February, 2021 | Latest Finance News

2021 Child Tax Credit Calculator

The American Rescue Plot Act, which Head Biden signed into law on March 11, for the interim increases the child tax credit from $2,000 to $3,000 per child ($3,600 for family 5 years ancient and younger) for the 2021 tax year. It also authorizes monthly “child allowance” payments to families from July to December. Half the total credit amount will be paid in advance with the monthly payments, while the other half will be claimed on the tax return that you’ll file next year.

But, not all will get the bonus credit amount. And some families won’t get any credit (or monthly payment) at all. That’s because the credit is reduced – and maybe eliminated – for people with an income above a certain amount. In fact, there are two “phase-out” rules in play – one just for the extra $1,000 (or $1,600) amount and one for the left over credit. That makes calculating the total credit and monthly payments very tough.

If you want to see how much money you’ll get, answer the four questions in the calculator below and we’ll give you a bespoke assess of the amount you’ll receive each month in advance from July to December and how much you’ll be able to claim as a child tax credit on your 2021 tax return.

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Pre-2021 Child Tax Credit Amount

For the 2020 tax year, the child tax credit was $2,000 per qualifying child. It was increasingly phased-out (but not below zero) for joint filers with an adjusted yucky income (AGI) of $400,000 or more and for other taxpayers with an AGI of $200,000 or more.

New Phase-Out Scheme for 2021

Under the American Rescue Plot, the 2021 boost (i.e., the extra $1,000 or $1,600) is increasingly phased-out for joint filers with an AGI of $150,000 or more, head-of-household filers with an AGI of $112,500 or more, and all other taxpayers with an AGI of $75,000 or more. But, the boost can’t be reduced below zero (other limitations to this saving will apply as well).

After any saving of the augmented credit amount is calculated, the pre-void phase-out is then applied to the left over credit amount. So, for joint filers with an AGI of $400,000 or more and other taxpayers with an AGI of $200,000 or more, the credit is subject to an bonus saving – maybe to $0.

Monthly Payments in 2021

Once the credit amount is single-minded, 50% of it will be paid in advance with monthly payments. But those monthly payments will only run from July to December 2021. (The IRS said advance payment will be made on July 15, August 13, September 15, October 15, November 15 and December 15.) The left over 50% will be claimed as a credit on your 2021 tax return.

The IRS will also make two online portals so that people can update their income, marital status, and the number of qualifying family. You can also use the portals to opt out of the monthly payments if you want to take the full child credit on your 2021 return instead.

For more in rank on this year’s child tax credit, see Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs.

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Tax Deadlines Extended for Texas, Oklahoma and Louisiana Winter Storm Victims

Victims of February’s winter storms in Texas, Oklahoma and Louisiana can wait until June 15, 2021, to file their 2020 federal income tax return. This periodical from the IRS follows a catastrophe area declaration from the Federal Urgent circumstances Management Agency (FEMA) for those three states. Taxpayers in other states impacted by the storms that receive similar FEMA catastrophe declarations will reluctantly receive the same filing and payment relief.

Various federal tax filing and payment due dates for those and businesses from February 8 (Oklahoma) or February 11 (Texas and Louisiana) to June 14 will be shifted to June 15. In addendum to the May 17 private income tax filing deadline, this includes:

Various 2020 affair returns usually due on March 15;
2020 IRA donations formerly due on May 17;
Weekly estimated income tax payments naturally due on April 15;
Weekly payroll and excise tax returns in general due on April 30; and
2020 returns for tax-exempt organizations typically due on May 17.

In Oklahoma, penalties on payroll and excise tax deposits due from February 8 to February 23 will also be waived if the deposits are made by February 23. In Texas and Louisiana, the same applies for deposits due from February 11 to February 26 they’re are made by February 26.

You don’t have to contact the IRS to get this relief. But, if you receive a late filing or late payment penalty notice from the IRS that has an first or total filing, payment or deposit due date falling within the delay period, you should call the number on the notice to have the penalty abated.

In addendum, the IRS will work with any taxpayer who live everyplace else, but whose records de rigueur to meet a deadline in the works during the delay period are located in Texas, Oklahoma or Louisiana. Taxpayers qualifying for relief who live in another state need to contact the IRS at 866-562-5227. This also includes workers assisting the relief actions who are linked with a recognizable regime or goodhearted establishment.

