Staying up-to-date with shifting tax laws in 2021 is not a task for the faint of heart. Just when we thought we had rounded the corner on COVID-19, a second surge began, leaving many Americans on shaky financial grounds.
Having predicted a potential COVID-19 resurgence, the IRS preemptively extended several pandemic provisions introduced in 2020 while allowing others to expire. Although amending these laws has ultimately benefited the taxpayer, doing so has also created a great deal of confusion.
Not to mention, our legislative machine has continued to grind on in the meantime, transforming promising tax bills into enforceable laws. If you’ve been simultaneously tracking these numerous extensions, expanding provisions, and expirations, it can feel like staring down into the eye of a churning storm.
But, it doesn’t have to feel that way. Before we explain why hiring a CPA is crucial to your 2021 refund success, let’s examine a case in point: The CARES Act.
A Case In Point—The 2020 CARES Act
The Cares Act introduced several lifetime firsts for many millennials, including its most popular provision: stimulus checks.
But, income-based assistance aside, the CARES Act also provided essential unemployment coverage to individuals hit hardest by the pandemic. This timely assistance arrived in the form of generous weekly payments and a host of supporting programs, including:
- Pandemic Unemployment Assistance (PUA): Extended unemployment benefits to non-traditional employees, including self-employed workers and members of the gig economy workforce
- Pandemic Emergency Unemployment Compensation (PEUC): Mandated a 13-week extension of unemployment benefits dispensed by state governments from 26 to 39 weeks
- Paycheck Protection Program: Extended forgivable loans to qualifying small businesses who required financial assistance to pay their employees
- Placed a temporary halt on student loan payments and evictions and prevented utility shutoff
Since then, all of these stopgap measures have expired. (However, New Jersey residents with low to middle income won’t face the threat of eviction until 2022, thanks to expanded provisions enacted into local laws by the state legislature.)
Yet, not all provisions enacted by the CARES Act have fallen by the wayside. For example, although student loan payments have resumed, loan holders need not pay taxes on contributions made by their employer until 2022. Likewise, the federal government will continue to fund subsidies to businesses that extend financial assistance to workers leveraging the Family and Medical Leave Act—until 2025.
With select provisions expiring and others receiving extensions well into 2025, keeping up with the tax code has never been more challenging. Consider the following changes that are also in the works for 2021.
The ABCs of the Consolidated Appropriations Act
With a sophisticated name like that, you can bet that tax filing complications are sure to follow.
The Consolidated Appropriations Act of 2021 layers in additional support for individuals, families, and businesses facing financial hardship due to the pandemic. However, perhaps inevitably, the law also infuses an added layer of complexity when filing your 2021 taxes.
The 2021 Child Tax Credit
For 2021 only, the IRS has upped the Child Tax Credit by $1,600 for children under age six and $1,000 for children between ages 6 and 17.
As in previous years, your income determines your eligibility—although eligibility requirements are currently rather generous. So, for example, a single parent can earn an annual salary of $240,000 and still expect to receive partial credit, even if a minuscule one.
Compared to 2020, this amounts to a HUGE difference. In 2020, families received a $2,000 tax credit for all dependents under the age of 17. And, for families with children under age 6, it made absolutely no difference in your refund amount.
This year that amount expands to $3,600 for families with kindergarten-aged children (or younger) and $3,000 for all other minors.
Moreover, those tax refunds are arriving in an unprecedented manner: as advance payments. But, unfortunately, receiving these payments now doesn’t mean earning a larger (or even comparable) refund later. If anything, these advance payments mean you can expect to witness a smaller refund than ever before hitting your bank account in 2022—unless, that is, you hire a CPA to help you crunch the numbers. While a CPA can’t help you pull a fast one over the IRS, they can help you identify missed opportunities for savings that have accrued in unseen losses over the years. By tweaking your finances across the board, you can save thousands of dollars on your tax returns—every single year.
The Fine Print Cont.
