the change. Likewise, IRS representatives won’t be able to confirm that an update was made.

Low-income families can still sign up

It’s not too late for low-income families to sign up for advance CTC payments.

The IRS urged any family not already receiving payments who normally isn’t required to file a tax return to explore the tools available through IRS.gov. These tools can help determine eligibility for the advance CTC or help them file a simplified tax return to sign up for these payments as well as Economic Impact Payments and the Recovery Rebate Credit.

The deadline to sign up is November 15, 2021. People can get these benefits, even if they don’t work and even if they receive no income.

Families who sign up will normally receive half of their total Child Tax Credit on December 15. This means a payment of up to $1,800 for each child, under 6, and up to $1,500 for each child, ages 6 to 17.

Get ready to file next year

Early in 2022, families will receive Letter 6419 documenting any advance payments issued to them during 2021 and the number of qualifying children used to calculate the advance payments. This letter can help them accurately reconcile the advance CTC payments they have received and claim any remaining portion of the CTC when completing their 2021 federal income tax return next year.

The income change feature joins a growing set of services available through CTC UP. Available only on IRS.gov, the portal already allows families to verify their eligibility for the payments and then, if they choose to:

  • Switch from receiving a paper check to direct deposit;
  • Change the account where their payment is direct deposited;
  • Update their address or
  • Stop monthly payments for the rest of 2021.

Latest information available on IRS.gov

The IRS has created a special Advance Child Tax Credit 2021 page designed to provide the most up-to-date information about the credit and the advance payments. It’s at IRS.gov/childtaxcredit2021.

The agency encourages partners and community groups to share information and use available online tools and toolkits to help non-filers, low-income families and other underserved groups sign up. People can check their eligibility by using the advance Child Tax Credit Eligibility Assistant.

The webpage features a set of frequently asked questions and a user guide for the Child Tax Credit Update Portal (Publication 5549) PDF. It also provides direct links to the portal, as well as two other online tools – the Non-filer Sign up Tool and the Child Tax Credit Eligibility Assistant – and other useful resources.

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IRS, Security Summit partners remind families to make online safety a priority during National Cybersecurity Month

IRS Cybersecurity -2021-209, Oct. 22, 2021

WASHINGTON — The Internal Revenue Service today reminded families, teens and senior citizens about the continued importance of protecting personal and financial information PDF online. Although the IRS and its Security Summit partners continue making strides in fighting identity theft and fraudulent tax returns, help is needed.

The Security Summit works to protect taxpayers from criminals that file fraudulent returns for refunds. The Summit coalition includes representatives of the software industry, tax preparation firms, payroll and tax financial product processors as well as state tax administrators and the IRS, which work together year-round to protect taxpayers.

During National Cybersecurity Month, the IRS is asking parents, families and others to be mindful of the pitfalls that can be found by sharing devices at home, shopping online and through navigating various social media platforms. Often, those who are less experienced can put themselves and others at risk by leaving an unnecessary trail of personal information for fraudsters.

Staying safe online

Here are a few common-sense suggestions that can make a difference for children, teens and other vulnerable groups to potential dangers to protect their personal data:

  • Teach them to recognize and avoid scams. Phishing emails, threatening phone calls and texts from thieves posing as the IRS or legitimate organizations pose ongoing risks. Do not click on links or download attachments from unknown or suspicious emails.
  • Remind them why security is important. Be careful not to reveal too much personal information. Keeping data secure and only providing what is necessary minimizes online exposure to scammers and criminals. Birthdates, addresses, age, financial information such as bank account and Social Security numbers are among things that should not be shared freely.
  • Teach them about public Wi-Fi networks. Connection to Wi-Fi in a mall or coffee shop is convenient but it may not be safe. Hackers and cybercriminals can easily intercept personal information. Always use a virtual private network when connecting to public Wi-Fi.
  • Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update. Remember, to encrypt sensitive files such as tax records stored on computers. Be sure all family members have comprehensive protection especially if devices are being shared. Use strong, unique passwords for each account.

Remember, the IRS does not use text messages or social media to discuss personal tax issues, such as those involving tax refunds, stimulus payments or tax bills.

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IRS addresses taxpayer reliance on FAQs, will save copies of old FAQs

JOURNAL OF ACCOUNTANCY

The IRS announced on Friday that if a taxpayer relies in good faith on frequently asked questions (FAQs) that the Service posts to its website, and if that reliance is reasonable, then the taxpayer will have a reasonable-cause defense against any negligence penalty or other accuracy-related penalty if it turns out that the FAQ does not correctly state the law as it applies to the taxpayer’s situation. This new policy applies to all FAQs, including those released by the IRS before the policy was announced.

The IRS updated its “General Overview of Taxpayer Reliance on Guidance Published in the Internal Revenue Bulletin and FAQs” webpage to reflect this new stance.

The IRS also says that it plans to append this lengthy disclaimer to all FAQs:

These FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.

FAQ archive and transparency about changes

The IRS also announced that it is updating its process for issuing FAQs following the enactment of new tax legislation. Under the new process, FAQs addressing new legislation, as well as any revisions or updates to those FAQs, will be announced in an IRS news release and posted on the IRS website in a separate fact sheet. Older versions of FAQ fact sheets will be kept on IRS.gov so that taxpayers can refer to any prior version that they may have relied on. The IRS says this process addresses taxpayer concerns about transparency and the potential impact on taxpayers when FAQs are amended.

Some of those taxpayer concerns were voiced by National Taxpayer Advocate Erin Collins in a July blogpost, in which she recommended that the IRS (1) “should never assess a penalty against a taxpayer for taking a position consistent with an FAQ posted on the IRS website at the end of a taxpayer’s taxable year or at the time of return filing unless the IRS has convincing evidence the taxpayer knew the FAQ had been changed” and (2) “should include the versions and dates of each FAQ on its website or create an archive of obsolete or modified FAQs, including applicable dates, so that taxpayers can locate an FAQ that was in effect at the time they filed their returns.”

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Give tax withholding a fresh look as 2021 year-end nears

IR-2021-199, October 8, 2021

WASHINGTON — The Internal Revenue Service reminds taxpayers today that the last quarter of 2021 is a good time to check withholding.

Life brings constant changes to individual financial situations. Events like marriage, divorce, a new child or home purchase can all be reasons to adjust withholding.

The convenient Tax Withholding Estimator, also available in Spanish, will help taxpayers determine if they have too much withheld and how to make an adjustment to put more cash into their own pocket now. In other cases, it will help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their tax return next year.

Items that may affect 2021 taxes

Things to consider when adjusting withholding for 2021 are:

Pay as you go

Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. About 70% of taxpayers, however, over withhold their taxes every year, which typically results in a refund. The average refund in 2021 was more than $2,700.

Taxpayers can pay online, by phone or from the IRS2Go app. They can schedule payments for future dates, which can be useful during filing season, for payment plan payments or for estimated tax payments.

Taxpayers can also log into their IRS.gov/account to view the amount they owe, their payment plan details and options, their payment history (up to 5 years), any scheduled or pending payments, and key tax return information from their most recent tax return.

Tax Withholding Estimator

The IRS Tax Withholding Estimator makes it easier for everyone to have the right amount of tax withheld. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year, or whose jobs or tax circumstances have changed during the year.

The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a user-friendly, step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.

For more information about taxes, estimated taxes and tax withholding, see Tax Withholding at IRS.gov.

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