Those and businesses in a federally confirmed catastrophe area who suffered uninsured or unreimbursed catastrophe-related losses can choose to claim them on either the return for the year the loss occurred (in this reason, the 2021 return naturally filed next year), or the return for the prior year. This means that taxpayers can, if they choose, claim these losses on the 2020 return they are filling out this tax season. Be sure to write the FEMA declaration number (4586 for Texas, 4587 for Oklahoma, 4590 for Louisiana) on any return claiming a loss. It’s also a excellent thought for unnatural taxpayers claiming the catastrophe loss on a 2020 return to place the Catastrophe Mark (e.g., “Oklahoma – Severe Winter Storms”) in bold letters at the top of the form. See IRS Periodical 547 for details.

[NOTE: Similar tax relief is void for victims of severe storms in Alabama, Kentucky and Tennessee.]

What’s the Recovery Rebate Credit?

If you didn’t get a third spur check – or you only got a partial check – then you surely want to check out the recovery rebate tax credit when you’re working on your 2021 tax return.

The recovery rebate tax credit and spur checks are joined at the hip. In fact, third spur checks (counting “plus-up” payments) were simply advance payments of the credit. So, if the collective total of your third spur check and any “plus-up” payment is less than your allowed recovery rebate credit amount, you may be able to get the alteration back on your 2021 tax return in the form of a larger tax refund or a lower tax bill. If your third spur check exceeded the amount of the credit, you don’t have to repay the alteration. Either way, you win!

This helps eligible Americans who either didn’t receive a third spur check or didn’t get the full amount. And, in some cases, even a person who expected the $1,400 third-round payment can claim a recovery rebate credit that boosts their refund or reduces the tax they owe. So, even if you’re not vital to file a 2021 tax return, make sure you at least check to see if you qualify for the recovery rebate credit. If you do, go ahead and file just to claim the credit and get a refund (even if the IRS hasn’t processed your 2020 return yet).

Eligibility for the Recovery Rebate Credit

The eligibility rules for the recovery rebate credit are in the end the same as they were for third-round spur checks. The huge alteration is that eligibility for the spur check was typically based on in rank found on your 2019 or 2020 tax return, while eligibility for the recovery rebate credit is based on in rank from your 2021 return. So, you could qualify for a spur check but not for the credit – and vice versa.

You’re commonly eligible to claim the recovery rebate credit if, in 2021, you:

Were a U.S. citizen or U.S. inhabitant alien;
Can’t be claimed as a needy on another people tax return; and
Have a Social Wellbeing number (SSN) valid for employment that’s issued before the due date of your 2021 tax return (counting extensions).

For married couples filing a joint return, if only one spouse has a valid SSN, you can only claim up to $1,400 for the spouse with a valid SSN. If you’re claiming the extra $1,400 for a needy, the needy must also have a valid SSN or adoption taxpayer identification number (ATIN). Commonly, if neither you nor your spouse have a valid SSN, you can claim only up to $1,400 for each qualifying needy claimed on your tax return. But, if either you or your spouse was an active member of the U.S. Armed Forces at any time during 2021, only one of you needs to have a valid SSN to receive up to $2,800, plus up to $1,400 for each qualifying needy.

A person who died in 2021 or 2022 can still claim the recovery rebate credit on his or her final tax return set by a extant spouse or expressive if the equipment listed above are pleased.

How to Assess the Recovery Rebate Credit

Similar to the eligibility rules, assess of the 2021 recovery rebate credit is commonly the same as the assess of third-round spur checks, except that they’re based on in rank from uncommon sources. Third spur checks were commonly based on in rank from either your 2019 or 2020 tax return, whichever was most just filed when the IRS started dispensation your payment. If you didn’t file a return for either of those two years, the IRS sent a third spur check based on no matter what in rank, if any, was void to it. In many cases, that in rank came from the Social Wellbeing Handing out (SSA), Railroad Retirement Board, or Veterans Handing out (VA) if you receive refund from one of those federal agencies. But, the amount of your recovery rebate credit is based completely on in rank found on your 2021 tax return. (Don’t include any in rank a propos your first- or second-round spur checks or the 2020 recovery rebate credit on your 2021 return!)

