Welcome to 2021 Tax Season!

We hope that 2021 was a prosperous and healthy year for you and your family. We are currently preparing for the 2021 filing season. Here is some information regarding tax changes and important topics that may be relevant to you.

 

Organizer

Recently we have had more requests for Tax Organizers. If you prefer not to fill one out, please notify our office and we can have you removed from those future mailings. We encourage you to assemble your tax information and complete as much of the organizer as possible. Most of your 2020 amounts are preprinted so that you may easily verify recurring items. Disregard any items in the organizer that do not apply to you. Please email, mail or bring in the organizer and all tax documents as soon as they become available. If the organizer is not provided with this letter and you wish to receive a copy, please call our office and we can email or mail a copy to you.

 

Tax Season Hours

Beginning Monday, January 31st through Friday, April 15th, we will have extended office hours. We will be open from 7:30 A.M. to 6:00 P.M. from Monday-Friday and 8:00 A.M. to 12:00 P.M. on Saturdays.

 

Tax Documents

We will return your original tax documents to you upon completion of your tax return. We may not keep copies of all documents you submit to us. It is your responsibility to keep your tax records in case of an IRS or state notice.

We must receive all information to prepare your returns at least 45 days prior to the due date of the returns. If we have not received all of your information at least 45 days prior to the due date, we cannot guarantee that your returns will be completed before the deadline. If we are unable to complete the returns, we will assume that you want us to prepare an extension of time to file your returns; however, you will need to provide us with an authorization before we can file the extension on your behalf. You should keep in mind that this would be an extension of time to file the returns; however, any tax estimated to be due would need to be paid with the extension request. We assume no liability for late filing or late payment penalties.

Fees

Due to current increases in general business and personnel costs, our fees will be increasing.

 

Appointments

If you have previously received a prescheduled appointment, a phone call was made to remind you of the appointment. If you are interested in scheduling one, please do not hesitate to contact our office.

 

Below are some important tax changes and topics that may impact you.

 

Stimulus payments

The American Rescue Plan Act, which was passed into law in March 2021, authorized a third round of stimulus payments (also referred to as economic impact payments) that were issued to many taxpayers.

 

People who received an economic impact payment should have received IRS Notice 1444-C, Your Economic Impact Payment, notifying them of the amount of the payment you should have received. The maximum payment was $1,400 per taxpayer, spouse, and dependent. The economic impact payments are

treated as advance tax credits against the 2021 income taxes. If applicable, please include a copy of Notice 1444-C when you provide us with your other tax documents.

 

Advanced child tax credits

Starting in July 2021, the IRS began sending Advanced Child Tax Credit payments to those who qualify to claim the Child Tax Credit on their 2021 income tax returns. The total calculated Child Tax Credit that taxpayers can claim on their 2021 income tax return will be reduced by the amount of any advanced payments received.

The IRS will send Letter 6419 to taxpayers in January 2022 reminding them of the amount of advanced payments they received. If this applies to you, please provide us with a copy of the notice so that we can properly calculate the Child Tax Credit you are eligible to receive on your 2021 income tax return.

 

Online IRS account

We highly recommend that you set up your own IRS online account. With an online IRS account, you can view your account status, make payments (including balances due and estimate, among others), view past payments, confirm economic impact payments received, pull IRS transcripts, and view new IRS notices and letters you received, among other activities.

Accounts can be set up in as little as 10 minutes at www.irs.gov. If you have any trouble setting up an account, please contact our office and we can help walk you through the process. We can also help you set up your account in person during your tax appointment. If you are married, then each spouse should set up their own separate account.

 

Identity theft measures

Starting in 2021, all taxpayers can register for an Identity Protection PIN (IP PIN), which is a six-digit number assigned by the IRS that prevents others from filing fraudulent returns using your Social Security Number or Individual Taxpayer Identification Number (ITIN). Previously, the IRS only made this program available to identity theft victims.

You can register for an IP PIN at www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin. Once you are registered, the IRS will send you a new six-digit PIN in the mail each January. Any income tax returns filed on your behalf, whether by paper or electronically, will be rejected by the IRS unless the correct six-digit PIN is reported on your income tax return.

 

Property transactions

Did you sell any real estate this year? Be sure to provide copies of escrow statements, as well as the Loan Estimate form, the Closing Disclosure form, and California Form 593, Real Estate Withholding Tax Statement. We need these documents to properly prepare your return. If you can get them to us as early as possible, we can make sure we have everything we need, and make sure that any state withholding documentation is correct.

 

1099s and K-1s

If you received 1099s or K-1s from investments in 2021, we may extend your return in case these documents are corrected after the original filing deadline. We are seeing increasing numbers of corrected information returns, which require taxpayers to amend their original tax returns to reflect the corrected amounts. In some cases, the amounts are vastly different and can create additional costs in amending the tax returns and potential penalty problems.

 

Foreign accounts

We must report overseas assets owned by businesses as well as individuals. So, the reporting requirements are increasing and the penalties for failure to report continue to be harsh. Not all foreign holdings must be reported. If, for example, you hold stock in a foreign company through a U.S. broker, those holdings do not have to be separately reported. However, if you hold any other types of foreign assets, including bank accounts and securities accounts, please let us know. If you have any doubt as to whether any of your assets are foreign, please discuss those assets with us. Again, this year we will need information on a business’ foreign holdings as well.

Please take extra care in preparing your organizer and documentation so we can do our best in finding new tax benefits that are hidden in the law and protect you from more aggressive audit programs and larger penalties.

If you have any questions, please feel free to contact our office. We appreciate the opportunity to be of service to you.

 

Sincerely,

Atherton & Associates, LLP