What You Need To Know When Filing Your 2021 Taxes – Answers to This Year’s Biggest Tax Questions
Posted in: JustAnswer
Tax season is always a busy time of year on JustAnswer, which processed nearly 100,000 tax questions last year alone. This year promises to be even busier with nearly 7,000 tax queries received in just the first six weeks of 2022. That’s not surprising given the number of changes and residual impacts from the pandemic that have people more confused than ever. Is unemployment taxable? Can I take a home office deduction if I haven’t returned to the office yet? Can I expect a child tax credit? How do I handle a rebate credit? Can I file an extension without penalty if I have to? These are just a few of the most common questions for 2022 taxpayers.
Here’s what JustAnswer Tax Experts are saying about some of the biggest questions for this year.
1 - Is unemployment taxable this year?
In a word, yes. Last spring (March 2021), President Joe Biden signed into law the American Rescue Plan Act (ARPA) which allowed the first $10,200 in unemployment benefits collected in 2020 to be waived from federal income taxes for those with household incomes of as much as $150,000. However, "No unemployment compensation exclusion is on the books for tax year 2021," says Angela Anderson, a Tax Expert on JustAnswer. "At the same time, just because that is the case now, does not mean that the situation will not change."
If you received unemployment benefits in 2021 you should receive Form 1099-G by the end of January. It shows gross unemployment income you earned and how much, if any, was withheld for taxes. This income is reported on Schedule 1 of Form 1040, and filed as part of your federal income tax return.
2 - My company’s office stayed closed this year, and we continued to work from home. Can I deduct part of my rent or mortgage as a home office deduction?
If you receive a paycheck or a W-2 exclusively from an employer, you’re out of luck. The Tax Cuts and Jobs Act suspended the business use of home deduction from 2018 through 2025 for employees, and unfortunately, there’s no similar deduction for taxpayers who work for an employer. “Even though COVID forced a lot of people to work at home, there’s no special consideration for that because of the rules of the Tax Cuts and Jobs Act,” explained Angela Anderson, a certified public accountant and tax specialist for JustAnswer.
Self-employed taxpayers, independent contractors and those working in the gig economy can take advantage of home office deduction, but the use of their home must meet two basic requirements to qualify. According to the IRS, a taxpayer needs to use a portion of the home exclusively for conducting business on a regular basis and the home must be the taxpayer's principal place of business. Anderson continues, “If part of the home is used exclusively and regularly for business purposes, a taxpayer may be able to deduct expenses such as mortgage interest, real estate taxes, insurance, utilities, repairs, and depreciation for the area used.”
3 - What’s the deal with the Advanced Child Care Credit?
Taxpayers who received the advanced child credit should not confuse the tax credit with free money. If you received the advanced child tax credit last year, then don’t expect to see it added into your refund. The amount is deducted from the total credit you can expect to receive.
“A lot of individual taxpayers were under the impression that the advanced child tax credit was in addition to the regular child tax credit–that it was more free money from the government,” says Anderson. “The rude awakening will be when they realize the advanced child tax credit is what it sounds like—an advance, and it gets deducted from the total credit they can expect to receive.”
Keep an eye out for Letter 6419 with information about child tax credit advanced payments.
4 - What do I need to know - or do - about the rebate payment I received?
According to the Recovery Rebate Credit introduced in 2020, joint filers earning less than $150,000 and singles earning less than $75,000 are eligible for a per-person credit of $1,400. A single person can claim $1,400; a couple with two dependents—with no age limit–can claim $5,600.
Most eligible taxpayers received their full credit amount last year, either directly deposited into their bank accounts or with a mailed check. Any discrepancy between the amount owed and received can be claimed on a 2021 return.
The good news is that any taxpayers who were paid more stimulus money than they were eligible for aren’t required to repay the excess to the government.
5 - I don’t think I can get all my paperwork together in time to file by April 18th. Will I be penalized for filing an extension?
You will not be penalized for filing for an extension – however it’s important to understand that filing an extension is only for filing the paperwork, not paying any taxes that are due. In addition, the extension needs to be filed before the tax deadline due date, which is April 18th this year because of Emancipation Day holiday in Washington, D.C. Normally, the tax deadline filing date is April 15th. For taxpayers who live in MA or ME, the tax filing due date is April 19th, due to Patriot’s Day Holiday.
According to Anderson, “Any tax amount due is required to be paid on or before the tax deadline date unless a payment arrangement has been set up with the taxing agencies. This is applicable for both federal and state. Even if a payment arrangement has been set up, note that interest on the unpaid balance will still apply, however, no penalties will incur.”
Anderson adds that tax extensions can be filed online as well as by mail. It is best to file the extension online and keep a record of the filing. If the taxpayer needs to mail in the copy of the extension, the taxpayer will use the Form 4868. The mailed Form 4868 must be postmarked no later than April 18th or 19th if you are in MA or ME.
Most states automatically grant a 6-month extension. However, there are some states that do not. For those states, the same rules apply for filing the extension. It must be filed or postmarked no later than April 18th or April 19th. For tax extension information by state, refer HERE.
JustAnswer Offering Free “Tax Chat” Expert Advice April 4-18th
If all of this sounds a bit confusing or you have a very specific and/or personal tax-related question for which you could use an expert’s advice, here’s some good news. For the two weeks leading up to the filing deadline in most states – April 18th – JustAnswer will be offering a free "Tax Chat" site – www.justanswer.com/taxchat – starting Monday, April 4th - 18th that will enable anyone to chat for FREE online with a live, verified and vetted Tax Expert for answer to very personal and specific questions about your own tax return.