President Biden’s Build Back Better tax bill
The latest version of this bill doesn’t have enough support to move forward. President Biden has not been able to accumulate the number of votes needed to get this passed. I believe his next move will be to revise the plan, likely with less drastic changes, to convince the hold outs to support it. It’s more likely than ever that this bill will not retroactively change tax law for the 2021 tax year.
Advanced Child Tax Credit
Many parents received monthly automatic deposits or checks in the back half of 2021, prepaying to their advanced child tax credit. If you received any payment(s) like this, you should receive Letter 6419 soon from the IRS reporting to you the full amount paid to you. This letter needs to be provided to your tax accountant as these payments will be reconciled on your 2021 tax return.
Economic Impact Payment Round Three
The third economic impact payment (stimulus check) received sometime in the spring of 2021 will be reconciled on your 2021 tax return (round one and two were reconciled on your 2020 tax return). If you received a stimulus check from round three, you should receive Letter 6475 soon from the IRS reporting the amount received. This letter needs to be provided to your tax accountant as these payments will be reconciled on your 2021 tax return.
IRS in Distress
The IRS has released various communications warning taxpayers to expect unprecedented delays when filing their tax returns this year. The COVID pandemic has backlogged and short-staffed the IRS even worse than they were before. Here are a few recommendations in reaction to this news:
My personal opinion: Reduce tax withholdings from your income sources and reduce estimated tax payments to put yourself in a balance due position. If you do find yourself in an over-payment position, choose to apply the over-payment to your next tax year rather than requesting a refund.
–Todd B. Bullinger, CPA, MBT