As with the spur checks, calculating the amount of your recovery rebate credit starts with a “base” amount. For most people, the base amount for the 2021 credit is $1,400. For married couples filing a joint tax return, the base amount is $2,800 (i.e., twice the general base amount). Then you add on $1,400 for each needy claimed on your 2021 return.

After adding up the base amount and any bonus amount for your dependents, you then need to set up if your recovery rebate credit is reduced because of your income. Your credit will be reduced – maybe to zero – if you select the single, married filing unconnectedly, or a qualifying widow(er) filing status and have an adjusted yucky income (AGI) above $75,000 on your 2021 tax return. If you file a joint return with your spouse, your credit will start to shrink if your 2021 AGI is over $150,000. For people who claim the head-of-household filing status, the tax credit is reduced if your AGI tops $112,500. Your credit absolutely disappears if your AGI is above $80,000 (singles), $120,000 (head-of-household), or $160,000 (joint filers).

Finally, after the credit is reduced (if de rigueur), you need to deduct the total third-round spur check and “plus-up” payments you expected last year from the credit amount. The IRS should have sent you a notice after it sent you a spur check – Notice 1444-C. The IRS also sent break notices to people who expected a “plus-up” payment. You can find the proper amount to deduct on these notices. The IRS is also sending another notice – Letter 6475 – with the same in rank. The tax agency will be sending these letters through March 2022. If you expected a joint spur payment with your spouse, Letter 6475 only shows half of the total payment amount. If you and your spouse file break 2021 tax returns, each of you must enter your half of the amount of the payment. You can also find the total amount to deduct from the credit on your IRS online account, if you have one. (Save Notice 1444-C and Letter 6475 with your other tax records.)

You report the final amount on Line 30 of your 2021 federal income tax return (Form 1040 or Form 1040-SR). The recovery rebate credit is a “refundable” credit, which means you’ll get a tax refund if the credit is larger than the tax that you would if not have to pay. (“Non-refundable” credits will only take your tax bill down to zero – they won’t trigger a refund even if they’re more than the amount you owe.)

Here’s an example of how the assess works:

Andrew and Becky reported an adjusted yucky income (AGI) of $152,000 on their 2020 return. They also have one child, who is five years ancient. Since Andrew was furloughed from his job for part of 2021, their 2021 AGI is only $120,000. Because their 2020 AGI was above the $150,000 phase-out threshold for joint filers, their third spur check was reduced by $840. It went from $4,200 ($2,800 base amount + $1,400 for their child) to $3,360. Since their 2021 AGI is below the phase-out threshold for joint filers, their recover rebate credit isn’t reduced. As a result, after subtracting the amount of their third spur payment, the recovery rebate credit they report on Line 30 of their 2021 tax return is equal to $840 ($4,200 – $3,360 = $840).

There’s a page-long database in the directions for Form 1040 that you can use to assess the amount of your credit. Tax schooling software will run the numbers and assess the credit.

Lost, Stolen or Hurt Third Spur Checks

If your third spur check was lost, stolen or hurt, you can question the IRS to do a “payment trace” to see if your check was cashed. If you file your 2021 tax return before a trace is perfect, don’t include the payment amount on the recovery rebate credit database. If you do, you may receive a notice from the IRS saying your credit was changed. An adjustment will be made after the trace is perfect and it’s single-minded that your payment wasn’t cashed. You won’t need to take any bonus action to receive the credit.

If you don’t request a payment trace, expect the IRS to reject any recovery rebate credit claimed on your 2021 return. Since the payment was issued to you, the IRS will thought-out you disallowed for the credit.

Who Will In fact Get a Recovery Rebate Credit?

Most Americans already expected the full amount of the 2021 recovery rebate credit as a third spur check payment. For those people, subtracting the spur money they earlier expected will reduce their recovery rebate credit to zero. So, if you expected a full third spur check, there’s no need to perfect the database to assess the credit.

