Nine million people who missed expanded tax benefits still have time to file!

IRS Tax Tips October 31, 2022

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Issue Number:  COVID Tax Tip 2022-166

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Nine million people who missed expanded tax benefits still have time to file

More than nine million people may qualify for tax benefits but didn’t claim them by filing a 2021 federal income tax return. Many in this group may be eligible to claim some or all of the 2021 recovery rebate credit, the child tax credit, the earned income tax credit and other tax credits. These and other tax benefits were expanded under last year’s American Rescue Plan Act and other recent legislation.

The only way to get the valuable benefits is to file a 2021 tax return.
Often, people can get these expanded tax benefits, even if they have little or no income from a job, business or other source. This means that many people who don’t normally need to file a tax return should do so for 2021, even if they haven’t been required to file in recent years.

Eligible people can file a tax return even if they don’t receive a letter. There’s no penalty for a refund claimed on a tax return filed after the regular April 2022 tax deadline.

The expanded tax benefits include:

  • An expanded child tax credit. Families can claim this credit, even if they received monthly advance payments during the last half of 2021. The total credit can be as much as $3,600 per child.
  • A more generous earned income tax credit. The law boosted the EITC for childless workers. There are also changes that can help low- and moderate-income families with children. The credit can be as much as $1,502 for workers with no qualifying children, $3,618 for those with one child, $5,980 for those with two children and $6,728 for those with at least three children.
  • The recovery rebate credit. Those who missed out on last year’s third round of Economic Impact Payments may be eligible to claim the RRC. Often referred to as stimulus payments, this credit can help eligible people whose third payment was less than the full amount, including those who welcomed a child in 2021. The maximum credit is $1,400 for each qualifying adult, plus $1,400 for each eligible child or adult dependent.
  • An increased child and dependent care credit. Families who have care expenses for a child or dependent so they can work or look for work can get a tax credit worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying persons.
  • A deduction for gifts to charity. Most tax-filers who take the standard deduction can deduct eligible cash contributions they made during 2021. Married couples filing jointly can deduct up to $600 in cash donations and individuals can deduct up to $300 in donations. In addition, itemizers who make large cash donations often qualify to deduct the full amount in 2021.

Free File to stay open until November 17
To help people claim these benefits, Free File will remain open for an extra month this year, until November 17, 2022. People with income of $73,000 or less can electronically file a return for free using brand-name software.

People can also visit ChildTaxCredit.gov to file a 2021 income tax return. Individuals with income below $12,500 and couples with income below $25,000 may be able to file a simple tax return to claim the 2021 Recovery Rebate Credit and the Child Tax Credit.

More information
EITC Assistant
Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?
Am I Eligible to Claim the Child and Dependent Care Credit?

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#IRSTaxTip: College students should study up on these two tax credits

— #IRSTaxTip: College students should study up on these two tax credits. http://ow.ly/i62g50KbK1z

 

Anyone pursuing higher education, including specialized job training and grad school, knows it can be pricey. Eligible taxpayers who paid higher education costs for themselves, their spouse or dependents in 2021 may be able to take advantage of two education tax credits. The American opportunity tax credit and the lifetime learning credit can help offset education costs by reducing the amount of tax they owe. If the American opportunity tax credit reduces the tax to zero, the taxpayer could receive a refund up to $1,000.

To be eligible to claim either of these credits, a taxpayer or a dependent must have received a Form 1098-T, Tuition Statement, from an eligible educational institution. However, there are exceptions for some students. To claim either credit, taxpayers must complete Form 8863, Education Credits, and file it with their tax return.

Here are some key things taxpayers should know about each of these credits.

The American opportunity tax credit is:

  • Worth a maximum benefit of up to $2,500 per eligible student
  • Only available for the first four years at a post-secondary or vocational school
  • For students pursuing a degree or other recognized education credential
  • Partially refundable; Taxpayers could get up to $1,000 back

The lifetime learning credit is:

  • Worth a maximum benefit of up to $2,000 per tax return, per year, no matter how many students qualify
  • Available for all years of postsecondary education and for courses to acquire or improve job skills
  • Available for an unlimited number of tax years

Taxpayers can use the Interactive Tax Assistant tool on IRS.gov to figure out if they’re eligible for either of these credits.

Missing W-2?

See the IRS advice if you are missing a W-2:

Here is a video tax tip from the IRS:

Missing W-2 English | Spanish | ASL

Subscribe today: The IRS YouTube channels provide short, informative videos on various tax related topics in English, Spanish and ASL.

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AZ Republic article on VITA

Free tax preparation will look different, but it’s still available. Here’s how to find it

Virtual preparation help and drop-off services will largely replace in-person meetings.

