Kathleen Hargrove, Author at Whalen & Company, CPAs

Advance Child Tax Credit Payments

Kathleen Hargrove on July 1, 2021

The American Rescue Plan enacted in March increased the child tax credit benefit for 2021 and directed the IRS to deliver direct payments to eligible families beginning in July. The credit increased from $2,000 to $3,600 for a child under age 6 and to $3,000 for a child age 6-17.

The payments are worth up to $300 per month for each child under age 6, and up to $250 for each child ages 6 to 17. They will be deposited to recipient’s accounts close to the 15th of each remaining month for 2021.

Normally, parents would claim the credit as a lump sum on their annual tax returns, lowering their overall tax bill or resulting in a refund.

The credit owed is ultimately determined by 2021 income and will have to be reconciled on next year’s tax return. That means individuals who got a new job or received a raise in 2021 may find themselves owing money to the government if their monthly payment was too high.

People might also receive too much in monthly payments if they have a child who no longer qualifies as a dependent in 2021, but was accurately claimed on the 2019 or 2020 tax return. The law does offer some repayment protection in those cases for lower-income households.

In a letter currently being sent to taxpayers, the IRS has explained that taxpayers don’t have to do anything to begin receiving the Advance Child Tax Credit payments (assuming they are otherwise eligible) for 2021.

The letter also states that taxpayers may choose to opt out of receiving the advance payments. For more information on opting out and for reasons you may want to consider this option, check out this list of FAQs provided by the IRS.

The IRS has also provided helpful tools here, including a new Child Tax Credit Eligibility Assistant and Child Tax Credit Update Portal.

This website has two links, the first interactive link will allow taxpayers to unenroll from any potential advance payments. Using the second link, the nonfiler sign-up link on the same website, non-filers who aren’t required to file a tax return and haven’t submitted information to prove their eligibility for the ACTC can provide their information.

If you have any questions on this announcement or your filing for next year, please contact your Whalen advisor for assistance.

Meals & Entertainment Deductions

Kathleen Hargrove on June 29, 2021

By: Morgan K. Webster, CPA

Writing off meals and entertainment as business expenses can be complex at times. Some things are 100% deductible, some are 50%, and a few are nondeductible. It all depends on the purpose of the meal or event, and who benefits from it.

The Consolidated Appropriations Act of 2021 issued a temporary 100% deduction for businesses for food and beverage expenses that are provided by a restaurant for amounts paid after December 31, 2020 and before January 1, 2023. These expenses were formerly 50% deductible under the TCJA. A restaurant, as defined under IRS Notice 2021-25, is a “business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises”.

The temporary 100% deduction does not include food and beverages provided by grocery stores, specialty food stores, liquor stores, vending machines, etc.

Entertainment expenses are still nondeductible. Food and beverages purchased at an entertainment activity are still 50% deductible if the food and beverages are purchased separately from the cost of the entertainment, or if the food and beverage is separated out on a bill or receipt.

In order to maximize your tax deductions for your business, we suggest your trial balance accounts reflect the following:

50% meals
Restaurant meals (100%)
Whole-staff lunches (100%)
Entertainment (0%)

If you have any questions on this guidance, please contact your Whalen advisor for assistance.

Many parents will receive advance tax credit payments beginning July 15

Kathleen Hargrove on May 25, 2021

Eligible parents will soon begin receiving payments from the federal government. The IRS announced that the 2021 advance child tax credit (CTC) payments, which were created in the American Rescue Plan Act (ARPA), will begin being made on July 15, 2021.

How have child tax credits changed?

The ARPA temporarily expanded and made CTCs refundable for 2021. The law increased the maximum CTC — for 2021 only — to $3,600 for each qualifying child under age 6 and to $3,000 per child for children ages 6 to 17, provided their parents’ income is below a certain threshold.

Advance payments will receive up to $300 monthly for each child under 6, and up to $250 monthly for each child 6 and older. The increased credit amount will be reduced or phased out, for households with modified adjusted gross income above the following thresholds:

$150,000 for married taxpayers filing jointly and qualifying widows and widowers;
$112,500 for heads of household; and
$75,000 for other taxpayers.

Under prior law, the maximum annual CTC for 2018 through 2025 was $2,000 per qualifying child but the income thresholds were higher and some of the qualification rules were different.

Important: If your income is too high to receive the increased advance CTC payments, you may still qualify to claim the $2,000 CTC on your tax return for 2021.

What is a qualifying child?

For 2021, a “qualifying child” with respect to a taxpayer is defined as one who is under age 18 and who the taxpayer can claim as a dependent. That means a child related to the taxpayer who, generally, lived with the taxpayer for at least six months during the year. The child also must be a U.S. citizen or national or a U.S. resident.

