Taxpayers can start checking their tax refund status within 24 hours after receiving an e-filed return. The easiest and most convenient way to do this is by using the Where’s My Refund? Tool on the IRS website. The tool also provides a personalized refund date after the return is processed and a refund is approved.

There are two ways to access the Where’s My Refund? Tool – visiting IRS.gov or downloading the IRS2Go app. To use the tool, taxpayers will need the following information:

• Their Social Security number or Individual Taxpayer Identification number
• Tax filing status
• The exact amount of the refund claimed on their tax return

The tool displays progress in three phases: when the return was received, when the refund was approved, and when the refund was sent. When the status changes to approved, this means the IRS is preparing to send the refund as a direct deposit to the taxpayer’s bank account or directly to the taxpayer in the mail, by check, to the address used on their tax return.

The IRS updates the Where’s My Refund? Tool once a day, usually overnight, so taxpayers don’t need to check the status more often than that. Calling the IRS won’t speed up a tax refund. The information available on Where’s My Refund? is the same information available to IRS telephone assistors.

Taxpayers should keep in mind that they need to allow time for their financial institution to post the refund to their account or for it to be delivered by mail. As always, please contact the office if you have any questions about tax refunds, tax returns, or any other tax matters. Help is just a phone call away.

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

The American Rescue Plan Act (ARPA), passed in March 2021, increased the child tax credit benefit for the 2021 tax year and simultaneously directed the IRS to deliver half of the amount that families are eligible for in monthly checks beginning in July. The advanced payments are worth up to $300 per month per child under age 6, and up to $250 for each child ages 6 to 17.

Typically, the child tax credit is claimed when filing your annual tax return on form 1040. The Biden administration has made it a priority to deliver relief immediately to struggling families, and the advanced child tax credit payments have been touted by the administration to help reduce child poverty.

The maximum child tax credit amount is available to individuals with adjusted gross income of $75,000 or less and married couples with adjusted gross income of $150,000 or less. Credits phase out for incomes above those thresholds. The IRS will use older (2019 or 2020 if filed) income information to process the advanced payments. As with many advanced credit schemes, the final credit that a taxpayer or couple will be eligible for will depend on their actual 2021 income. Thus, many taxpayers may find themselves in the unenviable situation of being forced to repay some or all of the advanced credit when filing their 2021 income tax returns in 2022.

The IRS has developed an online portal for opting out of the advanced child tax credit. The tool can also be used for non-filers that are otherwise eligible for the advanced payments to apply.

To opt out you will need the following:

• Either IRS username for your IRS account or an ID.me account, which can be registered upon sign up or created with a Facebook, Google, or LinkedIn login
• A photo ID copy of your passport or driver’s license
• A camera phone capable of taking a picture to be verified against the photo ID
• Your Social Security Number

Additionally, please keep in mind that for married couples, each spouse will independently need to opt out of the advanced payment program.

For those taxpayers who are certain they will not be eligible for the full credits in 2021 or do not want to deal with a potential situation of owing back a significant portion of the credit when filing their 2021 return, the use of the opt out tool is strongly encouraged.

If you’re self-employed and use your car for business, you can deduct certain business-related car expenses. There are two options for claiming deductions:

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Many businesses hire part-time or full-time workers, especially in the summer. The IRS classifies these employees as seasonal workers, defined as an employee who performs labor or services on a seasonal basis (i.e., six months or less). Examples of this kind of work include retail workers employed exclusively during holiday seasons, sports events, or during the harvest or commercial fishing season. Part-time and seasonal employees are subject to the same tax withholding rules that apply to other employees.

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The IRS is automatically refunding money to eligible people who filed their tax returns reporting unemployment compensation before the recent changes made by the American Rescue Plan.

Background

Typically, when an individual receives unemployment compensation, it is taxable. However, under a recent law change (American Rescue Plan), taxpayers who earned less than $150,000 in modified adjusted gross income can exclude some unemployment compensation from their income, which means they don’t have to pay tax on some of it.

People who are married and filing joint returns can exclude up to $20,400 – up to $10,200 for each spouse who received unemployment compensation. All other eligible taxpayers can exclude up to $10,200 from their income.

This law change occurred after some people filed their 2020 taxes. Eligible taxpayers who filed and figured their 2020 tax based on the full amount of unemployment compensation will automatically receive a refund. The IRS expects to begin issuing these refunds in May.

What You Need to Do

There is no need to do anything. The IRS will determine the correct taxable amount of unemployment compensation. Any resulting overpayment of tax will be either refunded or applied to other taxes owed.

The recalculations will take place in two phases:

• First, taxpayers who are eligible to exclude up to $10,200.
• Second, those married filing jointly who are eligible to exclude up to $20,400, and others with more complex returns.

