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Tax Credits Unique to 2021

February 27, 2022

It is hard to believe it is already February. The time of year when important tax documents begin disbursing to mailboxes and e-mail inboxes across the country. Americans begin bracing for the impact of another year of sorting and organizing what can feel like mountains and mountains of tax documents. 2021 taxes may lead to having even more paperwork to sort through as we navigated another year of new legislation brought by an attempt to stimulate the economy weakened by the continued pandemic. Two of the bigger tax stimuli that will effect most people are the 3rd round of Economic Impact Payments (EIP #3) and Advance Child Tax Credit payments. With all of these tax changes I find myself often wondering, “How does the average person, not in the industry, manage to keep up with all of this stuff?!” As filing season officially began on January 24th, I thought it would be timely to share information on these tax items unique to 2021.

EIP #3, is similar to EIP #1 & #2 from the 2020 tax year in the sense that it is an advanced payment that will later be reconciled on your income tax return. The full amount of EIP #3 is $1,400 per taxpayer and dependent on your tax return. Depending on the amount of advanced payment received during the year and your Adjusted Gross Income (AGI), you may be entitled to an additional tax credit for up to the full amount. Fortunately, the opposite does not apply. If you received too much of an advanced payment from EIP #3, lucky you, there will not be any repayment amounts. EIP #3 was released in early 2021 and if you did receive by deposit or check, will be reported to you on IRS Letter 6475. Verify the amount reported on Letter 6475 against any deposit received and keep it handy for your tax return preparation.

The next item unique to 2021 are the Advance Child Tax Credit payments. These payments began on July 15, 2021 and for most taxpayers, were based upon your 2020 information. Unless opted out of, these payments were sent to “qualifying” taxpayers on a recurring monthly basis with the intent of pre-paying one-half of the estimated 2021 credit. For 2021, this credit increased to $3,600 for children ages 5 and under, and $3,000 for children ages 6 through 17, (excluding income phase-outs). Similar to EIP #3, when the 2021 return is filed there will be a reconciliation of the amounts received for the Child Tax Credit vs. the eligible credit amount. The key difference to this reconciliation in comparison to EIP #3 is, if too much credit was received, there will be a “claw-back” on the 2021 return that will reduce potential refunds or even require repayment. Any of these amounts received will be reported on IRS Letter 6419. If Married Filing Jointly, each taxpayer will receive their own Letter 6419. Verify the amounts reported on Letter(s) 6419 against any deposits and keep it with your tax documents.

Any inaccuracies on these figures when filing your tax return will significantly delay processing and any associated refunds, making it increasingly important to report accurately. Hiring a Certified Public Accountant will help ensure that you are filing a complete and accurate return.

Published in the Victoria Advocate

Christopher Laughhunn CPA/CFP® is the Tax & Accounting Principal for Keller & Associates CPAs, PLLC and an Associate Advisor for KMH Wealth Management, LLC.

https://kellerwealthadvisors.com/wp-content/uploads/2022/03/Copy-of-Unnamed-Design.png 247 500 Keller Wealth Advisors http://kellerwealthadvisors.com/wp-content/uploads/2024/04/KellerWA-300x80-1.png Keller Wealth Advisors2022-02-27 22:14:322024-05-14 15:14:27Tax Credits Unique to 2021

Preparing for the Guaranteed

February 13, 2022

This is part 2 of a 2 part article series discussing unexpected loss. The first part, “Navigating the Guaranteed,” was published 1/23/2022.

Preparing your finances for death isn’t a pleasant topic to think about, much less talk about. As uncomfortable as it may be, simple conversations and small steps will lead to a big impact to those left behind if done correctly. Follow the tips below on how to prepare:

  1. Get organized. Do you have a central spot (i.e. a physical or electronic filing system) where you keep important estate documents, life insurance information, and account statements? Gone are the days where every statement and document comes in the mail for your loved ones to easily track down the details of your financial life. As the world evolves into a more digital culture, it is crucial for you to have a central hub for these important items, and for someone to know where it is and how to access. This can help avoid a messy, time consuming scavenger hunt.
  2. Communicate about finances and any final wishes. It’s common for only one member of a household to handle the finances. While you may not care to be involved in day-to-day matters, you should strive to be aware of what your future financial situation looks like. Make sure beneficiaries are on file for qualified accounts, if and how life insurance premiums are being paid, and have an idea of what your debt situation looks like. The time to become aware of these answers isn’t when you are sitting across from an attorney or financial advisor after the fact.
  3. Review or create estate documents. At each meeting with a client, our firm reviews each individual’s estate documents: we find this review extremely important and you should as well. Make an item on your to-do list for this year to review your wills and Power of Attorney documents because life can change quickly. If you don’t currently have a will or POA documents, there are plenty of online resources and local attorneys that can assist you in getting these drafted and in place. It’s also important to note that all retirement accounts will be distributed at death based on the beneficiaries on file (see item number two) with the custodian, not your will.
  4. Consider your life insurance options. This can be a key component in, whether your family thrives or struggles if you experience an unexpected death. There are many different methods and opinions on how to calculate how much life insurance a person needs, but a good starting point for most is approximately ten times their income in coverage. Typically, a term life policy will provide you the most ‘bang for your buck’. If you’re unsure what sort of coverage would be most suitable for you, I would recommend consulting a fee-only advisor or CERTIFIED FINANCIAL PLANNER™ that would be able to provide you with an unbiased opinion.

Death can feel scary, but preparing for it financially doesn’t have to be. Give your loved ones the gift of a well prepared plan for the guaranteed.

Published in the Victoria Advocate

Sara Potts is a CFP® Professional and Operations Manager with KMH Wealth Management, LLC.

https://kellerwealthadvisors.com/wp-content/uploads/2022/02/Preparing-for-the-Guarenteed-photo.png 247 500 Keller Wealth Advisors http://kellerwealthadvisors.com/wp-content/uploads/2024/04/KellerWA-300x80-1.png Keller Wealth Advisors2022-02-13 21:50:492024-04-15 11:10:09Preparing for the Guaranteed

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