2021 Child Tax Credit Changes Under The American Rescue Plan Act

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The American Rescue Plan Act changed the way that the Child Tax Credit is paid to eligible parents for 2021. Instead of being claimed as a credit on your income tax return as was previously the case, starting this month, one-half of the amount of the credit will be paid monthly via a direct deposit to your checking account or a physical check mailed to you. The amount of the credit will also increase to $3,600 for children under the age of 6 and $3,000 for children ages 6 to 17. The credit was only $2,000 prior to this change.

The American Families Plan

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President Biden recently proposed the American Families Plan which calls for an increased audit rate and higher income taxes. The proposed changes could require proactive tax planning now to determine the best timing of income recognition. The Plan includes several new spending initiatives in the areas of education, childcare, paid leave, nutrition, unemployment insurance, and tax credits.

Tax Day for Individuals Extended to May 17

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The Internal Revenue Service 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 IRS will be providing formal guidance in the coming days.

Protective Refund Claims for Taxes Paid Under the Affordable Care Act (ACA)

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April 15th is not just Tax Day. It is also the deadline to file a protective refund claim for timely-filed 2017 tax returns. Currently there is litigation pending in the Supreme Court challenging the constitutionality of the tax provisions of the Affordable Care Act (“ACA”). This litigation may not be decided until the summer. In the event the Court determines the ACA tax provisions are unconstitutional, taxpayers may preserve their right to a refund by filing a protective refund claim for taxes paid in tax years where the statute of limitations remains open, generally 2017 and after.

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