Tax pro: Filers should know about some changes this year

EPHRATA — As you get ready to file your 2021 tax return, Sam Barnes has a word of advice.

“The IRS is backed up 8-10 months,” said Barnes, an Ephrata accountant and an enrolled agent with the Internal Revenue Service certified to prepare business tax returns. “Do everything electronically, or it will be months before you get your refund.”

Barnes said the IRS is so backed up because workers in the service’s western processing centers in California and Utah have spent much of the COVID-19 pandemic working from home, and thus unable to open, much less handle, mail.

“No one is in the office. They’ve had to rent storage space to hold the stacks of paper in San Jose and Ogden, and they are trying to catch up,” Barnes said. “It will be the same this year.”

There are a number of changes to the tax code that will affect filers this year,” Barnes said. First and most important of those for Grant County residents is the expanded child tax credit, which has been raised to $3,600 for each child under age 6 and $3,000 for each child aged 6-17 from $2,000 in previous years.

A portion of that tax credit was also paid out in advance to taxpayers over the course of the year, Barnes said. Taxpayers claiming the credit will need to reconcile what they have already received with the total credit they can claim on their tax return.

“A typical parent has already received half the credit for their children,” Barnes said. “They’ve never done this with a tax credit before, so the refund is going to be a little smaller.”

The IRS has also sent out a number of letters to taxpayers noting how much they have received in child tax credits (letter 6419) and how much they received in stimulus payments in 2021 (letter 6475). While the third round of stimulus payments, the only round issued in 2021, is not itself taxable, Barnes said taxpayers who believe they did not receive the full amount of $1,400 can claim the amount they believe they are owed on line 30 of Form 1040.

“There’s no special form for that,” he said.

Barnes also said taxpayers who take the standard deduction rather than itemize are now able to claim a maximum of $300 per person – up to $600 for a married couple filing jointly – deduction for charitable contributions.

“You no longer have to itemize for that,” he said.

Student loan debt forgiven in 2021 is no longer considered income and taxed, Barnes said.

However, there is one spot of bad news for those who received unemployment benefits in 2021: all unemployment compensation is now taxable again, Barnes said. Congress excluded the first $10,200 of unemployment benefits paid in 2020 from federal income tax.

“That’s back to normal now,” he said.

Barnes also said new tax rules have changed how parents can use 529 education savings accounts, which were originally set up to allow taxpayers to save money tax-free for college tuition. Up to $10,000 per student can be withdrawn from a 529 savings account to pay for tuition at private elementary and secondary schools, and each taxpayer can withdraw up to $10,000 during their lifetime to pay down college debt, he said.

Charles H. Featherstone can be reached at cfeatherstone@columbiabaisnherald.com.