Child Tax Credit Updates

The IRS will begin issuing advance checks to taxpayers that they believe will qualify for the new child tax credit advances in 2021.

The IRS has posted a great FAQ here to answer most questions regarding this new additional credit.

You can determine your eligibility for these credits using the IRS tool here.

Your eligibility will be based on your actual 2021 income and dependents, therefore you may qualify based on 2020 income and dependents, but fail to qualify in 2021 if your income increases or there are changes in dependents.
If you receive advance payments under this program, but ultimately do not qualify due to income or dependent changes, the advances will need to be repaid with your 2021 tax return.
Therefore, if you do not expect to qualify for the higher credits in 2021 due to one of these reasons, or if you could be on the threshold of qualifying, you should opt out of receiving the advance credits to avoid having to repay the advance credits with your 2021 tax return.
You can elect to opt out of the advance payment program here.

Should you opt out of the advance credits, but ultimately qualify based on your 2021 income and dependents, you will receive the credits on your 2021 tax return.

Waiting For Your Refund? You’re Not Alone.

The IRS continues to experience delays in processing returns and the related refunds. Taxpayers can check the status of their refunds here, but many times the result will be that the return is processing. A call to IRS will provide the same information until there is an update to the file in the system. From a lack of toner and ink for printers in IRS offices to the backlog of 2019 tax returns still in inventory for processing, there are many reasons for these delays. 2020 tax returns brought more causes for delays, one of which is the Rebate Recovery Credit that allowed taxpayers to claim their stimulus payments on their 2020 tax returns if they did not receive one in the mail or electronically when the stimulus payments initially processed. A recent Treasury Inspector General report indicates that returns with mismatches between IRS stimulus payment records and amounts claimed on the taxpayer’s return require a manual review by an examiner; this will cause significant delays in processing as millions of returns are already in that ‘waiting for review’ status. While the IRS is hiring and trying to remedy the processing lag, it could be some time before all returns that they have received are processed as they continue to implement the new expanded child tax credits recently enacted by Congress.

Ohio Announces Extended 2020 Tax Filing Deadline

Following the IRS announcement last week, Ohio has extended the filing deadline for 2020 individual income tax returns to May 17, 2021. The announcement can be read here. As with the current IRS position, first quarter 2021 estimated payments are still to be made by April 15, 2021.

IRS Postpones 2020 Individual Tax Filing Deadline to May 17, 2021

The IRS announced that the deadline for filing 2020 individual tax returns has been moved to May 17, 2021 from April 15, 2021 due to continued pandemic-related difficulties. This does not include an extension for paying 1st quarter estimated taxes as was the case with 2020’s deadline deferral. State and local taxing authorities may or may not conform to this deadline change. Updates regarding state and local due dates will be posted as they are available. Details can be read in the IRS announcement here.

Third Round of Stimulus Payments Begins

The IRS will begin processing the 3rd round of stimulus payments from the recently-executed American Rescue Plan Act as soon as possible. The following was announced by the IRS on March 12, 2021:

Following approval of the American Rescue Plan Act, the first batch of payments will be sent by direct deposit, which some recipients will start receiving as early as this weekend, and with more receiving this coming week.

Additional batches of payments will be sent in the coming weeks by direct deposit and through the mail as a check or debit card. The vast majority of these payments will be by direct deposit.

No action is needed by most taxpayers; the payments will be automatic and, in many cases, similar to how people received the first and second round of Economic Impact Payments in 2020. People can check the “Get My Payment” tool on IRS.gov on Monday to see the payment status of the third stimulus payment.

“Even though the tax season is in full swing, IRS employees again worked around the clock to quickly deliver help to millions of Americans struggling to cope with this historic pandemic,” said IRS Commissioner Chuck Rettig. “The payments will be delivered automatically to taxpayers even as the IRS continues delivering regular tax refunds. We urge people to visit IRS.gov for the latest details on the stimulus payments, other new tax law provisions and tax season updates.”

Highlights of the third round of Economic Impact Payments; IRS will automatically calculate amounts

In general, most people will get $1,400 for themselves and $1,400 for each of their qualifying dependents claimed on their tax return. As with the first two Economic Impact Payments in 2020, most Americans will receive their money without having to take any action. Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.

Because these payments are automatic for most eligible people, contacting either financial institutions or the IRS on payment timing will not speed up their arrival. Social Security and other federal beneficiaries will generally receive this third payment the same way as their regular benefits. A payment date for this group will be announced shortly.

The third round of Economic Impact Payments (EIP3) will be based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered online at IRS.gov using the agency’s Non-Filers tool last year, or alternatively, submitted a special simplified tax return to the IRS. If the IRS has received and processed a taxpayer’s 2020 return, the agency will instead make the calculation based on that return.

In addition, the IRS will automatically send EIP3 to people who didn’t file a return but receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) or Veterans Affairs benefits. This is similar to the first and second rounds of Economic Impact Payments, often referred to as EIP1 and EIP2.

For those who received EIP1 or EIP2 but don’t receive a payment via direct deposit, they will generally receive a check or, in some instances, a prepaid debit card (referred to as an “EIP Card). A payment will not be added to an existing EIP card mailed for the first or second round of stimulus payments.

Under the new law, an EIP3 cannot be offset to pay various past-due federal debts or back taxes. 

The IRS reminds taxpayers that the income levels in this new round of stimulus payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly.) The reduced payments end at $80,000 for individuals ($160,000); people above these levels are ineligible for a payment. More information is available on IRS.gov.

New payments differ from earlier Economic Impact Payments

The third round of stimulus payments, those authorized by the 2021 American Rescue Plan Act, differs from the earlier payments in several respects:

  • The third stimulus payment will be larger for most people. Most families will get $1,400 per person, including all dependents claimed on their tax return. Typically, this means a single person with no dependents will get $1,400, while a family of four (married couple with two dependents) will get $5,600. 
  • Unlike the first two payments, the third stimulus payment is not restricted to children under 17. Eligible families will get a payment based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents and grandparents.

Additional information is available on IRS.gov.

IRS Introduces Online Account System

The new system allows taxpayers to view certain individual account information including:

  • The amount you owe, updated for the current calendar day
  • Your balance details by year
  • Your payment history and any scheduled or pending payments
  • Key information from your most recent tax return
  • Payment plan details, if you have one
  • Digital copies of select notices from the IRS
  • Your Economic Impact Payments (EIP 1 and EIP 2), if any

You can also:

  • Make a payment online
  • See payment plan options and request a plan via Online Payment Agreement
  • Access your tax records via Get Transcript

This will be a great benefit to taxpayers, allowing them to circumvent the long call wait times to get the information they need quickly.

You can register for this account here.