In this episode of the Planned Solutions Incorporated Podcast, The American Rescue Act includes a number of tax provisions that apply to 2021 and even some that apply to 2020. Many of these provisions phase out at higher income levels so taxpayers should be aware of which benefits they may benefit from and which may be eliminated based on their projected 2021 income. In some cases, diligent tax planning my allow a taxpayer to limit their Adjusted Gross Income (AGI) to a level that will allow them to qualify for additional tax deductions and credits.

Also, The American Rescue Act includes a number of tax provisions that apply to 2021 and even some that apply to 2020. Many of these provisions phase out at higher income levels so taxpayers should be aware of which benefits they may benefit from and which may be eliminated based on their projected 2021 income. In some cases, diligent tax planning my allow a taxpayer to limit their Adjusted Gross Income (AGI) to a level that will allow them to qualify for additional tax deductions and credits. For more information, https://www.irs.gov/payments/online-payment-agreement-application.

And,The American Rescue Plan Act of 2021 provides taxpayers with three different opportunities to collect stimulus payments. Taxpayers who did not file their 2019 income by the time their stimulus payments were processed had their stimulus amount based on their 2019 income. Meanwhile, those who did not qualify for a stimulus payment, or received a reduced stimulus payment, may qualify for additional funds on their 2020 tax return. The third opportunity is based on the income on the taxpayer’s 2021 income tax return.

Plus a look at the Planned Solutions Incorporated Office Bulletin Board-The federal tax filing deadline has been extended to May 17th by the IRS. This will give taxpayers an additional month to collect, file, and if applicable pay their 2020 income taxes. Meanwhile, other states have responded to this news in different ways. For example, California extended its tax-filing deadline in-line with the IRS but did not extend the deadline to make payments. So taxpayers should still try to gather all of their tax information and at least have a good estimate of their tax liability by April 15th so they will know if they need to make estimated payments. This is especially true if you live in a state that has not conformed to the extended IRS filing deadline.

One of the challenges for the 2020 tax season has been tracking down the actual amount of stimulus payments taxpayers received. There has been understandable confusion about the stimulus payments with most taxpayers believing that the second round of stimulus, which was primarily paid in 2021, was a credit for 2021 when in fact it is a credit for 2020. To avoid these issues during the 2021 tax season it is important to maintain records of the amount you receive in the third round of stimulus in preparation for next years’ tax season.

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The Personal Finance Review is published and distributed on a biweekly basis by Planned Solutions, Inc. for informational purposes only. Please seek the advice of a qualified financial planner before taking any action.

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