Individual Tax Returns: 2021 Year In Review
January 20, 2022 Author: Matt Caras, CPA Compass Pointe CPAs
2021 is over which means the next tax season is upon us. Unfortunately, as of the writing of this blog, COVID-19 is still having a material impact on our society. The past couple of years seems to have blended together, making it difficult to think back and remember to which tax year certain transactions and changes may relate.
Here is a quick summary of a few 2021 tax items that will need to be thought of during your 2021 tax return preparation:
Economic Impact Payment #3 (Stimulus Check)
The third round of stimulus payments was sent in early 2021. Similar to the first two checks, the payment amount was based on the latest processed tax return from either 2020 or 2019. The maximum amount was $1,400 per person. Those who received a stimulus payment in 2021 should be receiving Letter 6475 from the IRS. Your tax professional will need this letter.
If you were eligible for the 3rd stimulus payment and did not receive that payment, you can claim that credit when you file your 2021 tax return.
Advance Child Tax Credit Payments
Beginning July 15, 2021, advance child tax credit payments were sent to eligible taxpayers. See our blog which goes into greater detail about these payments. The IRS will be sending out Letter 6419 detailing these payments to those who received them. Your tax professional will need these letters.
If you were eligible for the advance child tax credit payments and did not receive them or did not receive the full amount of the payment, you can claim the remaining credit when you file your 2021 tax return.
If you received too much in payments, the excess may need to be paid back to the IRS through the filing of your 2021 tax return.
See the IRS FAQs for additional information.
The 60% adjusted gross income limitation for cash contributions was changed to 100% for both 2020 and 2021.
An additional “standard deduction” relating to charitable giving is also available to those who do not itemize. In 2021, you can deduct up to $300 if you file single or $600 if married filing jointly for cash contributions made to 501(c)(3) charities.
Between 2020 and 2021, there were two rounds of PPP loans available to eligible businesses. See our blog here that goes into greater detail. Most of the PPP loans were forgiven in 2021. If you had a loan forgiven, your tax professional will need to know this information. It is not too late to apply for forgiveness if you still have a PPP loan outstanding. Reach out to your bank who financed the loan to learn about their PPP forgiveness process.
Business Meal Deduction
In 2021 and 2022, business meals are available for a 100% Federal deduction (normally 50%) if the meal is provided by a restaurant. The term “restaurant” means a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the business’s premises. States may vary from this deduction.