First of all- the IRS has just announced that the deadline for filing personal taxes has been extended to 17 May 2021.  They are having a hard time processing all the stimulus checks- plus the remnants of 2019 tax forms that were mailed in during the coronavirus shutdown.   Use the time wisely- file properly, accurately, and garner all the benefits you deserve!

And,now, back to my regularly scheduled blog.

So what was in this great package passed as a budget reconciliation measure?

Let’s start with what individual benefits now obtain.

Cash payments

First there is an economic impact payment (EIP).  Call it a stimulus, call it an economy evener- whatever you call it, if you earned less than $80,000 adjusted gross, you are getting some federal payment.

Every individual tax payer will receive $ 1400 ($2800 for joint payers), with an additional $1400 for each dependent child or adult listed as a dependent on the tax form.  If the 2020 tax form is already filed, that will be the basis for the payments- otherwise, the IRS will base the payments on the 2019 taxes filed.  Sometime before 1 September 2021- or when the 2020 taxes are filed, the IRS will reconcile the EIP to reflect the dependents and married status.

Note carefully, this is a tighter payment process than we’ve employed in the past.  Singles making less than $75K taxable income get the whole shebang- but by the time the adjusted gross has attained $ 80K, the payment has fully disappeared.  Marrieds have a $ 150K threshold, with the payments fully erased at adjusted gross incomes of $ 160K.  Head of Households have their funds zeroed out at $ 120K, but the taper begins at $ 112,500.

Note:  There is no quid-pro-quo to collect past tax debts owed the IRS.  The stimulus will not be hindered by tax debts.

Unemployment

For starters, unemployment compensation will NOT be taxed if less than $ 10,200 were received by the household, unless one’s adjusted gross income exceeds $ 150K.  Please note that the tax forms may not reflect this fact yet, so you may want to wait to file your taxes so as to not have to pay income taxes on the unemployment you received.

Moreover, the US government will be supplementing unemployment benefits to the tune of $ 300 a week through Labor Day (6 September 2021).

Child Tax Credit- 2021 Tax Year

A whole new process for child tax credits (CTC) now obtains.  If a child is 5 or under, then the CTC will be funded at $ 3600 per annum.  From age 6 through 17, the CTC is decreased to $ 3000 per annum.  The child must reside with parents IN THE USA for at least six months a year and it is a fully refundable tax credit (no earned income requirement).

However, the credit is phased out as household income increases.  Singles earning $ 75K or more, HOH (head of households) at $ 112,500, and marrieds at $ 150K begin to see the funding decrease to $ 2000 per child.  Singles earning $ 200K and marrieds earning $ 400K get no child credits.

Earned Income Credit (EIC)

The new rules let those age 19 or higher (instead of 25) receive an earned income credit.  There no longer is a maximum age of 65, either, that precludes obtaining an EIC.    (24 is the age for students, and the age of 18 for foster/homeless kids does obtain.)

The maximum income at which EIC is now computed is $ 9820 (from $7100), at the rate of 15.3% (up from 7.65%), which means the credit- for those without children- is $1502.  2019 income can be substituted for 2021 income for the purpose of EIC computations.

Student Loan Forgiveness

Student loans forgiven after 31 December 2020 and before 1 January 2026 will not be subject to taxation.

All in all a pretty good deal for US taxpayers at the lower and middle class levels.