How The Irs Handles A Jc Refund Case
A JC Refund Case is assigned to an IRS examiner and either examined or surveyed. A survey is a decision to accept a return without an examination. In all cases, the IRS will prepare a report for the JCT:
- If the JC Refund Case is agreed, partially agreed, no-changed or surveyed: The Joint Committee Review Program will prepare the report. This program is part of the IRSs Large Business and International Division.
- If the JC Refund Case is unagreed, and the taxpayer files an appeal: The IRS Independent Office of Appeals will prepare the report.
In preparing a report for the JCT, the IRS may contact the taxpayer for more information, if necessary. The report will contain:
- A brief history of the taxpayer.
- An explanation of the reasons for the refund or credit.
- Supporting documents discussing the amount of, and reason for, all the adjustments considered by the IRS for the taxable years under review.
Consult Information For 2021
When consulting tax publications to prepare your tax return for 2021, you should place close attention to the publication’s date and the applicable year referenced for specific rules. Some publications, including the IRS website, may not incorporate all 2021 tax law changes until 2022. The Build Back Better Act , which passed the House in November 2021, is pending in the Senate. Although its prospects for enactment are uncertain, some or all of the BBB provisionswhich include such 2021 changes as an extension of the increased, temporary Child Tax Credit and higher taxes at very high income levelscould yet become law.
Make Those Kids Count
No one has children just for the tax breaks, but it’s a nice perk. In the past, parents could cash in on dependent children in two big ways: the personal exemption and the Child Tax Credit. Unfortunately, the Tax Cuts and Jobs Act of 2017 got rid of the personal exemption, which allowed taxpayers with families to deduct a generous $4,050 each for both parents and another $4,050 each for every dependent child under 19 years old, plus full-time students between 19 and 23 years old.
The good news is that the federal government significantly raised the value of the Child Tax Credit. For the 2021 tax year, children ages 5 and under qualify for a $3,600 credit and children 6 to 17 qualify for a $3,000 credit .
The Child Tax Credit is much more valuable than the personal exemption because it’s a credit, not a deduction. That means the full dollar value is subtracted from your final tax bill, not just your taxable income. Even better, it’s a refundable credit, meaning that if your credits are larger than your tax bill, you get to keep the change.
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Final Thoughts: Maximize Your Tax Refund
There are plenty of ways you can get a bigger tax refund . