Helping You Understand the Extended Tax Filing Deadline:
As a fiduciary one of the services we provide is assistance for our clients with their taxes. We are not tax experts which is why we value the relationships we build with our trusted CPA’s. We recently received this informational message from Zick’s Business Advisors about the extended filing deadline and felt it would be of benefit to share it here on our blog as a resource. If you have any questions or need help please call/text us or set up an appointment online.
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We hope it provides insight into the recent tax deadline extension.
A word from Zick’s Business Advisors:
It is important we share with you some recent developments affecting your income tax return preparation, filing, and payments:
On March 17, the Treasury Department and IRS announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021 to May 17, 2021. The federal income tax payment due date for the 2020 tax year is also extended to May 17, 2021. However, the first quarter estimated income tax payment deadline of April 15, 2021 has not yet been extended. Colorado has followed the federal extension, however not all states have adopted the extended deadline yet. We anticipate guidance from these states to be coming soon. While this may be a reprieve to many of you, we understand you may still wish to file your return as early as possible and encourage you to let us know if you anticipate a large refund and need the funds urgently.
In addition to the individual filing extension, the American Rescue Plan Act (ARPA) was signed into law March 11th and contains a number of important provisions that may affect your income taxes:
A third round of stimulus payments was issued in the amount of $1,400 per family member, which start to phase out at adjusted gross incomes (AGI) over $75k single or $150k married and are fully phased out at $80k individual and $160k married.
For 2021 only, ARPA expanded the dependent care credit for families with dependents under age 13 where both spouses are working to a maximum of $4,000 based on 50% of maximum $8,000 qualifying expenses per dependent up to two dependents. This translates to a total potential credit of $8,000 if you have $16,000 qualifying expenses between two dependents. The credit starts to phase out at AGIs above $125k. Along similar lines, ARPA increased the exclusion for employer-provided dependent care assistance up to $10,500.
In addition to the dependent care credit, the child tax credit was expanded to $3,000 per qualifying child or up to $3,600 for children under 6 at close of the tax year. These increased credit amounts are phased out for individuals with modified AGIs above $75k or couples with MAGI over $150k.
If your 2020 AGI is less than $150k and you received unemployment compensation, up to $10,200 per individual will be exempt from taxes. At the moment, the IRS is asking taxpayers not to file amended returns if they already filed before this provision came into effect. It remains to be seen how the IRS will adjust previously filed returns to reflect nontaxable unemployment compensation. Similarly, it may be prudent to hold off on filing until we receive authoritative guidance on individual states’ treatments of unemployment compensation.
Restaurants, food trucks, and similar businesses may receive restaurant revitalization grants from the Small Business Administration (SBA). These grants are non-taxable income and do not reduce basis in related expenses, allowing for a fully tax-free treatment similar to Payroll Protection Program (PPP) loans.
Eligible small businesses may also receive targeted economic injury disaster loan (EIDL) advances from the SBA. These advances are also fully tax-free.
The employee retention credit for eligible employers as amended by the Relief Act for up to $7,000 per employee per quarter has also been extended under ARPA to the final two quarters of tax year 2021. This credit is available to employers whose (1) operations have been fully or partially suspended as a result of a COVID-19 government order; or (2) whose gross receipts for a quarter are less than 80% of the employer’s gross receipts for the same calendar quarter in 2019.
We thank you for your patience thus far as we deal with another unprecedented tax season and navigate the constantly evolving regulatory climate. We aim to produce the highest quality returns for all of our clients and take the time to ensure we meet those standards. We appreciate the opportunity to be of service to you in this and coming years. Please do not hesitate to reach out for further guidance regarding your unique situation.