For the past two years, the COVID-19 pandemic and now more specifically the Omicron variant has wreaked havoc on global economies – the U.S. economy has been no exception. As a result, the federal reserve issued various stimulus payments and tax rebates to struggling middle and lower-income American citizens and families.
In brief, President Joe Biden’s administration issued 3 stimulus checks to help qualify U.S. citizens and families since 2020. Many citizens in the United States of America (especially since the outbreak of the highly contagious Omicron variant of the Covid-19 pandemic) are hoping for a 4th stimulus check of around $1,200 to be issued. For this, and other reasons, President Joe Biden’s administration drew up and proposed his Build Back Better Act.
Democratic Senator Manchin refused to give his vote – and the motion did not get passed. However, According to The Hill, Pramila Jayapal, Chair of the Congressional Progressive Caucus for the U.S. senate it must be time again to take a look at and re-address President Joe Biden’s proposed Build Back Better Act.
Build Back Better More Urgent
Chairman Jayapal argues in her statement, according to As.com: “In the months since negotiations around the Build Back Better Act stalled, the case for this legislation has only become more urgent”. Furthermore, the Congressional Progressive Caucus wants to see the bill being passed as early as March 1, 2022.
State Of The Union Address
This would allow for President Joe Biden to use the State of The Union address to discuss the relief that the countries’ eligible citizens will receive from the Build Back Better Bill. The group would like the President to use this address also to show citizens what relief they will soon receive in terms of the bill.
Whether the Build Back Bill will be passed or not remains to be seen. However, President Joe Biden, his administration, and other proponents have not given up yet. There might be hope for further tax rebates, an extension of the child tax credit program as well as a 4th stimulus check, and more direct payments to help relieve struggling citizens during this period, at least, of the COVID-19 pandemic.
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Experts Predict Long Payment Delays From IRS This Season, Provide Few Tips To Speed Up The Process
The IRS faces an enormous backlog due to staff shortages amidst the pandemic, it has recruited new officials, but the challenge remains tough. IRS is yet to process millions of tax returns of last season. The IRS officials are crushed under a ton of paperwork; millions of taxpayers will file their returns this year. The authorities will need to devise a compact strategy to overcome the backlog. CNBC reports that IRS had 6 million unprocessed returns by December 31, this is large numbers, and 2021’s tax returns might take some time.
IRS Workers Are Sparse
Experts suggest various ways to slim the time lag between filing the returns and receiving the payments. CNBC reports that the IRS only had 15,000 workers to answer around 24 million customer calls during the first six months of 2021, one person for 16,000 customers. Experts suggest taxpayers avoid the paperwork to the maximum extent; filers can switch electronic modes to fast forward the documentation. Taxpayers need to use advanced features to process tax refunds and other pending payments quickly. The electronic method will ease the burden on IRS officials during data verification.
Taxpayers Should File Electronic Tax Returns
IRS quoted Erin Collins, the National Taxpayer Advocate; she said, “Paper is the IRS’s kryptonite, and the agency is buried in it. The IRS still transcribes paper returns line by line, number by number, they received around 17 million original paper returns last year, and the processing delays have run as long as 10 months.” The taxpayers need to recheck their tax returns thoroughly; the wrong information might lead to payment abortion and several lengthy delays. The officials, too, will have to go through the same twice or thrice, which makes the process more complicated.
The families who receive enhanced Child Tax Credit or Stimulus payments or both need to exercise extra caution while filing their returns; the IRS issued letters to provide data for the amount allocated. The beneficiaries for the remaining half of the Child Tax Credit payments or extra credit should give complete information in their tax returns. IRS has announced April 18 as the deadline; individuals need to complete the filing process before the date.
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The $8,000 Child Tax Credit Is Unknown To Many Parents
The federal Child Tax Credit is well-known among American families with children, as parents of nearly 60 million youngsters received advance payments last year. However, there is another tax advantage for parents that is not so well-known than the CTC but can be even more generous, with up to $8,000 in tax credits available in 2022.