It’s not all bad news! Although the Child Tax Credit doesn’t amount to more now, more later, other provisions within the Consolidated Appropriations Act can mean considerable savings come tax filing time—if you know how to leverage them. Here are a few items to keep on your radar:
- Did your 2021 income include a paycheck made possible by the Paycheck Protection Program? If it did, I have great news for you, my friend: Because the IRS considers that amount “forgivable,” it doesn’t count toward your annual income. This stipulation can be a make-or-break moment when it comes to determining your 2021 income bracket. (Because these brackets have been adjusted for inflation—and, not in your favor—every little bit of savings counts.)
- Did your 2021 contributions to charity include cash donations? Then, you can deduct up to $300 in annual income per filer. Although this may seem like a paltry amount of savings, seizing every opportunity to itemize adds up.
- Sometimes, surprises are bad—especially when it comes to medical expenses. Although this provision may not affect your taxes, it could significantly impact your financial well-being. The “No Surprises Act” within the more extensive Consolidated Appropriations law safeguards consumers from balance billing for life-saving services, such as life flight. (Balance billing refers to charging the consumer for the portion of a medical bill that insurance doesn’t cover. It’s often the difference between in-network charges, which absorb these costs, and out-of-network fees. This law doesn’t prohibit balance billing outright, but it does forbid it on certain emergency services.)
Boost Your 2021 Refund Success by Hiring a CPA
By now, the bottom line here is pretty apparent. To supercharge your 2021 tax refund, you need to consult a master of unraveling all the fine print. You need someone who can streamline complex data into digestible chunks that you can leverage now to build your tax savings later.
When it comes to launching a bullet-proof plan for securing your financial future, CPAs outshine the competition.
And, here’s why:
As we’ve seen, tax laws are exceedingly complex. To make matters worse, they’re constantly changing as new bills filter through Congress, and portions of old laws expire. So unless you devote a considerable chunk of your spare time to following tax news, it’s easy for tax-saving opportunities to slip through the cracks. However, with a CPA in your corner, you can rest assured that every tax return you file reflects your best options to save.
Although it may be tempting to adopt a “do-it-yourself” attitude to tax preparation, taking the standard deduction is often not your best friend. (Nor are automated tax programs that boast a cheap fix to processing your tax returns.) Unless your tax situation is incredibly straightforward—and life is often anything but—you’re going to need a customized solution that fits your unique situation.
Enter your CPA.
A CPA knows how to craft a financial plan that sets you up for a lifetime of meaningful successes that match your savings goals. Whether for you this means boosting tax savings to support a thriving business, mapping out a robust source of retirement savings, or maximizing your tax credits and deductions, 2021 refund success has never been more within your grasp.
Steven Lissner & Co. Know Money Matters
Steven Lissner & Company deliver on their tax savings promise. With over 30 years of accounting expertise, Steven Lissner has empowered thousands of clients to surpass their financial goals.
Our essential services include:
- Tax planning: For individuals, couples, and businesses interested in compounding your tax savings across the decades, tax planning enables filers to achieve their wildest expectations for long-term savings.
- Tax preparation: This service reassures fliers that their tax returns have been filed accurately with regard to the latest tax laws and newest opportunities for annual tax savings.
- Audit protection: For tax filers facing the threat of an IRS audit, we provide a personalized plan to help each client regain “good” standing.
- Small business accounting: As a small business owner, you’ll find that opportunities to save on your taxes abound—if you know how to access them properly. We’ll help you create a resilient blueprint for financial success, including customized accounting, bookkeeping, and tax planning solutions.
Refining your life goals is difficult. But, filing your taxes doesn’t have to be.
Just as tax laws shift from year to filing year, so too do your life goals. So when plans change, enlist the guidance of a financial expert who specializes in “the pivot.” You deserve accounting solutions that inspire confidence, reflect competence, and breathe flexibility into your financial goals. So contact our accounting experts today at Steven Lissner & Co and secure your most significant refund to date!