TBC Information Network

Teal, Becker & Chiaramonte offering valuable insights, impressions and commentary on today's financial and business world.

Thinking about your 2021 personal tax return and items needed to file?

These are a few items to consider when gathering your personal income tax data for the upcoming tax year:

  1. Economic Impact Payment

The IRS issued a third round of stimulus checks starting March 12, 2021. Be sure to let your tax preparer know how much you received. Payments were $1,400 for each individual plus an additional $1,400 for each dependent in a family.

Did you receive less than these amounts?   Payments were phased out for joint filers with adjusted gross incomes (AGI) above $150,000, head-of-household filers with an AGI above $112,500, and single filers with an AGI above $75,000. In fact, third-round stimulus checks were reduced to zero if your AGI was above $160,000 (joint filers), $120,000 (head-of-household), or $80,000 (singles).

Did you have a loved one pass away during 2021?  For those individuals who have died on or after January 1, 2021 are still eligible to receive the third stimulus check.  If a check was not received, the deceased taxpayer may be entitled to claim a recovery rebate credit on their final 1040 return.

Don’t recall if you received a payment?  You can check the status of your third Economic Stimulus check by going to the IRS website and logging into “Get My Payment”.   You will need to enter your SSN, date of birth, street address and zip code. The IRS will indicate if a payment was issued.  If by direct deposit, the website will indicate the date of the deposit and the bank account number.

  1. Advanced Child Tax Credit Payments

On a monthly basis from July 15, 2021 – December 15, 2021, the IRS issued payments to eligible individuals as an advanced payment of the child tax credit that would have been taken on the 2021 tax return. The amount allowed as a Child Tax Credit on the 2021 return will be offset by the amount of payments received during the last half of the year.

Early in 2022, the IRS will issue Letter 6419 documenting any advance payments issued to families during 2021 and the number of qualifying children used to calculate the payments. Be sure to provide this letter to your tax preparer as this will be important information that they will need.

Individuals can also access the IRS Portal and create an account to view the amount of payments received during the year.

  1. IRA Distribution and Repayment

During 2020 “qualified individuals” affected by Covid-19 were permitted to withdraw up to $100,000 from an IRA or an employer plan such as a 401K or 403b without incurring penalties.  Individuals will still need to pay income tax on the distribution but could have elected on the 2020 return to spread the distributions over three years reporting 1/3 of the amount in tax years 2020, 2021 and 2022.

The taxpayer also has the opportunity to “recontribute” some or all of the Covid related distributions to their retirement plan at any time during the 3 year period if they choose. The amounts repaid will not be subject to tax.  Note the 3 year period for recontributions begins the date after the Covid distribution and ends on the third anniversary of this day.

Note the amount taxable will be reduced by amounts repaid by the taxpayer.  Be sure to advise your tax preparer of any amounts repaid during tax year 2021, including the date of the payments.

  1. Charitable Contributions

Normally individuals who claim the standard deduction can-not claim deductions for the amount of charitable contributions made during the year.  For 2021, individuals can claim a deduction up to $300 for cash contributions made to a qualifying organization.  This amount increases to $600 for married individuals filing a joint return.  Cash contributions include those made by check, credit card or debit card.

  1. Virtual Currency

Buying and selling cryptocurrency is taxable as the IRS views this as property much like stocks and not currency, which means you must report any capital gains and losses when disposing of it.

If you have cryptocurrency:

  • Did you sell crypto currency for cash
  • Pay for goods or services
  • Buy one crypto with another crypto
  • Receive mined crypto
  • Was paid in crypto or by airdrop
  • Received crypto rewards

You will need records of the fair market value of your cryptocurrency when you mined it or when you bought it, as well as records of the fair market value when it was sold, used to purchase goods or services or when it was exchanged for another cryptocurrency.

If you are becoming more involved in cryptocurrency, there are several cryptocurrency portfolio trackers that allow you to track the total amount and value of your cryptocurrencies across all wallets, exchanges, platforms and blockchains in real time.  Some popular Crypto Portfolio tracking tools include Blockfolio, Delta, Coinstats, Lunchmoney and Altpocket