Check out this story on azcentral.com: https://www.azcentral.com/story/money/business/consumers/2021/02/22/how-find-free-tax-preparation-services-arizona/6753822002/

Guidance on Unemployment Benefits Identity Theft

The Arizona Department of Revenue (ADOR) advises taxpayers who receive a Form 1099-G from the Arizona Department of Economic Security (DES) for unemployment benefits they did not receive to contact the Arizona Department of Economic Security for a corrected form.

Form 1099-G for Arizona Unemployment Insurance (UI) or Pandemic Unemployment Assistance (PUA) benefits are sent to the taxpayer and the Internal Revenue Service (IRS) as the compensation is taxable income. Since the amount is reported on the federal income tax return, which is the starting point for Arizona income taxes, taxpayers also report the amount on the state individual income tax return.

Unfortunately, some taxpayers have fallen victim to fraudsters stealing personal information and filing fraudulent claims for unemployment benefits. States across the nation have seen a significant surge in unemployment benefit fraud, largely in association with identity theft. There has not been a breach of information stored by DES. Rather, criminals are using phishing scams, previous corporate data breaches and other tactics to collect information from individuals across the country and file for UI and PUA benefits in their name.

Taxpayers who receive an incorrect Form 1099-G for UI or PUA benefits should contact DES to request a revised Form 1099-G showing they did not receive these benefits. DES will send a corrected 1099-G to the IRS and the taxpayer to adjust the unemployment compensation income. A corrected Form 1099-G showing zero unemployment benefits in cases of identity theft will help taxpayers avoid receiving an unexpected tax bill. The IRS advises that taxpayers who cannot obtain a timely, corrected form should still file an accurate tax return, reporting only the income they received. For more counsel from the IRS, click here.

What if I lost my IP PIN?

https://www.irs.gov/identity-theft-fraud-scams/retrieve-your-ip-pin

If IRS assigned you (or you applied for) an Identity Protection PIN (IP PIN) and you lost it or you didn’t receive our CP01A Notice with your new IP PIN, you’ll need to retrieve it or have it reissued to ‘e-file’ your return.

We assigned you an IP PIN if you:

  • Received a CP01A Notice
  • Opted-in to receive an IP PIN
  • Tried to e-file your tax return and it was ‘rejected because you didn’t include an IP PIN’

How to retrieve your IP PIN online

You may use our Get an IP PIN online tool to retrieve your current IP PIN. We require you to register and verify your identity in order to use the tool. This process is essential to protect your personal and tax information. Please refer to “Step 2: What You Need”, before using the online tool. Follow the prompts to retrieve your IP PIN.

If you previously created an online account and obtained an IP PIN, access Get an IP PIN and log in to your account with your username and password. You may be required to verify your identity again due to our increased account security. Follow the prompts to retrieve your IP PIN.

How to get your IP PIN reissued

If you’re unable to retrieve your IP PIN online, you may call us at 800-908-4490 for specialized assistance, Monday – Friday, 7 a.m. – 7 p.m. your local time (Alaska & Hawaii follow Pacific Time), to have your IP PIN reissued. An assistor will verify your identity and mail your IP PIN to your address of record within 21 days.

Get ready for tax season using IRS Online Account

Get ready for tax season using IRS Online Account

WASHINGTON — The Internal Revenue Service today reminded taxpayers they can securely access their IRS account information through their individual online account.

The IRS regularly adds features to online account. For example, people can now check the amounts of their Economic Impact Payments (EIPs) to help them accurately calculate any Recovery Rebate Credit they may be eligible for on their 2020 tax return. The EIP amounts can be found on the Tax Records tab. Amounts will show as “Economic Impact Payment” for the first payment and “Additional Economic Impact Payment” for the second payment. For married filing joint individuals, each spouse will need to sign into their own account to retrieve their portion of the payments. For more information regarding the credit, see Recovery Rebate Credit. Additionally, taxpayers can view:

  • The amount they owe, updated for the current calendar day
  • Their balance details by year
  • Their payment history and any scheduled or pending payments
  • Key information from their most recent tax return
  • Details about their payment plan, if they have one
  • Digital copies of select notices or letters from the IRS (under the Message Center tab)

They can also:

  • Make a payment online
  • See payment plan options and request a plan via Online Payment Agreement
  • Access their tax records via Get Transcript

Later in 2021, taxpayers will be able to digitally sign certain authorization forms, such as a power of attorney, initiated by their tax professional.

Here’s how to get started for new users:

  1. Select View Your Account at IRS.gov homepage
  2. Select the “Create or View Your Account” button
  3. Click “Create Account”
  4. Pass “Secure Access” authentication. This is a rigorous process to verify that the taxpayers are who they say they are. They must be able to authenticate their identity to continue. See www.irs.gov/secureaccess for details.
  5. Create a profile.

