october2021 - 19

FEATURE
Will the 2022 Income Tax Season
be Normal?
By Ken Berry, J.D.
THE UPCOMING 2022 tax return
season for filing 2021 returns
will be the third one since the
COVID-19 pandemic hit in early 2020. If
you're like many tax practitioners, your staffers are
returning to the business premises, or have already returned,
as much of the country resumes regular business activities.
So will the 2022 tax filing season be normal?
Not likely. In addition to lasting
health concerns, a number of new
tax law provisions will create complications
for some filers, as well as
potential pitfalls to avoid. What's
more, prospects are brightening for
year-end tax legislation that could
have a significant impact. Let's call it
the " new normal. "
Start with the scheduled tax-filing
deadline of April 15, 2022, for individuals
to file tax returns for the 2021 tax
year. During the 2020 tax season, the
IRS pushed back the tax return filing
due date until July because of the
COVID pandemic. In 2021 the deadline
was pushed back to May. The IRS isn't
expected to change the deadline for
2022, barring any unforeseen circumstances.
At least that should be
business as usual.
But consider some of the tax
changes in the American Rescue Plan
Act (ARPA) that went into effect in
2021. These could result in out-of-theordinary
situations for clients. Here are
a few common examples.
Economic Impact Payments: The
third round of Economic Impact Payments
(EIPs) began going out in March.
The maximum EIP of $1,400, plus
payments for qualified dependents,
isn't subject to federal income tax.
However, clients may have received
less than they are entitled to and,
therefore, are eligible for a credit on
their 2021 return.
Child Tax Credit: ARPA enhanced
the Child Tax Credit (CTC) by raising
the maximum CTC to $3,000 ($3,600
for children under age six), making the
credit fully refundable and authorizing
advance payments of the credit. The
IRS began issuing advance CTC payments
in July. This must be factored
into 2021 tax returns and could cause
tax return headaches. Clients should
be informed that their tax refund may
be smaller than they expected due to
advance CTC payments.
Dependent care credits: Under
ARPA, the maximum dependent care
credit for 2021 is increased for taxpayers
with an adjusted gross income of
$125,000 or less to $4,000 for one child;
$8,000 for two or more children (up
from $600 and $1,200, respectively).
In addition, the credit is made fully
refundable. Ensure that your clients
are reaping the maximum tax rewards
on their 2021 returns.
Unemployment
benefits: The
new law also provides a unique tax
break for some workers who who lost
their jobs in 2020. In brief, the first
$10,200 of unemployment benefits is
exempt from tax if your AGI was below
$150,000. But many taxpayers have
missed this tax break, so review your
clients' situations carefully.
COBRA subsidies: Generally,
employees who leave a company may
elect to continue health insurance
coverage for a specified time (usually,
up to 18 months) under the Consolidated
Omnibus Budget Reconciliation
Act (COBRA). But the employees must
pay the tab (plus a standard 2%
administrative fee). Fortunately, ARPA
creates a 100% subsidy for COBRA premiums
spanning April 1, 2021 through
September 30, 2021. These payments
are completely tax-free to those that
benefit. Note: Employers may recoup
their costs through a payroll tax credit.
Net result: This is shaping up as
another challenging tax return season
for taxpayers and tax return preparers
alike. Plus, drums are beating louder
in Washington for tax increases that
might be enacted before the end of the
year. Don't think that things are back
to " normal " quite yet. ■
Ken Berry, J.D. is a tax attorney in Washington,
D.C. and is the senior tax correspondent
for CPA Practice Advisor.
OCTOBER 2021 ■ www.CPAPracticeAdvisor.com
19
http://www.CPAPracticeAdvisor.com
october2021

Table of Contents for the Digital Edition of october2021
