Tax filers, rejoice! Many of the American Rescue Plan’s changes to the tax code could spell bigger refunds for more families.
Income tax returns for most Americans are due April 18. Major changes introduced by last year’s stimulus payments and child tax credits mean things look slightly different. Here are a few items to watch out for, plus free resources you can turn to for help.
Mark Your Calendars
- April 15: Deadline for filing your NC taxes. Find out more about how to file for free or pay your state income taxes here.
- April 18: Deadline for filing federal taxes. It changed because April 15 is a holiday, Emancipation Day, in Washington, DC.
- April 18: Deadline to request an extension. An extension gives you more time to complete the return, but the IRS still needs your estimated taxes by that date to avoid interest and late penalties.
- Oct. 17: Deadline to file a completed 2021 tax return, if you got an extension.
The late-filing penalty is 5% of the taxes due for each month your return is late, up to 25% of the balance due.
The late-payment penalty is 0.5% of the taxes due for each month the return is late. Again, penalties can increase to up to 25% of the unpaid tax.
The basic 1040 tax form has several new items, most stemming from the American Rescue Plan Act that went into effect last March.
Changes were made to the child tax credit, child and dependent care credit, earned income tax credit, and more. This time around, many families with young children will get a bigger tax credit, and more families will qualify for the credit, too.
- Child and dependent care credit for the 2021 tax year is refundable for people who live in the United States for more than half of the year. So if your liability is less than your credit, you get the remainder in your refund.
- The maximum child and dependent care credit percentage was increased in 2021, from 35% to 50%. So the highest credit amount available for the 2021 tax year is $4,000 for one child and $8,000 for two or more.
- And every eligible family with an adjustable gross income of $125,000 or less gets credit worth 50% of their qualifying expenses.
Child Tax Credit Payments
Under the American Rescue Plan, eligible families received up to six payments totalling $1,800 for each child five years old or younger and up to $1,500 for each child 6 to 17 years old. The final round of 2021 child tax credit payments went out on December 15, 2021.
But you still have half that money waiting for you, and you’ll get the tax credit of $1500 or $1800 when you file your taxes.
If you were overpaid and your income is above $75,000 for a single person, $112,500 for head of household or $150,000 if married and filing a joint return, that excess money may be taken out of your refund, but some taxpayers qualify for repayment protection. Check here to see if you may be one of them.
Experts recommend, if you owe money, waiting until closer to the deadline to file. It gives a bit more time to save up for the payment and figure out your plan of action, be it getting a loan or credit cards.
The IRS has said their phone volumes are at record levels, so the agency is urging filers to check IRS.gov and establish an online account to help them access information more quickly.
- Individuals can call 800-829-1040 and businesses can call 800-829-4933, Monday through Friday, from 7 a.m. to 7 p.m.
- Interactive Tax Assistant answers common tax questions on credits and deductions.
- The Volunteer Income Tax Assistance program assists people earning less than $54,000 per year or who have disabilities or limited English skills. Tax Counseling for the Elderly focuses on issues affecting people who are 60 or older. Both programs can be accessed here or by calling 800-906-9887.
- The IRS also has free e-filing for people with adjusted gross incomes less than $73,000. You can browse a list of eight providers that have been approved by the IRS here. Some, but not all, also offer free electronic filings for state tax returns.
- The NC Department of Revenue also offers a free e-filing option for many people. Find it here.