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NTA Weblog: Submitting Season Is Right here! IRS Kicks Off With EITC Consciousness Day – January 28


Submitting season kicked off on January 24 this 12 months. Every submitting season comes with challenges for taxpayers comparable to selecting a certified return preparer, finding a Volunteer Revenue Tax Help (VITA) website, and understanding the problems to deal with on their tax returns. The Earned Revenue Tax Credit score (EITC) Consciousness Day is a one-day nationwide training program to alert taxpayers to the significance of the EITC and train them find out how to declare it correctly.

The EITC’s significance exhibits in its numbers: In fiscal 12 months (FY) 2020, over 26 million taxpayers obtained the EITC, and the typical EITC quantity was almost $2,500. In FYs 2018 and 2019, an analogous variety of taxpayers obtained the EITC, and that common quantity was additionally almost $2,500 in each years. It’s actually a invaluable credit score for taxpayers, and one which requires cautious consideration to its particulars.

New Yr, New Regulation

The American Rescue Plan Act (ARPA) enacted a few modifications to the EITC. Some are everlasting whereas some are non permanent, presently making use of solely to tax 12 months (TY) 2021 returns.

Let’s begin with a few of the EITC’s non permanent modifications, making use of solely to TY 2021 tax returns:

  • Certified former foster youth and certified homeless youth who’re 18 years previous and with out qualifying kids might declare the EITC. These particularly weak taxpayers could also be eligible for an EITC refund of $1,502, as long as they meet the EITC’s guidelines. These guidelines are mentioned on web page 42 of the Kind 1040 (and 1040-SR) Directions. We summarize them right here:
    • Certified former foster youth are people who, between the ages of 14 and 17, have been in foster care and who present consent for the entity or entities who administered the foster care program to reveal info associated to their standing as a former foster youth. Certified homeless youth are people who certify that they’re an unaccompanied youth who’s homeless or who’s prone to homelessness, and who’s self-supporting.
    • Certified former foster youth and certified homeless youth who meet these definitions and meet all different necessities to assert the EITC should verify the field on Line 27 of the Kind 1040. The textual content accompanying that verify field reads as follows: “Examine right here in case you have been born after January 1, 1998, and earlier than January 2, 2004, and also you fulfill all the opposite necessities for taxpayers who’re a minimum of age 18, to assert the EIC. See directions.”
  • A broader age vary of taxpayers who don’t declare qualifying kids will be capable to declare EITC. Beforehand restricted to taxpayers age 25 to these youthful than 65, there may be now no higher age restrict on claiming this credit score. Taxpayers as younger as 19, if not a specified scholar, might now declare the EITC. Taxpayers who’re college students that carry a minimum of half the conventional full-time workload for ultimately 5 months of the 12 months are specified college students and can’t declare the EITC with out qualifying kids till the taxpayer turns 24 years previous. And, as famous earlier, homeless and former foster youth who’re as younger as 18 are eligible to assert the EITC.
  • Selection of 12 months earnings. Taxpayers will be capable to elect to make use of their TY 2019 earnings as an alternative of their 2021 earnings, if their TY 2021 earnings is decrease than their 2019 earnings. Reflecting COVID-19’s change to employment and incomes, this variation might allow sure taxpayers to assert the next EITC quantity than in the event that they relied on their TY 2021 earnings.
  • The earnings plateau and credit score quantities for taxpayers with out qualifying kids expanded considerably. For TY 2021, the EITC for these taxpayers’ plateaus at $1,502 for married taxpayers submitting collectively and incomes between $9,800 and $17,559, and on the similar credit score quantity for taxpayers with different submitting statuses incomes between $9,800 and $11,649.
  • For taxpayers claiming qualifying kids on their TY 2021 return, the EITC plateaus at $6,728 for a taxpayer with three qualifying kids who isn’t submitting a joint return and who’s incomes between $14,950 and $19,549, and on the similar quantity for married taxpayers submitting collectively with three qualifying kids and incomes between $14,950 and $25,549.

Let’s proceed with a few of the everlasting modifications to the EITC:

  • A further class of taxpayers who’re married however separated from their spouses could also be newly eligible for the EITC. Typically, taxpayers’ submitting standing have to be single, married submitting collectively, or head of family to assert the EITC with qualifying kids – married taxpayers submitting separate returns weren’t allowed to assert the credit score. Now, sure married taxpayers submitting individually might be able to declare EITC as long as they:
    • Didn’t reside with their partner over the past six months of the 12 months, or have a separation settlement or decree; and
    • Lived with their qualifying youngster or kids for greater than one-half of the 12 months.
  • The utmost quantity of funding earnings (like curiosity and dividends) {that a} taxpayer might have with out being ineligible for the EITC was elevated from 2020’s cap of $3,650 to $10,000.
  • Taxpayers whose qualifying kids don’t meet the social safety quantity requirement might be able to declare the EITC as in the event that they have been a taxpayer with out qualifying kids.

Issues, Issues, and Assist

The EITC guidelines are sophisticated, and EITC audits may be time consuming.  In FY 2020, the IRS carried out almost 158,000 EITC audits. Of those, 16.3 % have been closed as “no change”, 23.5 % closed as “taxpayer default”, 34.8 % have been closed as “with no response from the taxpayers”, and solely 464 petitioned the U.S. Tax Court docket.  The IRS closed almost 100,000 extra EITC audits in pre-pandemic FY 2019. That 12 months, the IRS carried out nearly 257,000 EITC audits. Of those, 13 % closed “unchanged”, 26.8 % closed as “taxpayer default”, and 939 taxpayers petitioned the U.S. Tax Court docket.

The IRS has posted info and developed instruments to help taxpayers present process an audit as a way to facilitate correct audit responses. These net instruments are helpful, particularly as a result of the IRS is sluggish to reply to taxpayer calls. As I talk about in my 2021 Annual Report back to Congress, the IRS’s phone service is woefully insufficient, hovering at a degree of service of 21 % throughout its cellphone traces in FY 2021. In that fiscal 12 months, the IRS obtained about 282 million phone calls. Customer support representatives answered solely about 32 million, or 11 %, of these calls. These corresponding with the IRS about an EITC audit can also really feel annoyed.

As I additionally talk about in my 2021 Annual Report back to Congress, the IRS had roughly 4.75 million items of taxpayer correspondence in its backlogged stock in mid-December 2021.

Assist is out there to eligible taxpayers:

Be taught extra from an EITC Consciousness Day occasion close to you. TAS will probably be internet hosting or taking part in EITC Consciousness Day and different pre-filing season occasions to make sure taxpayers perceive the EITC and might correctly declare it. IRS.gov comprises many instruments and sources to help taxpayers with EITC qualification and advantages.

Keep in mind to keep away from processing delays:

  • Make each effort to file your return electronically;
  • Present your financial institution routing info;
  • Request direct deposit to your refund; and
  • Triple verify entries in your return for errors.

Errors or inconsistencies with IRS data will trigger delays in processing.

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