Once the initial authentication process is complete, returning users can use the same username and password to access other IRS online services such as Get Transcript and Get An Identity Protection PIN (IP PIN) (if applicable).

All password-protected online IRS tools for taxpayers are protected by multi-factor authentication, offering extra security precautions.

 

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What tax records do you need to start preparing your return?

The first step of tax preparation is gathering records

As taxpayers get ready to file their 2020 tax return, they should start by gathering their records. Taxpayers should gather all year-end income documents to help ensure they file a complete and accurate 2020 tax return and avoid refund delays.

Taxpayers should have all necessary records handy, such as W-2s, 1099s, receipts, canceled checks and other documents that support any income, deductions or credits on their tax return.

Most taxpayers should have already received income documents including:

  • Forms W-2, Wage and Tax Statement
  • Form 1099-MISC, Miscellaneous Income
  • Form 1099-INT, Interest Income
  • Form 1099-NEC, Nonemployee Compensation
  • Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund
  • Form 1095-A, Health Insurance Marketplace Statements

Here are a couple other things taxpayers can do to prepare to file.

View IRS account online
Taxpayers can view their online account. This allows them to see the latest information about their federal tax account and most recently filed tax return through a secure and convenient tool on IRS.gov. This can help taxpayers if they need information from last year’s return.

People with an account on IRS.gov can also see the amounts of their Economic Impact Payments. This will be helpful to eligible individuals who either did not receive any Economic Impact Payments or received less than the full payments. They may claim the recovery rebate credit on their 2020 federal tax return.

People should visit Secure Access: How to Register for Certain Online Self-Help Tools for more information about how to create an account or how to reset the username or password.

Review unemployment benefits
Unemployment compensation is taxable and must be included as gross income on a taxpayer’s return.

Taxpayers should receive a Form 1099-G showing their unemployment income. They can have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do neither. In that case, taxes on those benefits need to be paid when their 2020 tax return is filed. Therefore, taxpayers who didn’t have tax withheld from their payments may see a smaller refund than expected or possibly have a tax bill.

Individuals who receive a Form 1099-G for unemployment compensation they were not paid should contact their state tax agency and request a corrected Form 1099-G. States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation. Taxpayers should file an accurate return including the income they actually received.

Taxpayers who are victims of identity theft involving unemployment compensation should not file an identity theft affidavit with the IRS.

More information:
Tax Topic 418, Unemployment Compensation
Publication 525, Taxable and Nontaxable Income
What taxpayers need to know to claim the earned income tax credit

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Tax Credits Can Boost Refunds!

EITC Awareness Day: Critical tax credit provides a significant refund boost to millions

IRS YouTube Videos:
Earned Income Tax Credit – Get it Right – English | Spanish | ASL

WASHINGTON – The Internal Revenue Service and partners across the nation remind taxpayers about the Earned Income Tax Credit today on “EITC Awareness Day” 2021. The IRS and partners nationwide urge people to check to see if they qualify for this important credit.

“This year marks the 15th annual EITC Awareness Day,” said IRS Commissioner Chuck Rettig. “For more than 45 years, this tax credit has been helping hard-working Americans and their families. We want to thank our partners around the country who help us reach out to those low- and moderate-income people who may qualify and not even know about it.”

The IRS earlier announced that it will begin accepting 2020 tax returns on Feb. 12. In the meanwhile, people can file their taxes electronically using IRS Free File or other name-brand software. Once filing season officially opens, the returns will be electronically submitted for processing. The IRS reminds taxpayers that the quickest way to get a tax refund is by filing electronically and choosing direct deposit for their refund.

New look-back rule
Under the COVID-related Tax Relief Act of 2020, taxpayers can use their 2019 earned income to figure their 2020 EITC if their 2019 earned income was more than their 2020 earned income. To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds in the coming year.

Also, any Economic Impact Payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 tax return. See IRS.gov/rrc for more information.

Vital refund boost
The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. For those who qualify, and if the credit is larger than the amount of tax they owe, they will receive a refund for the difference. While the majority of those eligible claim EITC every year, IRS estimates that one of five eligible taxpayers do not claim the credit.

Taxpayers earning $56,844 or less can see if they qualify using the EITC Assistant tool at www.irs.gov/eitc. The EITC Assistant, available in English and Spanish, helps users determine if they are eligible, have a qualifying child or children and  estimates the amount of the EITC they may get. If an individual doesn’t qualify for the EITC, the Assistant explains why.

Nationwide in 2020, more than 25 million taxpayers received over $62 billion in EITC. The average EITC amount received was $2,461 per return. The EITC is worth as much as $6,660 for a family with three or more children or up to $538 for taxpayers who do not have a qualifying child.