But, certain groups of people could very well end up with a clear credit amount, which will result in a lower 2021 tax bill or larger tax refund. For example, high and mighty you’re eligible, you may be able to claim a recovery rebate credit if:

Your AGI was above the applicable phase-out threshold on your 2019 or 2020 tax return (whichever return was used to assess your third spur check), but it’s lower on your 2021 tax return;
You added a needy (e.g., had a new baby) in 2021;
You share custody of your child, your ex-spouse claimed the child as a needy for the 2020 tax year, and you claim the child as a needy for 2021;
You got married in 2021 (mainly if there’s a wide gap between each spouse’s income);
You could be claimed as a needy on someone’s 2019 or 2020 tax return (whichever return was used to assess your third spur check), but not on anyone’s 2021 return;
You receive Social Wellbeing or veterans refund, didn’t file a 2019 or 2020 tax return, and care for a needy child, but the IRS didn’t get in rank about the child from the SSA or VA;
You didn’t have a SSN in 2021 but are issued one by the due date of your 2021 tax return (counting requested extensions);
The IRS sent you a third spur check that was less than what you were free to receive; or
The IRS didn’t send you a third-round spur check at all.

These are just a few of the more common reasons why you might be able to claim a recovery rebate credit. There will be other situations that result in a clear credit amount. That’s why it’s vital that you run the numbers when you file your own 2021 tax return. If you’re free to a refund, file your return electronically and sign up to have your refund frankly deposited into your bank account to get your money the fastest.

(NOTE: If you reside in a U.S. territory, don’t enter an amount on Line 30 of Form 1040 or Form 1040-SR. In general, the tax creation in American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands will provide the recovery rebate credit to eligible residents.)

Avoid Mistakes That Will Delay Your Refund

Simply claiming the recovery rebate credit won’t by itself delay the dispensation of your tax return or any tax refund. But, mistakes on your return – counting mistakes calculating the recovery rebate credit – can slow things down and make you wait longer for your refund. Opportunely, though, you won’t automatically lose out on the credit if you make a mistake on Line 30 of your Form 1040.

The IRS won’t assess your recovery rebate credit or right your entry if you enter $0 on Line 30 or leave it blank. The IRS will treat this as your declaration not to claim the credit. But, if you make a mistake on the Line 30 amount ($1 or more), the IRS will assess the right amount of the credit, right your tax return, and take up again dispensation it.

The IRS won’t contact you before making a minor change, and you won’t have to provide any bonus in rank, but at least the IRS will send you a notice amplification any changes they make. This will also delay the dispensation of your return.

If you agree with the changes the IRS made, no response or action is vital. If you argue, call the IRS at the toll-free number listed on the top right corner of the notice.

What Are the Income Tax Brackets for 2021 vs. 2022?

Tax Day is right around the corner – that’s the last day to file your federal income tax return (unless you request a tax filing additional room). For most people, Tax Day is on April 18 this year, which means you may still be working on your 2021 tax return. But smart taxpayers are also looking ahead and early plot out their 2022 tax approach, too. And no matter where you are right now in your tax filing and tax schooling, there are some basic things you need to know – like the federal income tax rates and which tax bracket you fall (or will fall) into.

The tax rates themselves are the same for both the 2021 and 2022 tax years. There are still seven tax rates now in effect: 10%, 12%, 22%, 24%, 32%, 35% and 37%. But, every year the tax brackets are adjusted to account for inflation. That means you could end up in a uncommon tax bracket from one year to the next, which also means you could be subject to a uncommon top tax rate each year even if your income remains the same.

The tax bracket ranges also differ from year to year depending on your filing status. For example, the 22% tax bracket for the 2021 tax year goes from $40,526 to $86,375 for single taxpayers, but it starts at $54,201 and ends at $86,350 for head-of-household filers. (For 2022, the 22% tax bracket for singles goes from $41,776 to $89,075, while the same rate applied to head-of-household filers with taxable income from $55,901 to $89,050.) So, that’s a touch else to keep in mind when you’re filing a return or schooling to reduce a future tax bill.

