IRS Issues Updated FAQs for the 2021 Tax Year

The Internal Revenue Service (IRS) recently released several sets of updated FAQs for U.S. taxpayers. The updated FAQs are intended to help taxpayers address a variety of specific issues as they prepare their annual returns for the 2021 tax year. In this article, Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, covers some of the highlights:

Updated IRS FAQs on the 2021 Child Tax Credit and Advance Child Tax Credit

The IRS published “extensive updates” to its FAQs on the 2021 Child Tax Credit and Advance Child Tax Credit. The FAQs now include in-depth answers to questions on topics ranging from eligibility for these credits to the tax implications of receiving them. Notably, while the IRS makes clear that Advance Child Tax Credits are not reportable income, “[i]f the total of your advance Child Tax Credit payments is greater than the Child Tax Credit amount that you are allowed to claim on your 2021 tax return, you may have to repay the excess amount on your 2021 tax return during the 2022 tax filing season.”

Updated IRS FAQs on the 2021 Recovery Rebate Credit

In its updated FAQs on the 2021 Recovery Rebate Credit, the IRS notes that “[i]ndividuals who did not qualify for, or did not receive, the full amount of the third Economic Impact Payment may be eligible to claim the 2021 Recovery Rebate Credit based on their 2021 tax year information.” The FAQs go on to address topics such as:

• Differences between the 2020 and 2021 Recovery Rebate Credit
• Information required to claim the 2021 Recovery Rebate Credit
• Income reporting requirements for taxpayers claiming the 2021 Recovery Rebate Credit
• What to do if you received a credit for which you were not eligible
• Joint filing considerations for special circumstances (i.e. if only one spouse received a credit)

Updated IRS FAQs on the 2020 Recovery Rebate Credit

The IRS also made minor updates to its FAQs on the 2020 Recovery Rebate Credit. The updates focus specifically on circumstances in which taxpayers can still claim the 2020 Recovery Rebate Credit by filing a new or amended return in 2022.

Updated IRS FAQs on the 2020 Unemployment Compensation Exclusion

The IRS made a single update to its FAQs on the 2020 Unemployment Compensation Exclusion for U.S. taxpayers. A newly-added FAQ addresses the obligation to file an amended return or return a tax refund received for an excessive credit in 2021.

As always, the updated FAQs reference the IRS’ reliance policy. Under this policy, “if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability.” As a result, rather than relying on the IRS’ FAQs exclusively, taxpayers who have questions about their federal income tax obligations should consult with an experienced tax professional.

Get Federal Tax Help from Virginia Tax Attorney Kevin E. Thorn

If you have questions or concerns about dealing with the IRS in 2022, Virginia tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, can help. To discuss your options in confidence, call 703-752-3752, email ket@thornlawgroup.com or request an appointment online today.