Archives for December 2021

Planning to tackle your own tax returns in April? It may seem like a good idea for individual taxpayers, but mistakes happen — and they can be expensive. Even the best tax software can’t eliminate potential human error.

If you’re preparing to file your own return, take a second (or third) look to be sure you’re not guilty of making the four most common tax return mistakes.

1. Transposed numbers. If the Form 1099 you receive shows $6,300 in income, and you inadvertently enter $3,600 instead, the IRS may interpret it as an attempt to dodge taxes. At best, transposing numbers will slow down your refund and raise red flags. At worst, it could trigger an audit. Be sure to verify every number you enter to ensure accuracy. Your tax software can tell you if your numbers don’t add up, but it can’t catch transposed figures.
2. Misspelled names. It’s easy to misspell a name when entering dependent information, but doing so could cause real problems with your return. Double-check the names, ages and Social Security numbers of all dependents before submitting your return.
3. Missing Social Security numbers. Don’t assume that your tax prep software will automatically populate your Social Security number. By checking for any missing information before filing your return, you can save yourself easily avoided IRS headaches later on.
4. Not reporting all your income or taking too many deductions. It’s important to keep track of all your income and report it to the IRS correctly — not just your W2 wages. Remember, as a taxpayer, it’s your job to be honest and file returns correctly. If you alter a few numbers to get an extra deduction or write-off, the IRS will eventually catch up with you.

Don’t let past mistakes derail your finances

Whether there’s an error on your latest tax return or you have years of unfiled taxes, reach out to the tax specialists at Magone & Company. Call us today at (973) 301-2300 to schedule a confidential, no-obligation consultation.

To help working parents overcome the financial challenges brought on by the pandemic, the American Rescue Plan expanded the Child Tax Credit (CTC) to provide relief to more families than ever before. For tax year 2021, the CTC increased from $2,000 per qualifying child to:

• $3,600 for children ages five and under at the end of 2021
• $3,000 for children ages six through 17 at the end of 2021

Eligible families started receiving monthly automated payments of $250 or $300 per child on July 15^th, without having to take any action. But some still haven’t received a credit, and you may be wondering if you’re missing out on money you deserve.

Am I qualified?

The rules are complex. According to the IRS, to qualify for advance payments of the CTC, you (and your spouse, if you filed a joint return) must have:

• Filed a 2019 or 2020 tax return and claimed the CTC on the return

OR

• Provided your information in 2020 to receive the Economic Impact Payment with the Non-Filers: Enter Payment Info Here tool

OR

• Provided your information in 2021 with the Non-Filer: Submit Your Information tool

Additionally, you must meet these qualifying conditions:

• Lived in a primary residence in the United States for more than half the year (the 50 states and the District of Columbia) or filed a joint return with a spouse who has a primary residence in the U.S. for more than half the year
• Have a qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
• Made less than certain income limits. The CTC may be reduced to $2,000 total per child (or phased out completely) if your modified adjusted gross income (MAGI) in 2021 exceeds:
• $150,000 for married taxpayers filing jointly and qualifying widows/widowers
• $112,500 for heads of household
• $75,000 for other individual taxpayers

Who is a qualifying child?

For 2021, a qualifying child is defined as one who is under age 18 whom the taxpayer can claim as a dependent. (In other words, it’s a child related to the taxpayer who generally lived with the taxpayer for at least six months during the year.) The child must also be a U.S. citizen or national, or a U.S. resident.

Clear the confusion

If you’re among the unsure, the IRS recently launched a new online tool — the Advance Child Tax Credit Eligibility Assistant — that can help you determine if you qualify for the CTC and the monthly advance payments. This tool is particularly useful if your family doesn’t normally file a federal tax return.

Once eligibility is determined, you can take the next step and register for the CTC payments using the Non-Filer Sign-up tool. And for your convenience, the Child Tax Credit Update portal allows you to view information about payments and opt out of receiving payments if you wish.

Ask a CPA

If you have any questions regarding your previous tax returns or eligibility, don’t hesitate to reach out to the professionals at Magone & Company.