Now, let’s get to the actual tax brackets for 2021 and 2022. When you’re working on your 2021 tax return, here are the tax brackets you’ll need:

2021 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)
10%	Up to $9,950	Up to $19,900
12%	$9,951 to $40,525	$19,901 to $81,050
22%	$40,526 to $86,375	$81,051 to $172,750
24%	$86,376 to $164,925	$172,751 to $329,850
32%	$164,926 to $209,425	$329,851 to $418,850
35%	$209,426 to $523,600	$418,851 to $628,300
37%	Over $523,600	Over $628,300

—

2021 Tax Brackets for Married Couples Filing Unconnectedly and Head-of-Household Filers

Tax Rate	Taxable Income (Married Filing Unconnectedly)	Taxable Income (Head of Household)
10%	Up to $9,950	Up to $14,200
12%	$9,951 to $40,525	$14,201 to $54,200
22%	$40,526 to $86,375	$54,201 to $86,350
24%	$86,376 to $164,925	$86,351 to $164,900
32%	$164,926 to $209,425	$164,901 to $209,400
35%	$209,426 to $314,150	$209,401 to $523,600
37%	Over $314,150	Over $523,600

If you’re already schooling for your 2022 tax return, you’ll want to look at the later tax brackets:

2022 Tax Brackets for Single Filers and Married Couples Filing Jointly

Tax Rate	Taxable Income (Single)	Taxable Income (Married Filing Jointly)
10%	Up to $10,275	Up to $20,550
12%	$10,276 to $41,775	$20,551 to $83,550
22%	$41,776 to $89,075	$83,551 to $178,150
24%	$89,076 to $170,050	$178,151 to $340,100
32%	$170,051 to $215,950	$340,101 to $431,900
35%	$215,951 to $539,900	$431,901 to $647,850
37%	Over $539,900	Over $647,850

—

2022 Tax Brackets for Married Couples Filing Unconnectedly and Head-of-Household Filers

Tax Rate	Taxable Income (Married Filing Unconnectedly)	Taxable Income (Head of Household)
10%	Up to $10,275	Up to $14,650
12%	$10,276 to $41,775	$14,651 to $55,900
22%	$41,776 to $89,075	$55,901 to $89,050
24%	$89,076 to $170,050	$89,051 to $170,050
32%	$170,051 to $215,950	$170,051 to $215,950
35%	$215,951 to $323,925	$215,951 to $539,900
37%	Over $332,925	Over $539,900

—

How the Tax Brackets Work

Suppose you’re single and had $90,000 of taxable income in 2021. Since $90,000 is in the 24% bracket for singles, is your 2021 tax bill simply a flat 24% of $90,000 – or $21,600? No! Your tax is in fact less than that amount. That’s because, using marginal tax rates, only a part of your income is taxed at the 24% rate. The rest of it is taxed at the 10%, 12%, and 22% rates.

Here’s how it works. Again, high and mighty you’re single with $90,000 taxable income in 2021, the first $9,950 of your income is taxed at the 10% rate for $995 of tax. The next $30,575 of income (the amount from $9,951 to $40,525) is taxed at the 12% rate for an bonus $3,669 of tax. After that, the next $45,850 of your income (from $40,526 to $86,375) is taxed at the 22% rate for $10,087 of tax. That leaves only $3,625 of your taxable income (the amount over $86,375) that is taxed at the 24% rate, which comes to an bonus $870 of tax. When you add it all up, your total 2021 tax is only $15,621. (That’s $5,979 less than if a flat 24% rate was applied to the entire $90,000.)

Now, suppose you’re a millionaire (we can all dream, right?). If you’re single, only your 2021 income over $523,600 is taxed at the top rate (37%). The rest is taxed at lower rates as described above. So, for example, the tax on $1 million for a single person in 2021 is $334,072. That’s a lot of money, but it’s still $35,928 less than if the 37% rate were applied as a flat rate on the entire $1 million (which would result in a $370,000 tax bill).

A New Top Tax Rate for the Future?

Will the top income tax rate go up in the near future? It will if Head Biden gets his way. Last year, as part of his American Families Plot, the head projected rising the highest tax rate from 37% to 39.6%, which is where it was before the Tax Cuts and Jobs Act of 2017. He was not able to get that change passed last year. In fact, it wasn’t even built-in in the huge costs and relief package unproductively pushed by the Biden handing out in 2021 – the Build Back Better Act.

