Tuesday September 27, 2022
Benefits for 19 Million Taxpayers on Extension
On August 18, 2022, the Internal Revenue Service (IRS) reminded taxpayers on extension to take advantage of all of the deductions and credits for which they are entitled.
IRS Commissioner Chuck Rettig noted, "Each year, eligible taxpayers overlook money-saving deductions and credits that can help them with the cost of raising a family, daycare, paying for college, saving for retirement or making a donation to charity. We want to ensure they are aware of all the tax benefits for which they may qualify."
Approximately 19 million taxpayers are on extension until October 17, 2022. This summer is an excellent time to consider potential tax benefits. There are at least seven specific benefits that may be helpful for taxpayers.
1. Earned Income Tax Credit (EITC) — Low or moderate income individuals and those with dependent children will benefit from the credit. Taxpayers must have earned income to be eligible.
2. Child Tax Credit (CTC) — Many families received half of their available CTC during July through December 2021. They can claim the balance of their CTC by filing a tax return.
3. Child and Dependent Care Credit (CDCC) — Individuals with qualified dependents who pay for work-related child-care may receive up to $4,000 for one child and up to $8,000 for two or more children.
4. Recovery Rebate Credit (RRC) — There were three rounds of Economic Impact Payments. Some individuals did not receive the full amount of their third payment, including families who welcomed a child in 2021 and are eligible to receive this credit.
5. Gifts to Charity — Over 90% of taxpayers claim the standard deduction. During 2021, individuals who claim the standard deduction may also deduct up to $300 in cash gifts. Married couples filing jointly may report an above-the-line charitable deduction of $600. Those individuals who make large cash donations may choose to itemize rather than taking the standard deduction. Cash gifts up to 60% of adjusted gross income are deductible for those who itemize.
6. American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC) — Individuals who are attending a college or university may benefit from credits for payment of tuition and other qualified costs. The credits will help reduce the net cost of their higher education program.
7. Savers Credit — There is a tax credit available for contributions of low-to-moderate income individuals for an individual retirement account or an employer-sponsored retirement plan.
The IRS urges taxpayers on extension to gather all of their IRS Forms W-2 and 1099. They should also ensure that they reported any Child Tax Credits as explained in IRS Letter 6419 or any stimulus payments as explained in IRS Letter 6475.
Taxpayers are encouraged to create an IRS Online Account. This will assist them to understand the correct amount of their Economic Impact Payments or Child Tax Credit payments. The IRS offers many helpful tools on IRS.gov.
Summer is an excellent time to update your 2022 withholding. If you have a life event such as marriage, divorce, a new child or a change of income, you may want to adjust your withholding. The IRS Tax Withholding Estimator on IRS.gov will be quite helpful.
If you need specific assistance, you can use the Taxpayer Assistance Center Locator tool and make an appointment with a trained representative. You can schedule an in-person visit at your local Taxpayer Assistance Center.
Published August 19, 2022