The Child and Dependent Care Credit isn’t completely new; it’s been around since the 1970s and was designed to help working parents offset the costs of daycare, after-school courses, and summer camps.
However, child care costs had not kept up with the credit, with the child advocacy group First Five Years Fund noting in 2018 that it only took into account around 10% of the average annual cost of caring for two children in the United States at the time.
Several tax benefits accrued for Americans as a result of the American Rescue Plan, including a large extension of the Child and Dependent Care Credit. Parents can now receive a tax credit of $8,000, nearly four times the previous limit of $2,100.
In comparison, the increased Child Tax Credit provides $3,600 for children under the age of six and $3,000 for children from 6 to 17.
Robbin Caruso is a partner in Prager Metis’ National Tax Controversy Practice. “They’re realising the rising expense of child care in our society,” she continued, “and it’s a huge opportunity for taxpayers that shouldn’t be passed up.”
The fact that it’s also fully refundable is critical since, according to experts, it might boost many parents’ tax refunds this year. Tax credits lower a person’s tax burden dollar for dollar, whereas deductions reduce a person’s overall taxable income.
As a result, tax credits like the Child and Dependent Care Credit are more useful to taxpayers than deductions, and they become even more attractive when they are fully refundable.
The maximum tax credit available to Americans is $8,000, which applies to families with two or more children.
Families can now claim a credit worth half of their child care costs, up to $16,000 for two or more children, under the extended tax break. In other words, under the enhanced tax credit, families with two children who spent at least $16,000 on daycare in 2021 will receive $8,000 from the IRS.
Parents could only claim 35 percent of a maximum of $6,000 in child care costs for two children before the American Rescue Plan, or a maximum tax credit of $2,100.
Parents with only one child can claim up to $8,000 in child care expenses.
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Muni Bonds Come With Higher Medicare Premiums During Retirement
Municipal bonds are a primary choice among investors to evade taxes. The muni bonds can incur higher Medicare deductions from the post-retirement income. Individuals should be aware of the pros and cons of investing in muni bonds. CNBC reports that President Biden announced a probable increase in tax rates; this led to a higher demand for these bonds. The US muni mutual and ETFs are worth $96.8 billion at present. The government has not entertained the idea of a tax surge. However, the bonds still draw investors’ interests due to several unique attributes.
Several Individuals Opt For Muni Bonds
Due to unexpected Medicare costs, the muni bond investment can be a bane for many investors. CNBC quoted Matthew Chancey, certified financial planner at CostalOne, who said, “There are a lot of moving parts, and you need to have someone look at it holistically.” The retirees should consider the higher Social Security tax and Medicare deduction before being awestruck by their high returns and present tax stability. CNBC reports that retirees with the Social Security payments and modified adjusted gross income (MAGI) above $44,000 (for joint filers) and $34,000 (for individual filers) are taxable for more than 85% of their Social Security income.
Medicare Premium Will Increase For Retirees Above MAGI Threshold
CNBC states that the Medicare Part B premiums have witnessed a 14.5% increase, to $170.10 per month. The threshold MAGI for retirees is $182,000 and $91,000 for joint filers and individual filers, respectively. Retired couples with MAGI above $75,000 will have to pay $578.30 under Medicare premium. The reports suggest the retirees may suffer more due to the increase in Medicare Part D, including prescription medicines. In the higher income bracket, retirees will have to pay $77.90 per month in 2022. The retirees need to calculate the deductions before investing in the bonds.
CNBC quoted Mary Kay Foss, certified public accountant and CPA faculty at CalCPA Education Foundation in Walnut Creek, California, who said, “It’s something that taxpayers seem so aware of because if they get into this higher bracket, they have to pay higher premiums for a full year.” Experts suggest that retirees should not give up on muni bond investment; instead, they need to consider all sides of the coin before getting their hands into it.
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