The Internal Revenue Service wants to see a 2021 income tax return from all Americans—including those who haven’t filed in years. The reason is recent legislation—including the American Rescue Plan and other new laws—has put some significant tax benefits in play for those who qualify.
Taxpayers and families can get these expanded tax benefits even if they have little or no income from a job, business or some other source. Claiming the benefits could mean tax refunds for many who file.
Expanded tax credits are available
Most of the expanded tax credits and other benefits are outlined in Fact Sheet 2022-10, which is now available on the IRS website, IRS.gov. But Americans can only reap the rewards if they file a return. The benefits include:
- An expanded Child Tax Credit: Families can claim this credit, even if they received monthly advance payments during the last half of 2021.
- An increased Child and Dependent Care Credit: Families who pay for daycare so they can work or look for work can get a tax credit worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons.
- A more generous Earned Income Tax Credit: The American Rescue Plan boosted the EITC for childless workers. There are also changes that can help low- and moderate-income families with children.
- The Recovery Rebate Credit: Those who missed out on last year's third-round of Economic Impact Payments (EIP3), also known as stimulus payments, may be eligible to claim the RRC. This credit can also help eligible people whose EIP3 was less than the full amount, including those who welcomed a child in 2021.
- A deduction for gifts to charity: The majority of taxpayers who take the standard deduction can deduct eligible cash contributions they made during 2021. Married couples filing jointly can deduct up to $600 in cash donations and individual taxpayers can deduct up to $300 in donations. In addition, itemizers who make large cash donations often qualify to deduct the full amount in 2021.
The IRS wants taxpayers to know that some refunds will be delayed by law. The IRS is prohibited from issuing refunds for the EITC before mid-February, a deadline shift shared by the Additional Child Tax Credit (ACTC).
This year, the ACTC is most often claimed by taxpayers who live overseas and did not have a main home in the U.S. for more than half of the tax year.
The mid-February restriction doesn’t normally apply to the Refundable Child Tax Credit (RCTC), claimed by taxpayers who had a main home in the U.S.—unless they claim the EITC as well.
Taxpayers need to gather all their documents before filing
Taxpayers should have all their year-end tax documents at hand before they file a 2021 return. Besides the obvious W-2s and 1099s, two statements from the IRS—Letter 6419 and Letter 6475—also need to be handy.
Letter 6419 shows the taxpayer’s total advance payments of the Child Tax Credit; Letter 6475 outlines the taxpayer’s total EIP3 payments. This information can also be determined from the taxpayer’s IRS Online Account.
Married couples who received joint payments must each sign into their individual accounts separately to get their respective amounts.
And finally, don’t forget this year’s filing and paying deadline is April 18. For those taxpayers living in Massachusetts and Maine, that deadline is April 19. Taxpayers who live and work outside the U.S. have a June 15 deadline; and if filers ask for an extension of time, they’ll have until October 17 to file.
Remember, however, that payment is not covered by an extension, so any tax due will have to be paid by the regular April 18 deadline.