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Tax refund 2022: Tax refunds to consider before filing tax returns

Washington-Many US tax filers get a refund when filing a federal income tax return. But this year, thanks to some temporarily expanded tax incentives, it could be more and in some cases less than expected.

This is especially true if you are eligible for one of the tax exemptions included in the American Rescue Plan, which was enacted last March.

In many cases, tax cuts also benefit low-income earners who normally do not need to file a tax return.

There are some important breaks to keep in mind when collecting documents to prepare the 1040.

1. More generous children and dependent deductions

Benefits of a temporary increase in children and dependent deductions if you are caring for a child under the age of 13, or another family member who is mentally or physically unable to take care of you, or if you are in school You may receive it. ..

“This is a big problem, and it has been greatly expanded,” said Kathy Pickering, chief tax officer at H & R Block’s Tax Institute.

more: The tax filing season begins with the IRS crisis, COVID-related complications

Credits are based on your income and are calculated as a percentage of eligible expenses you incur-50% this year, up from 35% in the previous year, but that percentage is for those who earn over $ 125,000 Will be reduced to.

Eligible expenses are deducted from the employer’s dependent allowance (for example, money put into a flexible spending account that is tax-friendly).

Overall, this year’s credit may reduce tax charges or increase refunds. Up to $ 4,000 for one dependent and up to $ 8,000 for two or more. Prior to 2021, credits were only $ 1,050 or $ 2,100, respectively.

2. Temporary expansion of child tax credit

The maximum child tax credit is temporarily $ 3,000 per child between the ages of 6 and 17 and $ 3,600 per child under the age of 5.

Unlike the previous year, credits will be fully refunded in 2021. This means you can get the maximum amount of credit even if you exceed your federal income tax debt for the year.

With the exception of the wealthiest households, “anyone with a child under the age of 17 is likely to be eligible for a child tax credit,” Pickering said.

See: File tax returns early as COVID delays may occur again

And for the first time, the IRS made a prepaid monthly payment for that credit from July to December. Therefore, you may have already received about half of your credit and the other half can be charged at the time of return. To assist in that calculation, the IRS will send you a letter (Letter 6419) detailing the amount you have already received. You need to use it to adjust the amount you have to pay. The amount may differ from what you expected.

The reasons are as follows. Prepaid payments were calculated based on 2020 or 2019 income and family conditions. However, the final calculation is based on 2021 information and may change your eligibility.

For example, if you had another child in 2021, you would have more rights than the prepayment would reflect.

Or, for example, if you divorced and changed which parent can claim your child on your tax return, you may have received a large amount of payment. The same is true if your income increases in 2021 or if your child turns 18 years old. Whether you need to “repay” the excess you get. In other words, the amount of credit charged in the first half may be reduced. Year-Depends on your income.

Income less than $ 40,000 ($ 60,000 if married) is fully repayable. However, if you earn more than $ 80,000 ($ 120,000 if you are married), you may need to repay. (This is the IRS FAQ on this issue.)

3. Request a collection rebate credit

Since the beginning of the pandemic, the IRS has sent qualified Americans three rounds of economic effect payments. The final payment was made in 2021.

If you receive a third payment, the IRS will send you a letter (letter 6475) detailing the amount paid. You must report that information upon return.

However, if you do not receive your third payment, or if you qualify for more than you paid due to changes in your income or family circumstances, ask if you would like to claim a refundable collection rebate credit. is needed.

“Individuals who are not eligible for a third economic benefit payment or are less than full may be eligible to claim a 2021 refund rebate credit based on the 2021 tax year information,” the IRS said. Said.

If you get an exciting payment but are disqualified from your 2021 income, the good news is. Mark Luscombe, Chief Analyst at Wolters Kluwer, said: Tax accounting.

4. Expansion of earned income tax credit

For 2021 only, low- and middle-income wage earners without eligible children may be eligible for more earned income tax credits than before.

The American Rescue Plan has nearly tripled the maximum credit available to $ 1,502.

To qualify, your 2021 income must be less than $ 21,430 ($ 27,380 if you are married together). And, permanently to all EITC recipients, the amount of investment income you may have in addition to wages still claims that credit has increased to $ 10,000.

This credit is also available for the first time to workers without children aged 19 and workers aged 65 and over.

If you have qualified children and your income is $ 57,414 or less, you can qualify for EITC. And depending on the number of children they have, they can get a maximum credit of $ 6,728.

5. Special charity tax deduction

Generally, only tax filers who have itemized deduction items can deduct charitable donations. However, the IRS again allows people receiving standard deductions (the majority of tax filers) to deduct up to $ 300 in cash to eligible charities. And this year, couples applying jointly can deduct up to $ 600.

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Tax refund 2022: Tax refunds to consider before filing tax returns

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