Tax Pro

For ideal personal and business financial planning, Tax Pro can help. We offer sound investing advice and are a leader in providing Corpus Christi, TX Accounting solutions.

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Timeline photos 03/02/2022

Eligibility for the 2021 Earned Income Credit (2/2)

The IRS recently highlighted revised eligibility rules for the Earned Income Credit. While many of the changes apply only for tax year 2021, several new rules will hold for future years as well. If you have earned income (such as wages, tips or self-employment income) and low to moderate overall income, you may now qualify for the credit even if you did not in the past.

Here are the rest of the key changes that apply for years 2021 and beyond:

HIGHER LIMIT ON INVESTMENT INCOME: For 2021, workers with investment income of up to $10,000 may qualify for the EITC. This limit is over two and a half times the 2020 threshold of $3,650. For years 2022 and later, the $10,000 limit on investment income will be adjusted upward based on inflation.

NEW RULES FOR MARRIED BUT SEPARATED SPOUSES: If you are separated from your spouse and have a qualifying dependent child, you may now have the option of being treated as unmarried for the purpose of the EITC. This rule enables some workers whose spouses have higher incomes to qualify for the credit. Generally, you must have lived separately from your spouse for at least the last half of the year and/or have a legal separation decree in order to use this option.

WORKERS WHOSE CHILDREN LACK SSNS MAY QUALIFY: Prior to 2021, most workers whose children did not have Social Security Numbers (SSNs) could not claim the EITC. Single and married workers may now apply for the credit as long as they have SSNs, even if their children do not. These workers will generally receive the same credit amount as childless EITC recipients.

You may claim the EITC even if you owe no tax, in which case you will receive the credit as an IRS refund. However, you MUST file a 2021 tax return to receive the credit. If you are unsure how to claim the credit, a tax professional can help you complete a return and file it electronically for faster processing.

Timeline photos 02/28/2022

Eligibility for the 2021 Earned Income Credit (1/2)

The IRS recently highlighted special 2021 rules for the credit that significantly increases the number of Americans eligible to claim the EITC. If you have earned income (such as wages, tips or self-employment earnings) and low to moderate income overall, this credit could dramatically reduce your tax or entitle you to a tax refund. Here are several key changes to the EITC that apply only for tax year 2021:

HIGHER INCOME LIMITS FOR CHILDLESS WORKERS: Single tax return filers with no children and adjusted gross incomes (AGIs) of up to $21,430 may qualify for the 2021 EITC. For childless married couples filing joint returns, the 2021 AGI limit is $27,380. Both of these AGI thresholds are almost $6,000 higher than the 2020 limits.

HIGHER CREDIT AMOUNTS FOR CHILDLESS WORKERS: The maximum EITC for filers without children is $1,502, nearly three times higher than the 2020 maximum.

EXPANDED AGE RANGE FOR CHILDLESS WORKERS: Ordinarily, workers without dependent children may only claim the EITC if they are of age 25-64. For 2021, all workers age 19 and up (and some 18-year-olds) are eligible for the EITC, with the exception of full-time students under age 24.

INCREASES FOR WORKERS WITH QUALIFYING CHILDREN: The EITC income limits and maximum credit amounts for filers with 1, 2, or 3 or more qualifying children are all slightly higher in 2021 than in 2020. The highest possible 2021 credit is $6,660.

CREDIT MAY BE BASED ON PRE-PANDEMIC INCOME: A special 2021 rule allows filers to use their 2019 earned income to figure their EITC, if their 2021 earned income was lower. This rule helps those who received reduced wages or unemployment benefits due to the pandemic.

You may claim the EITC even if you owe no tax, in which case you will receive the credit as an IRS refund. However, you MUST file a 2021 tax return to receive the credit. If you are unsure how to claim the credit, a tax professional can help you complete a return and file it electronically for faster processing.

Timeline photos 02/24/2022

EITC and ACTC - Did You Know?

