The new year is considered the beginning of many things. However, in the eyes of taxes and the IRS, you are only beginning to reach the end of the tax year.
That also means facing the deadline and submitting all the requirements before another year begins. If you have any unfinished business with the IRS, here are some things you need to keep in mind for the start of 2022.
Advance Child Tax Credit Payments
Advance Child Tax Credit payments are available if you have a qualifying child. If you are eligible, you can receive up to 40% of the total amount of your credit. Your Advance Credit Payment amount will be based on the information you provided on your 2021 return and an estimate of your 2022 income.
Expect that by January 2022, the IRS will send out Letter 6419 to the eligible individuals. This letter will include the total amount of advance Child Tax Credit received in the past year. You need to keep it along with your payment receipts and records.
Should you not receive your advance Child Tax Credit for the year, you can still file a 2021 federal income tax return for this coming year.
Economic Impact Payments
You may be eligible to receive Economic Impact Payments paid to you if you received unemployment compensation in the past and your unemployment compensation has been reduced or terminated. In this case, you will receive a check for the amount of the reduction.
If you did not receive any unemployment compensation, you could still file for the Economic Impact Payment for up to 12 months after the end of your 2021 tax year.
Recovery Rebate Credit
If you made alternative minimum tax payments in the past, you could be eligible for a recovery rebate credit. The recovery rebate credit is the adjusted gross income of your federal tax return for the past year or two years, depending on which is greater.
If you did not file your federal tax return for the year, there is no way for the IRS to send you a check. You can still file your tax return and claim the recovery rebate credit on your tax return. However, if you have not filed your tax return yet, we strongly recommend you do so immediately.
Charitable Deduction Changes
Under new tax laws, charitable donations of clothing and household items will be limited in 2022. If these items have been in used or worn condition, you will not be able to claim a deduction on these items.
Instead of a deduction, you can claim a credit that can be up to 20% or 30% of your charitable contributions. To qualify, household goods donated must be in usable condition. They should still be used for their functional purpose by or on behalf of an organization qualified to receive tax-deductible contributions.
For clothing and household items, the amount that can be deducted will be limited to the contribution amount that exceeds $500 per item. If you have already made your claims for the charitable deduction for 2021, you do not need to worry about the change. In case you haven’t made any claims for the deduction, you will have to make sure your items are in good condition before claiming the deduction.
If you are finalizing your taxes for 2021 or preparing for 2022, we strongly recommend you get in touch with a tax specialist. Your tax situation for the year is different from the previous years, and the tax laws are also different. That is why a tax specialist is critical to make sure you get a detailed plan for your tax situation.
We hope you find this article informative. If you already have tax problems you need solutions to, we can help. Axiom Tax Resolution Group has tax relief resolution specialists in Birmingham, AL, who can help you avoid all mistakes possible regarding tax preparation. Contact us today to know how we can help.