Tim’s Tax News on the Tenth – June 2021

The IRS recently announced that the first monthly payment of the expanded and newly advanceable Child Tax Credit (“CTC”) from the American Rescue Plan Act will be made on July 15, 2021. Approximately 39 million households—covering about 88% of children in the United States—are slated to begin receiving monthly payments without any further action required.

The American Rescue Plan Act increased the maximum Child Tax Credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children between ages 6 and 17. The IRS announced the increased CTC payments will be made on the 15th of each month unless the 15th falls on a weekend or holiday. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above. 

Separate from the Child Tax Credit, under the American Rescue Plan Act, the Internal Revenue Service will be sending more than 2.8 million refunds this week to taxpayers who paid taxes on unemployment compensation that new legislation now excludes as income.

IRS efforts to correct unemployment compensation overpayments will help most affected taxpayers avoid filing an amended tax return. So far, the IRS has identified 13 million taxpayers that may be eligible for the adjustment. Some will receive refunds, which will be issued periodically, and some will have the overpayment applied to taxes due or other debts. This adjustment is due to the American Rescue Plan Act which excluded up to $10,200 in unemployment compensation per taxpayer paid in 2020. The $10,200 is the maximum amount of income that can be excluded when calculating taxable income; it is not the amount of any refund.

Taxpayers will receive letters from the IRS, generally within 30 days of the adjustment, informing them of what kind of adjustment was made (such as refund, payment of IRS debt payment, or payment offset for other authorized debts) and the amount of the adjustment. This retroactive adjustment/exclusion of income can impact the Earned Income Tax Credit, Premium Tax Credit, and Recovery Rebate Credit.

If you would like more details, please do not hesitate to call our office. Our office has been successful in helping taxpayers with IRS and IDOR collection problems for over 29 years. If you have a tax or debt problem, please contact me at 847-705-9698 or thughes@lavellelaw.com and find out how we can help you.

Are you receiving the Lavelle Law eNewsletter? Sign up today and receive valuable updates and perspectives on a wide range of legal issues: http://goo.gl/pjeJkm

Lavelle Law, Ltd. is registered with the Illinois Department of Financial and Professional Regulation as an approved continuing education provider for CPE for CPAs and Enrolled Agents. If your organization is seeking CPE courses in the area of Business Law, Innocent Spouse Relief, IRS Collections, Tax Scams (including ID Theft), or other areas in tax law that can be taught at your office, please contact me at thughes@lavellelaw.com