If you're claiming the Earned Income Tax Credit or Additional Child Tax Credit, both of which are refundable credits, your refund will be released by the IRS starting from March 1st, 2022. A refundable credit is one which gives you cash back even if you didn't pay any tax into the system during the year.

You may check the status of your refund at https://www.irs.gov/refunds.

Timeline photos 02/22/2022

IRS Suspends Sending Notices Due to Return Processing Delays – Did You Know?

As a result of pandemic-related issues, the IRS has a backlog of millions of original and amended 2020 and 2019 tax returns awaiting processing. This situation creates a risk that taxpayers who have met their tax filing and payment obligations could receive automated IRS notices about unfiled returns or balances owed. To prevent confusion and undue taxpayer stress, the IRS has temporarily halted sending certain letters and notices.

- The suspended notices and letters include:
- Notices related to unfiled or delinquent individual tax returns (especially IRS Letters CP80, CP59, CP759, CP516, CP616, CP518 and CP618)
- Tax balance due letters to individual taxpayers (CP501, CP503, CP504)
- Notices to individual taxpayers regarding insufficient tax withholding from paychecks
- Delinquent business tax return notices (CP259, CP959, CP518, CP618)

Although the IRS will not send out these documents while clearing the backlog, penalties and interest charges may still accrue on unpaid tax balances. Therefore, if you have yet to file your 2020 return or owe past tax, you should pay as much of the tax due as possible as soon as you can. A tax professional can help you determine how much to pay, and also help you file any overdue returns.

Timeline photos 02/16/2022

Unemployment Insurance Fraud - Did You Know?

Millions of Americans received unemployment insurance (UI) benefits in 2021 due to pandemic-related business cutbacks and shutdowns. Unfortunately, scammers took advantage of this situation to fraudulently collect UI payments.

In the most common version of UI fraud, scammers applied for benefits using another person's name and taxpayer ID number. The scammer then collected benefit payments without the affected person's knowledge.

Recipients of 2021 UI payments should receive IRS Form 1099-G (Certain Government Payments) from their state governments. If you get a 1099-G form but were not paid UI benefits in 2021, immediately report the issue to the state agency that sent the form. If you did receive benefits in 2021, carefully check the amount shown on your Form 1099-G against your tax and banking records. If the form shows more benefits than you actually got, report this at once.

Reporting incorrect 1099-G forms ensures that you will not be charged tax on benefits you did not receive. It also helps authorities track down scammers and crime syndicates.

Report UI Fraud: https://www.dol.gov/agencies/eta/UIIDtheft

Timeline photos 02/14/2022

Save Yearly Income Statements for a Smoother Tax Season

Many taxpayers will receive year-end income statements from employers, banks, stock issuers and other sources in January and early February. Make sure to save each document, so you can refer to it for your tax return.

The most common annual income statements include:

- W-2 forms from your employers, showing your wages and any taxes withheld
- Forms 1099-INT and 1099-DIV showing your interest and dividend income
- Forms 1099-MISC and 1099-NEC showing gig economy and other self-employment earnings, along with rents, royalties and other miscellaneous income
- Form 1099-K from payment processing services like PayPal and CashApp if you received $600 or more in payments through one of these platforms for goods or services
- Records of virtual currency (including crypto) transactions

In addition to these documents, you will need Form 1095-A (Health Insurance Marketplace) if you plan to claim the Affordable Care Act Premium Tax Credit. If you received advance payments of the 2021 Child Tax Credit (CTC), you will also need IRS Letter 6419 to figure any remaining credit you are owed.

Lastly, watch for IRS Letter 6475 about economic impact payments (EIPs, also called stimulus payments), which will help you determine your eligibility for the Recovery Rebate Credit. A tax professional can help you check that you have all the records needed to file an accurate return. Accurate filing reduces IRS processing time, allowing you to get your refund as soon as possible.

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