The New York State 2021 to 2022 budget increased certain personal income tax rates for the 2021 tax year. Practitioners should consider warning affected clients about the effects of these new rates. The budget increases the 8.82% bracket to 9.65%. In addition, for taxable income over $5 million and up to $25 million, the new tax rate is 10.3%. For taxable income over $25 million, the new t...
The IRS has indicated that it has begun to issue refunds to taxpayers who paid 2020 income taxes on unemployment compensation before the retroactive change that excluded some or all of such compensation for certain taxpayers was enacted as part of the American Rescue Plan. These refunds were discussed in our April 1, 2021 post. The IRS is starting with refunds for single taxpayers and will m...
As discussed in our March 11, 2021 post, the American Rescue Plan expanded the child credit for 2021 and created an advance payment of a portion of the credit for certain taxpayers. Beginning in 2021, the maximum child tax credit is $3,600 per child for children under the age of 6 and is $3,000 per child for children between ages 6 and 17. The higher child credit amounts are phased out when modi...
As practitioners prepare extensions for clients as we approach the upcoming filing due date, it is important to warn clients that such extensions require the use of estimates for amounts that are not yet known. Practitioners should warn clients in writing, indicating that differences between actual amounts and estimates could cause the client to owe additional taxes, including penalties and in...
In addition to individual tax returns being due on Monday, May 17, 2021, calendar-year exempt organizations must also file Forms 990 or a request for extension by the same date. New for this year: Exempt organizations that file Form 990, Return of Organization Exempt from Income Tax, are required to electronically file the return for tax years beginning after July 2, 2019, which is the 2020 ...
For some taxpayers who had debits scheduled for April 15, 2021 for federal income tax balances due for the 2020 tax year, the debit did not occur on April 15. The IRS has indicated that this was caused by an issue with their software and that these debits are expected to occur within the next week, without further action required by practitioners or clients. (Nevertheless, clients should mon...
On April 8, 2021, New York State announced that unemployment benefits that are excluded from federal gross income must be added back to income for the purpose of the New York personal income tax. New York has updated the instructions for Form IT-558, New York State Adjustments due to Decoupling from the IRC, to include a new code for this add-back. The adjustment code is A-011. The revised...
On March 31, 2021, in IR-2021-71, the IRS announced that it will begin sending refunds to taxpayers who received unemployment benefits and are eligible for the exclusion on up to $10,200 of benefits but who filed their tax return before the recent changes made by the American Rescue Plan. Such refunds will occur in the spring and summer, starting in May 2021. The IRS indicated that, for taxpay...
In Notice 2021-21, the IRS announced that the due date to contribute to an IRA for the 2020 tax year is May 17, 2021, matching the filing due date. The later due date also applies for contributions for health savings accounts. The due date for making first quarter estimated taxes for the 2021 tax year remains April 15, 2021. ...
As discussed in earlier posts, the American Rescue Plan, which was enacted on March 11, 2021 provides a retroactive exclusion for unemployment benefits received during 2020 (up to $10,200 per taxpayer). This exclusion is available for taxpayers with adjusted gross income of under $150,000. In its original guidance, the IRS indicated that, when computing income for the purpose of this thresho...
