That benefit applies to low- and moderate-income households, making less than $57,414. The IRS said that by law, it can't issue refunds to anyone claiming the earned income tax credit before mid-February. The timing also depends on what's in your return. "Most people already do this, but some people actually file paper returns." "Hands down, the fastest way to get your refund check is to file electronically and have the funds direct deposited into your bank account," Khalfani-Cox said. The IRS is overworked and underfunded, and it's coping with those challenges while using antiquated computer systems. Collins, the IRS' national taxpayer advocate, says the agency has a backlog of some 35 million returns. ![]() "However, delays will likely mostly be felt by people who do manual or paper tax submissions," she said.Įrin M. Taxpayers who file early and electronically should be able to avoid massive delays, Khalfani-Cox said. With that lapse, the full amount of unemployment payments in 2021 are again taxable at the federal level. "People laid off from work were able to exclude up to $10,200 in unemployment benefits in the year 2020," Khalfani-Cox said. ![]() The American Rescue Plan also boosted unemployment benefits - but the tax rules for that money are different from the previous year. For tax purposes, that money isn't considered income - but because they're advance payments on a tax benefit, they do reduce the amount recipients might have otherwise received in their refund.Īs NPR's Cory Turner reported, current estimates suggest "that by the end of tax season, families will have received an average of $4,380 from the 2021 version of the child tax credit, compared with the $2,310 they got under the previous version." The program sent monthly checks to eligible families in the latter half of 2021, with up to $300 per month for every child younger than 6 and $250 per month for older children. The child tax credit was expanded under the American Rescue Plan, benefiting tens of millions of U.S. "Part of the reason is that people have to account for that child tax credit that they've already received in advance," Khalfani-Cox said. How will changes to the child tax credit shake things up?įinancial advisers are warning taxpayers that they should expect to get smaller refunds than they did last year. ![]() The IRS says a slew of costs, from hand sanitizer to home COVID-19 tests, can be paid for or reimbursed through tax-free spending accounts such as flexible spending accounts and health savings accounts. If your circumstances don't meet those guidelines, you have another option. Another caveat: You can't claim COVID-19 costs if your insurance company has reimbursed you for them. "You can write off COVID-19 expenses - like face masks and personal protective equipment (PPE)," Khalfani-Cox said, "but only to the extent that those costs and your medical expenses exceed 7.5% of your adjusted gross income."Īs an example, a household with an adjusted gross income of $67,521 (the median income in 2020) would need to spend more than $5,064 before that tax relief kicks in. The pandemic has been an expensive crisis for many families - and some of the most common costs can affect your taxes.
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