By Jonathan E. Becker
TAX RETURN DUE DATE AND EXTENSIONS
KNOW YOUR DEADLINE: While Tax Day generally falls on April 15th, this year (unless you live in Maine or Massachusetts) your federal income tax returns are due on Monday, April 18th. If you live in Maine or Massachusetts, your due date is Tuesday, April 19th, because of the Patriot Day holiday in those states.
FILE AN EXTENSION: If you cannot reasonably file on time, or are considering filing late because you don’t have the money to pay your taxes, be sure to file a timely extension (form 4868), which can let you. . .
PAY SMALLER PENALTIES: Filing an extension will let you avoid failure-to-file penalties, which are significant and accrue quickly (5% of the amount of the amount owed, per month, to a maximum of 25%), provided you actually file by the extension date. Although failure to pay penalties may still apply, these are comparatively small and accrue slowly (0.5% of the amount owed but not paid, per month, to a maximum of 25%). Interest will apply in both cases, but is at a fairly low rate (currently 3% per annum, adjusted quarterly).
PAY WHAT YOU CAN: Finally, if you can pay part of what you owe with your extension, you will get credit for that amount as of the date of the payment, and penalties and interest would be calculated using only the unpaid amount.
CHILD TAX CREDIT
REPORT YOUR ADVANCE CHILD TAX CREDIT PAYMENTS: If you have children, you may have received a small check (or a direct deposit to your bank account) from the US Treasury each month from July 2021 through December 2021. These were advance refunds of one half of your estimated Child Tax Credit for 2021. You will need the total of these payments to report on your 2021 1040, because they reduce the remaining Child Tax Credit that you can claim on your tax return.
STIMULUS PAYMENTS
CHECK THAT YOU RECEIVED ALL OF YOUR STIMULUS PAYMENTS: If you earned under $75,000 as a single filer, $112,500 as a head-of-household filer, or $150,000 as a married filing jointly filer, you should have received a stimulus check in 2021 ($1,400 per filer, and additional amounts for dependent children); be sure to have the amount of stimulus you received available because your 1040 will ask you about it, and any amount that you received that was less than what you were entitled to is a refundable credit.
BUT DON’T REPORT IT AS INCOME: Stimulus payments are not reportable as income and, if you received too much, you don’t have to pay back the difference, so be sure to complete the Recovery Rebate Credit Worksheet to see if you are entitled to some additional stimulus credit.
UNEMPLOYMENT BENEFITS
BE MINDFUL OF SPECIAL PROVISIONS: If you received unemployment in 2020, a special provision exempted the first $10,200 in benefits from federal income tax. This is not the case in 2021 – if you received unemployment compensation in 2021, the full amount is subject to tax.
CHARITABLE DEDUCTION FOR NON-ITEMIZERS
In 2020, even if you did not itemize deductions – that is, you took the standard deduction – you could still deduct up to $300 in charitable contributions made in case, by check or credit card. This is again the case in 2021, but the maximum deduction has been doubled for married filing jointly filers to $600 (reportable on line 12b of form 1040). Note that while donations to political campaigns or “go fund me” campaigns are usually not tax deductible, many (if not most) social justice, religious, disaster relief, and similar contributions are deductible. If you aren’t sure, ask your tax professional.