The IRS has created the ability for taxpayers to create an online account to securely access information, view notices, make payments and more. Read about the online benefits and create an account at IRS.gov/account.

The American Rescue Plan includes a significant overhaul of the child tax credit, but only for the 2021 tax year. The IRS and Treasury created a website for taxpayers to opt out of receiving advance payments, or to provide information on status changes that would impact the amount of the credit at https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

IR-2021-130: IRS announces two new online tools to help families manage Child Tax Credit payments (govdelivery.com)

Our VNFA Tax Department sent out personalized recommendations to clients who may be affected last week. Please look for an e-mail from tax@valleynationalgroup.com, or reach out to us with any questions.

The Pennsylvania CPA Journal recently published an article by our own Laurie Siebert discussing modern planning strategies in our ever-changing world. You can read it here: PICPA Summer 2021 (mydigitalpublication.com)

We are hiring! Our team is seeking to fill client service positions with professional, experienced individuals. Do you know someone who would make a great addition to our Bethlehem office? VNFA – JOIN OUR TEAM

If you owe Federal taxes, you can pay them online! EFTPS^® is a free system offered by the U.S. Department of Treasury to pay your federal taxes. However, new enrollments for the system can take up to five days to process. With the payment deadline of May 17 less than a week away, enrollment is encouraged ASAP. Visit IRS.gov for more information.

Tax Q&A RE: Filing for Extension
When do I need to get my information to (VNFA) to file in time for the new May 17 deadline?
April 15 is our estimate based on current turnaround times. For return information received after that date, our team will be assessing the best course of action, including the option of filing for an extension to file by October 15.

How do you determine when filing an extension is appropriate?
There are several reasons and benefits to filing for an extension. Most often the recommendation comes due to late arrival of information. Sometimes that is because they are not available or there are corrections – Schedule K-1s and Form 1099s are frequent culprits. Tax filing season is a finite amount of time and tax preparers get busy. So, taxpayers who are out of town for a period during tax season or clients who simply got their information together too close to that deadline can often take advantage of an extension to relieve the stress that often accompanies trying to pull everything together by tax time. Finally, and especially notable this year, an extension will allow you to take advantage of retroactive changes to the tax law that might be made after the filing deadline, without the added time and expense of filing an amendment.

Does an extension mean there is something wrong with my return or flag me for auditing?
No and no. Filing an extension is very simply allowing more time to complete an accurate return. In fact, sometimes, filing an extension can help avoid penalties or errors because of the extra time to evaluate everything. As for the myth that extensions somehow flag taxpayers as an audit risk, some tax professionals theorize that filing an extension will decrease your odds of being audited, since IRS auditors must meet quotas and try to do so early in the year. While the IRS does not disclose its process for selecting returns for audit, the earlier a return is filed, the longer it is in the system and thus subject to a review.

READ MORE from our Tax Q&A at valleynationalgroup.com/tax

The IRS and the Treasury Department have extended the federal income tax filing due date for individuals for the 2020 tax year from April 15, 2021, to May 17, 2021. Many states, including Pennsylvania, are following suit, and extending their filing deadlines to match (and in some cases extended beyond May – be sure to check with the state tax agencies where you are required to file).

The change is in response to an initial delay in the tax filing season coupled with the recent tax law changes presented by the American Rescue Plan Act. The later deadline allows individuals and tax preparers more time to accurately gather, prepare and review your tax return to determine the best possible outcome.

This relief applies to individual taxpayers, including those who pay self-employment tax.

• You do not have to take any action to qualify for this postponement.
• This relief does not apply to estimated tax payments that are due on April 15, 2021.
• The decision does not automatically change deadlines for state tax payments or payments of any other type of federal tax.

Recent changes, including those impacting unemployment and stimulus payments require software updates that present further possible delays in the preparation process. Additionally, those who qualify for additional tax benefits may still receive recommendation for an additional filing extension to October 15, 2021.

If your tax returns are prepared by our VNFA Tax Department, we ask for your patience as we manage these updates and give careful attention to each of the returns moving through our offices. Email tax@valleynationalgroup.com with any immediate questions. Otherwise, you will hear from us when we have additional updates on your return(s).

American Rescue Plan Act of 2021
The stimulus signed into law last week includes many items that could impact people’s tax planning for 2021, but let’s focus on two of the key topics that have an impact on the 2020 tax return.

Unemployment:

• Extends the $300 unemployment weekly supplemental benefit through Sept. 6, 2021
• Makes the first $10,200 of unemployment benefits tax-free for people with incomes of less than $150,000 for 2020 only. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200.
  • The exclusion should be reported separately from your unemployment compensation – the IRS has updated instructions and the Unemployment Compensation Exclusion Worksheet
  • The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time
  • For those who haven’t filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return.

Stimulus Payments:

• Payments are based on 2019, or 2020 tax returns if they have already been filed.
• Individuals earning up to $75,000 in adjusted gross income (AGI) will get direct payments of $1,400
• Partial payments are available only to individuals making up to $80,000 AGI and couples earning $160,000 AGI
• Married couples earning up to $150,000 in adjusted gross income will get $2,800
• Eligible recipients also will receive $1,400 for each of their dependents
  • Taxpayers who have an increase in adjusted gross income in 2020 as compared to 2019 may want to hold off filing 2020 returns until the filing deadline. This will maximize the amount of stimulus payments received because their stimulus payment will not be potentially reduced by the higher 2020 adjusted gross income.

You can pay your Federal tax due directly on the IRS website.
–> Go to IRS.gov and click on “Make a Payment”

You can pay withdrawing the amount directly from your bank account or pay using a debit or credit card.  (Please note processing fees will apply for debit/credit card payments).

In addition to your bank account information and payment amount, the IRS will need your Social Security Number, Date of Birth and you will need to confirm your address as reported on a previously filed tax return.

The IRS has a video Easy Ways to Pay My IRS Taxes – YouTube

News for Educators & Student Loan Borrowers

The IRS announced that eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. READ MORE

The Department of Education announced that President Biden extended the student loan payment pause and interest waiver “at least” through September 30, 2021. READ MORE