9 Million people with unclaimed tax credits
The Taxpayer Advocate Service (TAS) has estimated that 9 million people qualify for unclaimed tax benefits. TAS wants to inform people about claiming these missed tax credits.
As a result of the pandemic, the Earned Income Tax Credit (EIC) rules were changed so that more people would qualify for the credit. Previously, if you didn’t have a qualifying child, you had to be at least 25 and under age 65 at the end of the year. For the first time, the EIC is available in 2021 for both younger workers and senior citizens. There is no upper age limit for claiming the credit if taxpayers have earned income.
The maximum EIC for people without children almost tripled in 2021 to $1,502. The EIC expansions for young adults and seniors without qualifying children are temporary. Congress must take action to extend these expansions or, even better, make them permanent.
Senior citizens may not have filed a tax return in previous years because they weren’t getting a refund, and their low income didn’t require them to file. As a result of the changed EIC rules, people who didn’t file in previous years might receive a refund in 2022.
When filing your 2021 return, you have the option of using your 2019 earned income to calculate your 2021 EIC. However, your 2019 earned income must be more than your 2021 earned income to use this option. Using your 2019 earned income could result in a larger refund if you had very little earned income in 2021.
You will need to file an amended return if you have already filed your 2021 return and discover you would benefit from using your 2019 earned income.
The Taxpayer Advocate has also reported that people have failed to claim the Recovery Rebate Credit, the Child Tax Credit.
The Recovery Rebate Credit is available for people who didn’t receive the stimulus in 2021. If you didn’t receive the full amount of stimulus you were entitled to, you can claim it as a Recovery Rebate Credit on your return. You may be able to receive the full amount of these credits, even if you have no income or are not usually required to file a federal income tax return.
For tax year 2021, the Child Tax Credit increased from $2,000 per qualifying child to $3,600 for children under age 5, and $3,000 for children 6 through 17 at the end of 2021.
TAS is also trying to make people aware that time is running out to claim the credits on your 2021 federal income tax return using the IRS’s Free File.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at firstname.lastname@example.org.