Refunds
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with EITC or ACTC and the Recovery Rebate Credit if applicable. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud.

‘Where’s My Refund?‘ on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by Feb. 22. Therefore, EITC/ACTC filers will not see an update to their refund status for several days after Feb. 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.

Workers who can claim the EITC
Workers at risk for overlooking this important credit can include taxpayers:

  • Without children
  • Living in non-traditional families, such as a grandparent raising a grandchild
  • Whose earnings declined or whose marital or parental status changed
  • With limited English language skills
  • Who are members of the armed forces
  • Living in rural areas
  • Who are Native Americans
  • With disabilities or who provide care for a disabled dependent

Life events or changes may make people eligible for certain tax benefits like the EITC. The IRS urges people to use the EITC Assistant to check their eligibility for this valuable credit.

How to claim the EITC
To get the EITC, workers must file a tax return and claim the credit. Eligible taxpayers are urged to claim the credit even if their earnings were below the income requirement to file a tax return. Free tax preparation help is available online and through volunteer organizations.

Those eligible for the EITC have these options:

  • Free File on IRS.gov. Free brand-name tax software is available that leads taxpayers through a question-and-answer format to help prepare the tax return and claim credits and deductions, if they are eligible. Free File also provides online versions of IRS paper forms, an option called Free File Fillable Forms, best suited for taxpayers comfortable preparing their own returns.
  • Free tax preparation sites. EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, use the search tool on IRS.gov, the IRS2go smartphone application, or call toll-free 800-906-9887. They should be sure to bring along all required documents and information.
  • Find a trusted tax professional. The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov. EITC recipients should be careful not to be duped by an unscrupulous return preparer.

The IRS reminds taxpayers to be sure they have valid Social Security numbers (SSN) for themselves, their spouse, if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.

Avoid errors
Taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them. Since the rules claiming the EITC can be complex, the IRS urges taxpayers to understand all of them. People can find help to make sure they are eligible by visiting a free tax return preparation site, or using Free File software or by using a paid tax professional.

Beware of scams
Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.

Visit IRS online
IRS.gov is a valuable first stop to help taxpayers get it right this filing season. Information on other tax credits, such as the Child Tax Credit, is also available.

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IRS Stimulus Update

Treasury issues millions of second Economic Impact Payments by debit card 

 

WASHINGTON – Starting this week, the Treasury Department and the Internal Revenue Service are sending approximately 8 million second Economic Impact Payments (EIPs) by prepaid debit card.

 

These EIP Cards follow the millions of payments already made by direct deposit and the ongoing mailing of paper checks that are delivering the second round of Economic Impact Payments as rapidly as possible.

 

For those who don’t receive a direct deposit, they should watch their mail for either a paper check or a prepaid debit card. To speed delivery of the payments to reach as many people as soon as possible the Treasury’s Bureau of Fiscal Service is sending payments out by prepaid debit card.

 

IRS and Treasury urge eligible people who don’t receive a direct deposit to watch their mail carefully during this period. The prepaid debit card, called the Economic Impact Payment card, is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank®, N.A. The IRS does not determine who receives a prepaid debit card.

 

Taxpayers should note that the form of payment for the second mailed EIP may be different than the first mailed EIP. Some people who received a paper check last time might receive a prepaid debit card this time, and some people who received a prepaid debit card last time may receive a paper check.

 

More information about these cards is available at EIPcard.com.

 

EIP Cards are safe, convenient and secure. EIP Card recipients can make purchases online or in stores anywhere Visa® Debit Cards are accepted. They can get cash from domestic in-network ATMs, transfer funds to a personal bank account and obtain a replacement EIP Card if needed without incurring any fees. They can also check their card balance online, through a mobile app or by phone without incurring fees. The EIP Card provides consumer protections including certain protections against fraud, loss and other errors.

 

EIP Cards are being sent in a white envelope that prominently displays the U.S. Department of the Treasury seal. The EIP Card has the Visa name on the front of the Card and the issuing bank name, MetaBank®, N.A. on the back of the card. Each mailing will include instructions on how to securely activate and use the EIP Card.

 

EIP Debit Card Image

 

EIP Envelope Image

 

EIP Cards are being issued to eligible recipients across all 50 states and the District of Columbia. Residents of the western part of the United States are generally more likely to receive an EIP Card.

 

The swift issuance of this second round of payments follows the successful delivery of more than $270 billion in CARES Act Economic Impact Payments earlier this year. To check the status of a payment, visit IRS.gov/GetMyPayment. For more information about Economic Impact Payments visit IRS.gov/EIP.