When to File an Amended Return

Taxpayers only need to file an amended return if the recalculations make them newly eligible for additional federal tax credits or deductions not already included on their original tax return. For example, the IRS can adjust returns for taxpayers who claimed the earned income tax credit and, because the exclusion changed their income level, may now be eligible for an increase in the EITC amount.

However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but are now eligible to claim them following the change in the tax law. If they now qualify for these credits, they should consider filing an amended return to claim this money. These taxpayers may want to review their state tax returns as well.

Taxpayers who haven’t yet filed and choose to file electronically simply need to respond to the related questions when preparing their tax returns. For those who choose to file a paper return, instructions and an updated worksheet about the exclusion are also available.

Don’t hesitate to contact the office with questions. As always, help is just a phone call away:

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Some taxpayers who claim the 2020 Recovery Rebate Credit (RRC) on their 2020 tax returns are discovering that they may be getting a different amount than they expected. Let’s take a closer look at why this is happening.

The first and second Economic Impact Payments (EIP) were advance payments of the 2020 credit. Most eligible taxpayers already received the first and second payments and shouldn’t (and don’t need to) include this information on their 2020 tax return. However, those who didn’t receive a first or second EIP or received less than the full amounts may be eligible for the 2020 RRC. However, to claim the credit, they must file a 2020 tax return – even if they don’t usually file a tax return.

How the Rebate Recover Credit Works

When it processes a 2020 tax return claiming the credit, the IRS determines the eligibility and amount of the taxpayer’s credit based on the 2020 tax return information and the amounts of any EIP previously issued. If a taxpayer is eligible, the credit is reduced by the amount of any EIPs already issued to them.

• If there is a mistake with the credit amount (Line 30 of the 1040 or 1040-SR), the IRS will calculate the correct amount, make the correction and continue processing the return.
• If a correction is needed, there may be a slight delay in processing the return, and the IRS will send the taxpayer a letter or notice explaining any change.

Taxpayers who receive a notice saying the IRS changed the amount of their 2020 credit should read the notice and review their 2020 tax return. Taxpayers who disagree with the IRS calculation should review their letter as well as the questions and answers for what information they should have available when contacting the IRS.

Common reasons that the IRS corrected the credit are as follows:

• The individual was claimed as a dependent on another person’s 2020 tax return.
• The individual did not provide a Social Security number valid for employment.
• The qualifying child was age 17 or older on January 1, 2020.
• Math errors relating to calculating adjusted gross income and any EIPs already received.

Don’t hesitate to call if you have any questions about this topic:

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Beginning January 1, 2021, and extending through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided, and the expense is not lavish or extravagant under the circumstances.

In most tax years, there is a 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception was included in the Taxpayer Certainty and Disaster Relief Act of 2020, part of a series of tax laws intended to provide coronavirus-related relief.

Where can businesses get food and beverages and claim 100%?

Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods, not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities like restaurants, even if a third party operates these facilities under contract with the employer.

Questions?

For more information about this and other coronavirus-related tax relief for business owners, please contact the office today:

San Jose: (408) 252-1800

Watsonville: (831) 726-8500

Many parents are looking for ways to save for their child’s education, and a 529 Plan is an excellent way to do so. Even better is that thanks to the passage of tax reform legislation in 2017, 529 plans are now available to parents wishing to save for their child’s K-12 education as well as college (two and four-year programs) or vocational school.

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Wheeler Accountants is thrilled to welcome Jeanne Wiener, CPA and Personal Finance Specialist, to the firm. Jeanne and her husband Joel currently live in San Carlos, CA. In June, Jeanne began heading up our new Estate and Trust group.

Jeanne brings extensive experience to Wheeler. She received her B.A. in Economics from Stanford University, and her Masters in Business Administration, Accounting, from the University of Southern California. Most recently, she worked as a Partner at Young, Craig & Co. specializing in Estate, Trust, and Individual tax for high-net-worth clients. Before transitioning to client tax services, she worked for many years as the Chief Financial Officer at Union Offset, Inc.

Jeanne is passionate about assisting clients with estate and trust matters, knowing what a profound difference it can make in people’s lives and financial futures. We look forward to gaining her expertise as we continue to grow as a firm.

It’s an exciting week for the Wheeler family, as Matt and Jenny Wheeler welcome their 4th child. In fact, with impeccable timing, little Charlotte Maddan Wheeler made her debut bright and early on Mother’s Day morning!

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Charlotte Maddan Wheeler

Born on 5/9/21 at 3:31 AM

6 lbs 15 oz

20 inches

Her parents and her 3 older siblings, Samantha, Devon, and Alexandra, are all feeling great.

Congratulations to the Wheeler family!