Well, 2020 & 2021 have been trying years to say the least with the pandemic, insurrection and a crumbling economy speared by a virus, and political idiots. But there are some opportunities this year because of the virus since the IRS had some new rules implemented at the last minute. Maybe you already filed, but hopefully these tax law changes can help bring additional money to work out better than you expect.
I have a family member that works for that agency that said the IRS will correct some of the problems if you filed already due to these new tax law changes. So this year if you reported unemployment compensation and didn’t file, you can probably exclude up to $10,200 from your income. Now your AGI has to be below $150,000 to qualify. If you didn’t file already, there is a procedure to claim this exclusion correctly and instructions are here. If you filed not claiming this and you qualified sometime starting in May, the IRS should run some sort of systemic adjustment to the affected accounts. That doesn’t mean they will fix it in May, but just start the process to correct them.
Then there is the Affordable Care Act and the fact some people didn’t adjust their incomes with the marketplace so the amount of help they got to pay for insurance, paid directly to the health insurance companies is correct based on their income. Some people ended up owing something if too much “help” in paying for insurance was sent to health insurers on their behalf. But for 2020 that “excess premium tax credit” that is on the Form 8962 is being waived. So if you think you owe money in 2020 because of the ACA you may not!
Then the Earned Income and the Additional Child Tax Credits are two refundable tax credits, which if you have no tax liability after any credits are applied you get what’s left over as a refund. This year you can use the prior years earned income that is if it’s higher than 2020’s earned income. Your software should calculate this for you and if you were writing it by hand you put PYEI on the dotted line next to each credit. It’s sort of similar to unemployment exclusion where you put UCE on the dotted line on schedule 1 for unemployment.
But my insider with the IRS noticed something. Maybe it was just some early returns and the software was updated. But some accounts showed nothing on the dotted line next to those two tax credits. But he noticed the earned income was the prior year. The trouble was that the refund was adjusted downward when the computers at IRS used the current year earned income since no PYEI was on the form. But when it’s a math error, the IRS rep over the phone can fix a lot of these types of problems relatively easily. In this case, he could see what was done and intended by the taxpayer and help input the adjustment to make another refund based on that fix. So if your refund is less than you expected, call the IRS and ask them because these new tax law changes were put into effect to help you!