The handing out’s failure to pass the Build Back Better Act didn’t affect the head’s desire to boost the top federal income tax rate, though. Raising the top rate back to 39.6% admittance with the 2023 tax year was built-in once again in Biden’s budget proposals release in March 2022. Under the budget plot, the 39.6% rate would apply to taxable income over $450,000 for married couples filing a joint return, $400,000 for singles, $425,000 for head-of-household filers, and $225,000 for married people filing a break return. These thresholds would still be indexed for inflation each year after 2023 under Biden’s plot.

Tax Day 2021: When’s the Last Day to File Your Taxes?

In 2020, Tax Day (the deadline for filing your federal income tax return) was pushed back from April 15 to July 15 because of the COVID-19 endemic. This year, the IRS total the due date again – this time to May 17. In addendum to giving you more time to file your 2020 federal income tax return, the Tax Day delay gave the tax agency more time to adjust its pad systems and forms to account for tax changes made by the American Rescue Plot Act – most notably, the $10,200 resistance for unemployment compensation expected in 2020. (The IRS is already sending refunds for this new resistance).

If you’re the victim of certain storms earlier this year in Alabama, Kentucky, Louisiana (February 11 storm or May 17 storm), Oklahoma, Tennessee, Texas or West Virginia, you have even more time beyond the Tax Day deadline to file your 2020 federal income tax return (the exact date depends on the state).

If you have a federal tax refund coming, you could get paid in as small as three weeks. In the past, the IRS has issued over 90% of refunds in less than 21 days. To speed up the refund process, e-file your 2020 tax return and select the direct deposit payment method. That’s the fastest way. Paper returns and checks slow things down greatly.

If for some reason you couldn’t file your federal tax return on time, it’s simple to get an compulsory additional room to October 15, 2021. But you had to request the additional room by May 17 to qualify. (Later dates apply for storm victims in Alabama, Kentucky, Louisiana, Oklahoma, Tennessee, Texas, and West Virginia). Keep in mind, but, that an additional room to file doesn’t extend the time to pay your tax. If you didn’t pay up by the May 17 deadline, you’ll owe appeal on the unpaid tax. You could also be hit with bonus penalties for filing and paying after Tax Day.

And don’t forget about your state tax return. Most states synch their income tax return deadline with the federal Tax Day – but there are a handful of states that have uncommon deadlines. Plus, while most states adjusted their filing deadlines to May 17 or later, not all states did. Check with the state tax agency where you live to find out exactly when your state tax return is (or was) due.

Tax Day 2021: When’s the Last Day to File Taxes?

Last year, the deadline for filing your federal income tax return was pushed back from April 15 to July 15 because of the COVID-19 endemic. This year, the IRS total the due date again – this time to May 17. In addendum to giving taxpayers more time to file their 2020 federal income tax returns, the additional room gives the tax agency more time to adjust its pad systems and forms to account for tax changes made by the just enacted American Rescue Plot Act – most notably, the $10,200 resistance for unemployment compensation expected in 2020.

If you’re a victim of the February winter storms in Texas, Oklahoma, or Louisiana, you can wait until June 15, 2021, to file your 2020 federal income tax return. Moving the general filing deadline from April 15 to May 17 doesn’t affect these catastrophe-related extensions. If there are other natural disasters between now and May 17, other Americans could have their filing deadline pushed back even further, too.

If for some reason you can’t file your federal tax return on time, it’s simple to get an compulsory additional room to October 15, 2021. But you have to act by May 17 to qualify (June 15 for storm victims in Texas, Oklahoma, or Louisiana). Keep in mind, but, that an additional room to file doesn’t extend the time to pay your tax. If you don’t pay up by the first due date, you’ll owe appeal on the unpaid tax. You could also be hit with bonus penalties for filing and paying late.

And don’t forget about your state tax return. Most states synch their income tax return deadline with the federal tax due date – but there are a handful of states that have uncommon deadlines. Plus, while most states have adjusted their filing deadlines to May 17 or later, not all states have done so. Check with the state tax agency where you live to find out exactly when your state tax return is due.