Tax Justice Warriors

The American Rescue Plan was signed into law by President Joe Biden on March 11, 2021. It contains several provisions. Part of the law focuses on tax provisions as well.

In this episode, there is a rundown of top ten items affecting individual tax filers.

1) The third round of stimulus payments (economic impact payments)

2) Earned income tax credit expansion

3) The premium tax credit expansion and partial waiver of repayments

4) Unemployment recipients automatically eligible for the premium tax credit

5) Child tax credit expansion

6) Child and dependent care credit expanded

7) Employer provided dependent care assistance

8) Non-taxable unemployment compensation of $10,200

9) Limits on business losses

10) Potential student loan forgiveness non-taxable

Tune in to learn more!

The tax season keeps changing. The IRS announced that the tax filing deadline for federal individual income tax returns are due on May 17. That does not affect corporate taxes or quarterly estimated tax payments. Will it affect your state tax filing – check with your state’s tax agency.

How will the changes affect tax filing? I talk through some effects that might occur for tax preparers and the IRS. However it goes for you, I hope your tax season is wonderful.

The American Rescue Plan has now been signed into law. It includes an expansion of the child tax credit for 2021.  That plan expands the age for qualifying children to include 17-year-olds.  It increases the credit to $3,000 per child for many families (with $3,600 being the amount for children under age 6).   The $2,500 earnings floor is removed and the credit will be fully refundable.  Finally, half of the credit will be paid in advance by the IRS making monthly payments to families from July to December 2021.

In this episode, I touch on the child tax credit expansion and discuss the IRS role in distributing those payments of the credit in 2021.  The child tax credit and the earned income credit are times that the IRS is in the role of benefits distributor.  That is a change for the IRS from compliance enforcement.  I look at the dichotomy as the IRS faces their pivot from one role to another.  What will their approach be for the future?

Note:  As of the recording, the American Rescue Plan had not passed into law yet.

This episode provides a roundup of recent tax events and other issues. To begin with, the American Bar Association Midyear Tax Meeting was virtual. I provide highlights regarding the Individual & Family Taxation Committee’s focus on the Tax Gap and the Diversity Committee’s focus on inequality in race and taxes. With the IRS, their new electronic system to upload power of attorney forms seems to be working faster than faxing (2 weeks processing time vs. 2 months). On a personal note, I provide updates regarding teaching this semester, a Tax Court case trial this month and writing for Procedurally Taxing.

This is a short episode to provide some highlights on the 2020 tax return that not everyone may be aware of. While I covered some of these items in past episodes, I thought the highlights would be worth mentioning again.

Basically:

• the recovery rebate credit is one way taxpayers may get their economic impact (stimulus) payments through filing a tax return, but they may not get as much as they expect

• the earned income credit has a lookback to compare 2020 income and 2019 income to take the most advantageous for the credit

• there is legislation pending that may increase the child tax credit next tax season

• a reminder that unemployment income is taxable income

Tune it to learn more details!

This episode details the return of the U.S. Tax Court for hearings in Kansas City, Missouri, and Wichita, Kansas in February 2021.  Tune in to hear about remote proceedings, feedback on the Tax Court upgrade to the DAWSON system, and remote calendar calls.

The child tax credit is again in the news because of potential increases by Congress. On this episode, I look at the history and the requirements.

I also look at how the credit is both nonrefundable and refundable. That means that the nonrefundable portion takes care of the tax liability before the refundable portion is available. The refundable portion is called the additional child tax credit. Currently, the additional child tax credit is calculated as 15% of the taxpayer’s AGI in excess of $2,500, with the refund value capped at $1,400.

From current news on the proposed child tax credit changes:

The Democrats’ new proposal would increase the credit amount by $1,000 ($1,600 for those with children under 6) and allow taxpayers to receive the full amount as a refund. Additionally, the plan would make the credit payable in monthly installments of $250 and $300, respectively, rather than just once a year. The payments would start to phase out for individuals earning more than $75,000 a year or $150,000 for those married filing jointly.

If passed, the Treasury Department could issue advance payments of up to half the 2021 child tax credit starting in July based on families’ 2019 or 2020 tax return information. If there is any overpayment of the credit, individuals making less than $40,000 ($60,000 for couples filing jointly) will not need to repay the amount, nor will it be garnished from wages.

This episode focuses on the current state of affairs in working with IRS Collections and Enforcement. The issues with the IRS customer service are making it difficult to represent clients. As I focused on last episode, there are delays in CAF Unit processing of Form 2848 power of attorney forms. There are still long delays with speaking with someone over the phone at the IRS to resolve issues. Additionally, the Taxpayer Advocate Service has high workloads that make it difficult to find assistance there.

The IRS does not seem to have received the memo with regard to those issues because clients are still receiving notices from the IRS about balances due with threats of levies or liens. Unfortunately, practitioners and taxpayers have trouble communicating with the IRS about those notices.

To be positive, the IRS reports they are back to normal processing time for receiving mail. There are no communication problems with IRS Counsel and Tax Court so several of my cases came to resolution. The IRS is also taking good steps with their new IRS University and new Chief Taxpayer Experience Officer Ken Corbin toward improving customer service.

Referenced it today’s episode:

https://taxrepllc.com/tax-rep-network-podcast-episode-91-irs-enforcement-in-2021-a-conversation-with-darren-guillot/

https://www.irs.gov/newsroom/irs-creates-new-chief-taxpayer-experience-officer-position-ken-corbin-to-lead-new-focus-to-improve-service-to-taxpayers

While I identified on a previous episode changes that the IRS is making for submissions of power of attorney forms, that still does not change how the IRS processes those forms. There were delays last year for processing of Form 2848 and other forms within the IRS. I talk in this episode about delays at the CAF (Central Authorization File) Unit. This is an issue because the IRS moves forward with collecting through liens or levies yet the representative is unable to communicate with the IRS on a client’s behalf. That cuts down on getting transcripts to learn about the status of the case and beginning any negotiations to fix the situation and help out all parties involved.