2021 has come and gone, and 2022 is upon us. The beginning of the year always means it’s tax season, and this year (like last year) has some slight changes due to the pandemic. Here in Metro Atlanta, individuals, families, and businesses will be starting to collect and compile tax documentation for the filing of their taxes in the next couple of months. Let’s take a look at the following COVID relief changes that will impact your 2021 tax return.
COVID Relief That May Affect Your 2021 Taxes:
The Advance Child Tax Credit
Half of your total allowed Child Tax Credit (CTC) was dispersed between July and December of 2021. This means that there will be this much less in the credits owed to you. The upper limit was also adjusted, along with the advance payments, but taxpayers should expect less in tax credits due to the monthly advance on their CTC. You may refer to letter 6419; this letter will help you determine how much more CTC you can expect for your 2021 tax return.
The Third Stimulus Payment
Now, if you received the third stimulus payment as planned, you don’t have to worry about this. You don’t owe taxes on that payment, just like the previous two. However, if you did not receive the third stimulus payment (Economic Impact Payment or EIP), you will be eligible to claim it on your tax return. Refer to letter 6475 (going out late January) for more information.
Note to taxpayers: remember to save any IRS letters or other tax documentation that you receive in the mail. These documents are important in the timely filing of your return.
Suspended Student Loan Payments
Unless you logged into your federal student loan account and physically opted out of the payment pause, you will have paid no student loan payments during 2021. Furthermore, even those who continued to pay on their loans did not accrue or pay interest on their loans. This, while a significant source of help for many, means that you will not be able to deduct any student loan interest this year. This is a source of large amounts of deductions for some people. Keep this in mind as you prepare your taxes.
Unemployment Benefits & Taxes
2020 was filled with unemployment benefits that were, in part, tax-free (up to $10,200). As of January 10th, 2022, there doesn’t seem to be any plan to continue this tax-free benefit. Keep in mind that, if you were refunded any of the taxes that you paid on the 2020 tax year’s tax-free $10,200, you will need to claim that amount on your taxes this year.
Furthermore, keep in mind what you selected for withholding on your unemployment checks. If you selected a low percentage, you will owe money on that income this year. If your withholding was set high, you may get a refund on the money that you paid.
Questions? Ask Your Team of Tax Experts in Metro Atlanta
Here at NTRC Tax and Finance in Metro Atlanta, we hear common questions quite frequently. This means that we have answers to all of your questions – even if we have to research something for you. 2020 and 2021 tax seasons, due to COVID relief, will go down in history as being complicated years, but with a little help from our team of tax experts, you’ll be getting your refund in no time. For more information or help with filing your 2021 tax return, contact our team.