Tax Update

 1. Married Filing Jointly

• $0 to $19,900 = 10%

• $19,900 to $81,050 = 12%

• $81,050 to $172,750 = 22%

• $172,750 to $329,850 = 24%

• $329,850 to $418,850 = 32%

• $418,850 to $628,300 = 35%

• $628,300 and over = 37%

The AMT exemption amount for TY 2021 is $73,600 ($114,600 married/joint). The income level at which the AMT exemption begins to phase out between $1,047,200 and $1,505,600 if married filing jointly.

  2. There is no Personal and dependent exemption on Federal Tax Return.

  3. Standard deduction for joint filers has been raised to $25,100, single filers $12,550 for year 2021.

  4. Child Tax Credit: For Tax Year 2021, Child Tax Credit is increased from $2000 per qualifying child to $3,000 per child ($3,600 for ages 5 and under). The age limit for qualifying children also rose to 17 (from 16). 

The credit is reduced to $2,000 per child if your modified adjusted gross income (MAGI) exceeds a certain limit. The limit for 2021 is: 

• $150,000 for married couples filing jointly

• $112,500 for heads of household

• $75,000 for single filers

IRS has made monthly advance child tax payments for last six months based on previous year’s tax return. IRS has notified to each filer to confirm exact payment received at the beginning of 2022. This amount will be adjusted against child tax credit on 2021 Tax Return.

Eligible families who did not receive any advance Child Tax Credit payments can claim the full amount of the Child Tax Credit on their 2021 federal tax return, if eligible. 

5. Child and Dependent care credit:

• Maximum credit is increased to $4000 per child for day care expenses up to $8000 for the year 2021.

6. Economic Impact Payment:

Third economic impact payment of $1400 for each eligible individual for married filers with gross income less than $150,000. If you are eligible for the benefit but did not receive the full amount, please forward letter 6475 received from IRS for the amount paid. We will calculate allowable recovery rebate credit on your 2021 Tax Return.

7. There is no moving expenses deduction on the Tax Return unless you are a member of the Armed Forces on active duty and, due to a military order, you move because of a permanent change of station.

 8. Repeal of deduction for alimony payments. Alimony is no longer deductible by the payor spouse nor included in the recipient spouse’s gross income for any divorce or written separation agreement executed after December 31, 2018.

 9. Medical Expenses deduction. Medical expenses above 7.5% of AGI are deductible under Itemized deductions. 

 10. Deduction for State and Local income taxes and property taxes is limited to $10,000 under Itemized deduction on Federal Tax Return.

 11. Mortgage Interest Deduction of mortgage interest is limited to $750,000 of mortgage on Principal residence purchased after December 15, 2017.

 12. Miscellaneous Itemized deductions subject to 2% floor are repealed under TCJA on Federal Tax Return. This includes Tax Preparation Fees, Unreimbursed employee business expenses, home office for employees, Investment advisor fees.

13. Nonitemizers may claim a $300 deduction of cash contributions made to qualified organizations (excluding private foundations or donor advised funds) for 2021. Joint filers can claim up to $600 on their 2021 Tax Return.

 14. Maximum 20% deduction on Qualified Business Income from Pass through Entities. There are complex rules for eligibility of such deduction.

These are Federal Tax updates. States may not conform to these changes. This has made tax filing more complex !!!!

If your ITIN wasn’t included on a U.S. federal tax return at least once for tax years 2018, 2019, and 2020, your ITIN will expire on December 31, 2021. ITINs with middle digits (the fourth and fifth positions) “70,” “71,” “72,” “73,” “74,” “75,” “76,” “77,” “78,” “79,” “80,” “81,” “82,” “83,” “84,” “85,” “86,” “87,” or “88” have expired. In addition, ITINs with middle digits “90,” “91,” “92,” “94,” “95,” “96,” “97,” “98,” or “99,” IF assigned before 2013, have expired. 

IRS communicates to taxpayers with these expiring ITINs. All expired ITINs must be renewed before being used on a U.S. tax return.

Foreign Income to be reported on US Tax Return

US Citizens, Resident Aliens and those who have substantial presence in US for any given year, need to report their worldwide income on US Tax Return.

Taxpayers with an interest in, or signature or other authority over, foreign financial account/s whose aggregate value exceeded $10,000 at any time during the year generally must file FINCEN-114 with US Treasury. This return must be filed before 15th April. There is a provision of automatic extension for another six months for filing.

For more information, please visit, http://bsaefiling.fincen.treas.gov/docs/FBAR_EFILING_FAQ.pdf

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. There are serious penalties for not reporting these financial assets (as described below). This FATCA requirement is in addition to the long-standing requirement to report foreign financial accounts on FinCEN Form 114. For Taxpayers living in US and filing married filing Joint income tax return, they need to report on Form 8938; if the total value of specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

We recommend setting up your own IRS online account. You can view your account status, make payments of estimated tax/tax due, view past payments, IRS transcripts, letters and notices issued by IRS. 

Starting 2021, all taxpayers can register for an Identity Protection PIN, which is a six digit number assigned by IRS every year to each filer which shall be used on your Tax Return. This will prevent filing of fraudulent returns using your Social Security Number. This is a voluntary program. Earlier this program was available only to identity theft victims. You can register for an IP PIN at https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin. Once enrolled, any Income tax returns filed either by paper or electronically will be rejected by the IRS unless correct six-digit pin is reported on your income tax return.