Tag Archives: unemployment

IRS Updates Mid-November

Charitable Giving Deduction

The IRS reminds taxpayers that they can take advantage of a special tax provision to easily deduct up to $600 on their 2021 return. Typically, those who choose to take the standard deduction cannot claim charitable contribution deductions, but the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended this temporary provision through the end of 2021. Single filers may deduct up to $300 for cash contributions, and those married filing jointly may deduct up to $600. Qualified charities can be found using the IRS Tax Exempt Organization Search tool. 

401(k) Limit Increase Announced

The IRS has announced that the contribution amount for 401(k) plans in 2022 will be $20,500, up from $19,500. Income ranges for determining eligibility to make deductible contributions to traditional and Roth IRAs, and to claim the Saver’s Credit, also are increased. The limit on annual contributions to an IRA remains unchanged at $6,000, as does the $1,000 IRA catch-up contribution limit for those aged 50 and over. Other cost-of-living adjustments for 2022 are in Notice 2021-61.

Inflation Adjustments Announced

The 2022 annual inflation adjustment for more than 60 tax provisions, including tax rate schedules, have been announced. These adjustments generally apply to tax returns filed in 2023. The standard deduction for married couples filing jointly will be $25,900, $800 more than the current deduction. Single taxpayers or married individuals filing separately will have a standard deduction of $12,950 and for heads of households it will be 19,400. The maximum Earned Income Tax Credit amount is increased, as are the monthly limitation for parking, foreign earned income exclusion, the Alternative Minimum Tax exemption amount, and many more.

Unemployment Compensation Exclusion FAQ

The IRS has updated its Frequently Asked Questions (FAQs) on the 2020 unemployment compensation exclusion. The updated topics include Amended Returns (1040-X), Receiving a Refund, Letter, or Notice, and Post Unemployment Compensation Exclusion Adjustment. FAQ pdf fact sheet is available here.

Tax Updates January 29

We are very busy with the tax season, but life continues. Here are the most recent updates from the IRS’s website.

Deferred Social Security Taxes Coming Due

Employers were given the option last year of deferring employees’ Social Security tax withholdings from September through the end of 2020. Those who elected to do so were originally obligated to begin withholding the deferred tax to be paid back over the first four months of 2021. However, as part of the Consolidated Appropriations Act, 2021, signed into law December 27, employers now have the entire year, from January 1, 2021 until December 31, 2021, to withhold and pay the deferred tax. Penalties, interest and additions to tax will now start to apply on January 1, 2022, for any unpaid balances.

COVID Employee Retention Tax Credit Extended

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made a number of changes to the employee retention tax credits, modifying and extending the Employee Retention Credit (ERC) fr six months, through June 30, 2021. Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of wages paid to employees in the first half of 2021.

Qualified wages are limited to $10,000 per employee per calendar quarter, making a maximum ERC of $7,000 per employee per quarter.

Filing Season – Agency Preparing

The IRS has announced that the tax filing season will begin Friday, February 12. After the December 27 changes to tax law, including a second round of Economic Impact Payments (EIPs), further programming was required. Proper programming is critical to ensure refunds are not delayed, and that eligible people will receive any remaining EIP monies as a credit when they file their 2020 return. The IRS urges individuals and tax professionals to file electronically for the speediest processing. Note: Free File is open and returns can be filed. Software companies and Free File partners will begin transmitting returns to the IRS beginning February 12.

Beware Unemployment Fraud

The IRS is warning taxpayers who receive Forms 1099-G for unemployment benefits they did NOT actually get, to contact their state agency for a corrected form.

Unemployment benefits are taxable income, but receiving a 1099-G in error suggests identity theft. Scammers took advantage of the pandemic by filing fraudulent claims using stolen personal information from individuals who had not filed claims. See Identity Theft Central for more information about identity theft and steps to be taken if one believes they’ve been a victim of fraud in this way.