MJD & Associates, LLC

2020 Tax Filing Deadline for U.S. Taxpayers Abroad Remains June 15, 2021 The IRS recently issued a reminder to American taxpayers living and working outside the U.S. that they must file their 2020 federal tax returns by Tuesday, June 15, 2021. This June 15 deadline applies to U.S. citizens, dual citizens and resident aliens whose tax home and physical dwelling both lie outside the 50 states, D.C. and Puerto Rico. It also applies to active military personnel who were serving o...verseas on their normal filing due date. The IRS recommends attaching a note to your return explaining why you qualify for the special deadline. Ordinarily, members of these groups may file their returns up to two months after the general IRS spring deadline. However, even though the IRS moved the 2020 tax filing deadline for U.S. residents from April 15 to May 17, 2021, the deadline for taxpayers outside the country did not change. Many taxpayers abroad must file IRS returns even if they do not owe tax. For example, If you qualify for the Foreign Earned Income Exclusion or Foreign Tax Credit, which can reduce or eliminate your U.S. tax, you must file an IRS return to claim these benefits. You may have to file one or more forms disclosing your foreign bank accounts and other financial interests. A tax advisor can help you determine your filing requirements.

Expanded Child Tax Credit for 2021 with Advance Payments Did You Know? The recently enacted American Rescue Plan Act (ARPA) made important changes to the Child Tax Credit (CTC) for 2021. The Act raises the maximum age for a child to qualify for the CTC from 16 to 17. The maximum credit amount will also increase from the 2019 and 2020 level of $2,000 per child. Qualifying taxpayers will receive a credit of up to $3,600 for each child age 5 or younger, and $3,000 per child ag...e 6 through 17. The increased CTC amount applies for eligible taxpayers with adjusted gross incomes (AGIs) in the following ranges: Single: AGI of $75,000 or less Married Filing Jointly: AGI of $150,000 or less Head of Household: AGI of of $112,500 or less Qualifying taxpayers with AGIs above these limits, but below $200,000 for individuals or $400,000 for joint filers, will still receive a credit of at least $2,000 per child. The 2021 CTC will completely phase out starting with AGIs above the $200,000 / $400,000 threshold. Married taxpayers who file separately typically only receive a partial CTC amount. The CTC will also be fully refundable for 2021, meaning that if the credit reduces your tax to less than zero, you may receive an IRS refund. Furthermore, many people may receive up to 50% of their 2021 CTC in the form of advance payments. The IRS will start issuing these payments periodically beginning in July. The remaining credit amount will be calculated when you complete your 2021 federal tax return. Unless Congress takes additional action, these special CTC provisions will apply ONLY for tax year 2021. The changes have no effect on your 2020 tax return. A tax professional can help you determine whether you qualify for the CTC, and how to claim the credit if you do.

National 529 College Savings Day on Saturday - Did You Know? If you put money in a 529 account for education, withdrawal of earnings are tax-free if used for qualified educational expenses. Qualified educational expenses include tuition, fees, housing, meals and books. Many states offer a full or partial tax deduction for 529 plan contributions. They may also offer incentives and promotions to encourage families to open and contribute to 529 accounts this coming Saturday for National 529 College Savings Day. The 2017 Tax Cuts and Jobs Act (TCJA) also expanded eligibility for 529 savings plans. Up to $10,000 per year can be used for Kindergarten through Grade 12 education (public, private, or religious schools).

IRS Begins Issuing Refunds for Eligible Unemployment Benefits Recipients The American Rescue Plan Act (ARPA) retroactively excluded some 2020 unemployment benefits from taxable income. Generally, taxpayers with modified adjusted gross incomes below $150,000 do not have to pay tax on their first $10,200 of 2020 unemployment compensation. Unfortunately, many people who qualify for this exclusion filed their 2020 federal tax returns before the new law took effect in mid-March. T...he IRS has now begun to review and adjust the returns of taxpayers who reported 2020 unemployment income. If the filer overpaid as a result of paying tax on excluded unemployment benefits, the IRS will either issue a special refund or reduce the balance of tax owed. The IRS has begun to adjust the simplest returns affected by ARPA rules for 2020 unemployment benefits. Most of these returns belong to single filers without dependents who did not claim any refundable tax credits. After correcting all these returns and issuing appropriate refunds, IRS personnel will move on to adjust more complicated returns, such as joint returns filed by married couples. Refunds will be sent by direct deposit to those who provided banking information on their 2020 returns, and by paper checks otherwise. The refunds will be subject to offset rules, which allow the IRS to withhold refunds to cover past-due taxes, unpaid child support or other debts. Any taxpayer whose return is adjusted will also receive an IRS notice explaining the changes made. IRS officials have projected that this process will continue throughout the summer. In the meantime, most taxpayers who may have paid tax on excluded unemployment benefits do not have to take further action. Calling the IRS or filing an amended return will not result in a faster refund, and could even delay processing due to the need to reconcile multiple returns.

IRS Online Account Did You Know? All taxpayers who can properly verify their identity may set up a personal IRS online account. To create an account, simply visit the IRS View Your Account Information webpage (link below). Maintaining an online account can help you prepare for your federal tax returns, view payment history, see select IRS notices and stay on track with your tax planning and budgeting throughout the year. Setting up an online account will be particularly hel...pful if you are eligible to claim the Recovery Rebate Credit for 2020. The IRS offers this credit to those who qualified for Economic Impact Payments (EIPs, also called stimulus payments) in 2020, but received either no payments or smaller payments than they deserved. To apply for the credit, you need to know the amounts of any EIPs you received. Your IRS online account will display this information. Other information available from your online account includes any balance you owe to the IRS, your payment history (including pending payments), and digital copies of IRS notices you have received. You can also get key information from your most recent tax return, which you may need in order to get your 2020 return filed or determine your eligibility for certain credits and other programs. For detailed information from your past tax returns, you can request a transcript. To set up your account, you will need to go through an identity verification process. Once you have gathered the required documents, registration typically takes about 15 minutes. IRS View Your Account Portal: https://www.irs.gov/payments/view-your-tax-account. If your 2020 federal tax return is already filed, you may check on your refund status here: https://www.irs.gov/refunds.