As we prepare for the end of the year, it’s time to start thinking about taxes. We recently shared the latest business tax news for employers, and this week we’re sharing critical personal tax news.
These tax law updates include:
New features for the Child Tax Credit update portal
A PSA from the IRS for Natural Disaster Preparedness Month
2021 fourth quarter underpayment and overpayment interest rates
Check out everything you need to know and confirm your personal tax information is up-to-date, protected, and organized in our easy breakdown below.
Child Tax Credit Update Portal: New Features
Do you receive the Child Tax Credit via mail? Now, you can quickly and easily update their mailing address in the portal on IRS.gov to avoid mailing delays or even having a check returned as undeliverable. This change will update your address for all future checks as long as you update before the end of the month. You can still make changes after the end of the month, but the request won’t be effective until the next scheduled monthly payment.
When you change your address using the Child Tax Credit Update Portal, the IRS will use that address for all future correspondence. This feature is helpful even if you receive your tax credit payment by direct deposit.
For example, the IRS will mail your year-end summary statement (Letter 6419) if you’ve received advance Child Tax Credit payments during 2021. You will need this letter to fill out your 2021 federal income tax return accurately. For most families, the advance payments they receive during 2021 cover only half of the total credit, meaning they’ll claim the remaining portion on their 2021 tax return. This is why you must receive your Letter 6419 promptly.
Other things you can easily do on the Child Tax Credit Update Portal include:
Switching your payment method from a paper check to direct deposit,
Updating your direct deposit account, and
Stopping monthly payments for the rest of 2021.
Upcoming additions will allow you to:
Add or remove children in most situations,
Report a change in marital status, and
Report a significant adjustment in income.
Check the Child Tax Credit Update Portal for news and to easily make changes.
National Preparedness Month PSA: Prepare for Natural Disasters
The IRS has urged taxpayers to develop an emergency preparedness plan as we head into hurricane season and continue to deal with the threat of wildfires in some parts of the country. They recommend securing, duplicating, and organizing your critical tax and financial documents so they are easy to obtain in the aftermath of a disaster. Below are tips for doing just that.
What to Store & Where
Store your original documents in waterproof containers in a secure space. These include:
Tax returns
Birth certificates
Deeds
Titles
Insurance policies
Make Copies
Duplicate all of the above original documents and store them with someone you trust outside the area where there is a risk of natural disaster.
If your documents are all paper, use a scanner to save them on a USB flash drive, CD, or cloud service, all of which are secure and easy to transport and access.
Document Valuables
Record all of your property, particularly expensive and valuable items, with photos and videos. These can help support claims for insurance or tax benefits after a natural disaster hits.
Check the IRS disaster-loss workbooks for individuals and businesses to compile lists of belongings or business equipment.
Check Employer Fiduciary Bonds
Employers should also prepare for natural disasters when it comes to payroll. If your company uses a payroll service provider, confirm that they have a fiduciary bond in place to protect your organization in the event of a default by the provider.
The IRS also encourages employers to create an Electronic Federal Tax Payment System account at EFTPS.gov to monitor their payroll tax deposits and receive email alerts.
Know Your Resources
You may need to reconstruct your records after a disaster for tax purposes, getting federal assistance, or insurance reimbursement. Find out if your financial institutions provide statements and documents electronically.
If you’ve lost some or all of your records during a disaster, visit the IRS Reconstructing Records page for assistance.
Go to the IRS for Help
If you live in a federally declared disaster, visit the IRS Tax Relief in Disaster Situations or Around the Nation pages and check for available disaster tax relief. The IRS automatically identifies taxpayers located in the covered disaster area and provides filing and payment relief. You can also call 866-562-5227 to talk to an IRS specialist trained in disaster-related issues.
If a disaster impacted you outside of a federally declared disaster area, you might still qualify for disaster relief. This includes those not physically located in a disaster area but whose records necessary to meet a filing or payment deadline postponed during the relief period are located in a covered disaster area.
Learn more about National Preparedness Month at Ready.gov/september.
Interest Rates Stay the Same for Q4 2021
The IRS charges underpayment interest when individuals and corporations don’t pay their tax, penalties, additions to tax, or interest by the due date. This interest applies even if you file an extension.
If you pay more tax than you owe, the IRS pays interest on the overpayment amount.
The IRS determines these interest rates on a quarterly basis. For non-corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
For corporations, the rates are as follows:
General underpayment rate: Federal short-term rate plus 3 percentage points
General overpayment rate: Federal short-term rate plus 2 percentage points
Large corporate underpayments: Federal short-term rate plus 5 percentage points
Corporate overpayment of tax exceeding $10,000: Federal short-term rate plus 0.5 of a percentage point
The IRS recently announced that tax interest rates for the fourth quarter, beginning on October 1, 2021, will remain the same. The rates will be:
3% for overpayments (2% in the case of a corporation);
0.5 % for the portion of a corporate overpayment exceeding $10,000;
3% percent for underpayments; and
5% percent for large corporate underpayments.
Stay up with the latest personal tax news to protect your assets and get your information organized for tax season. Keep following our blog for vital accounting and tax news. Do you have more questions about personal tax law updates? Contact us at 603-505-2368 or schedule a complimentary consultation to find out how we can help you today!