How and when will advance payments be sent out?

Under the ARPA, the IRS is required to establish a program to make periodic advance payments which in total equal 50% of IRS’s estimate of the eligible taxpayer’s 2021 CTCs, during the period July 2021 through December 2021. The payments will begin on July 15, 2021. After that, they’ll be made on the 15th of each month unless the 15th falls on a weekend or holiday. Parents will receive the monthly payments through direct deposit, paper check or debit card.

Who will benefit from these payments and do they have to do anything to receive them?

According to the IRS, about 39 million households covering 88% of children in the U.S. “are slated to begin receiving monthly payments without any further action required.” Contact us if you have questions about the child tax credit.

Real Property Tax Valuation Relief

Kathleen Hargrove on April 28, 2021

Governor DeWine signed into law Senate Bill 57 yesterday (4/27) to provide further relief and assistance to Ohio taxpayers who have experienced a decline in the value of their real estate due to the COVID-19 pandemic.

Sponsored by State Sen. Bob D. Hackett (R-10th District) and State Sen. Nickie J. Antonio (R-23rd District), Senate Bill 57 modifies the law regarding property tax exemptions and procedures to authorize COVID-19-related property tax valuation complaints.

The law goes into effect on July 26, 2021. If you are an Ohio real property tax taxpayer who believes the value of your property has depreciated due to the impact of COVID-19 pandemic, you can file a complaint beginning on this effective date. Complaints must be filed on or before August 25, 2021.

It also authorizes an eligible party can file a special “COVID-19” complaint with the specific county Board of Revision requesting that a property’s tax valuation for tax year 2020 be determined as of October 1, 2020, instead of the typically mandated tax lien date of January 1, 2020.

Ohio’s statutory restriction on filing only one complaint in each three-year valuation period can also be waived if an owner chooses to file a tax year 2020 COVID-19 complaint.

If you have any questions on this new law, please contact your Whalen advisor for assistance.

Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes

Kathleen Hargrove on April 22, 2021

In recent months, there have been a number of tax changes that may affect your individual tax bill. Many of these changes were enacted to help mitigate the financial damage caused by COVID-19.

Here are two changes that may result in tax savings for you on your 2020 or 2021 tax returns. The 2020 return is due on May 17, 2021 (because the IRS extended many due dates from the usual April 15 this year). If you can’t file by that date, you can request an extra five months to file your 2020 tax return by October 15, 2021. Your 2021 return will be due in April of 2022.

1.Some unemployment compensation from last year is tax free.

Many people lost their jobs last year due to pandemic shutdowns. Generally, unemployment compensation is included in gross income for federal tax purposes. But thanks to the American Rescue Plan Act (ARPA), enacted on March 11, 2021, up to $10,200 of unemployment compensation can be excluded from federal gross income on 2020 federal returns for taxpayers with an adjusted gross income (AGI) under $150,000. In the case of a joint return, the first $10,200 per spouse isn’t included in gross income. That means if both spouses lost their jobs and collected unemployment last year, they’re eligible for up to a $20,400 exclusion.

However, keep in mind that some states tax unemployment compensation that is exempt from federal income tax under the ARPA.

The IRS has announced that taxpayers who already filed their 2020 individual tax returns without taking advantage of the 2020 unemployment benefit exclusion, don’t need to file an amended return to take advantage of it. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

The IRS will take steps in the spring and summer to make the appropriate change to the returns, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

2.More taxpayers may qualify for a tax credit for buying health insurance.

The premium tax credit (PTC) is a refundable credit that assists individuals and families in paying for health insurance obtained through a Marketplace established under the Affordable Care Act. The ARPA made several significant enhancements to this credit.

For example, under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) weren’t eligible for the PTC. But under the new law, for 2021 and 2022, the premium tax credit is available to taxpayers with household incomes that exceed 400% of the FPL. This change increases the number of people who are eligible for the credit.

Let’s say a 45-year-old unmarried man has income of $58,000 (450% of FPL) in 2021. He wouldn’t have been eligible for the PTC before ARPA was enacted. But under the ARPA, he’s eligible for a premium tax credit of about $1,250.

Other favorable changes were also made to the premium tax credit.

Many more changes

The 2020 unemployment benefit exclusion and the enhanced premium tax credit are just two of the many recent tax changes that may be beneficial to you. Contact us if you have questions about your situation.

Author: Kathleen Hargrove

News & Tech Tips

Advance Child Tax Credit Payments

Meals & Entertainment Deductions

Many parents will receive advance tax credit payments beginning July 15

Real Property Tax Valuation Relief

Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes