Important IRS Information Update: Changes You Need to Know

Important IRS Information Update: Changes You Need to Know

As a tax-paying citizen, it is critical to stay up-to-date on any changes made to the IRS guidelines, especially when it comes to tax filing season. In this article, we will highlight important updates to IRS guidelines that every taxpayer and business owner should know.

Introduction

In recent years, the IRS has made significant changes to its guidelines, impacting taxpayers and businesses alike. These changes are designed to streamline tax filing procedures, increase transparency, and promote compliance. As we enter another tax season, it’s vital to stay informed and understand how these changes may affect you.

Changes to IRS Guidelines

One of the most significant changes made to the IRS guidelines this year impacts the Earned Income Tax Credit (EITC) and Additional Child Tax Credit (ACTC). Beginning this year, the IRS is required by law to hold all refunds with these tax credits until February 15, 2022. This delay is designed to combat fraudulent claims that have plagued the IRS in recent years. The delay is expected to affect millions of taxpayers, and it’s crucial to understand how it may impact your tax filing strategy.

Another change worth noting is the increase in the standard deduction for tax year 2021. For single taxpayers and those who are married but file separately, the standard deduction has increased to $12,550. For those who are married and file jointly, the standard deduction has increased to $25,100. This increase is in line with inflation and is aimed at helping middle-class Americans keep more of their hard-earned money.

Impact on Business Owners

For business owners, there are several changes that may impact their tax filing strategy. One of the most significant changes is the introduction of the Employee Retention Credit (ERC). This credit was introduced as part of the CARES Act and was later expanded under the Consolidated Appropriations Act. The ERC is designed to provide relief to businesses that faced significant disruptions due to the COVID-19 pandemic. Business owners can claim a credit of up to $5,000 per employee for wages paid after March 12, 2020, and before January 1, 2022.

Another change impacting business owners is the increase in the maximum amount that can be expensed under Section 179. Beginning in 2021, business owners can expense up to $1,050,000 in qualifying property, an increase from $1,040,000 in 2020. This change is aimed at helping small businesses offset the costs of qualifying property purchases.

Conclusion

Staying informed about changes to IRS guidelines is essential. The updates mentioned above are just a few examples of how the IRS is working to streamline tax filing procedures and promote compliance. As a taxpayer or business owner, it’s important to understand how these changes may impact your tax filing strategy and take advantage of any credits or deductions that may be available to you. By staying informed, you can make informed decisions and optimize your tax filing process.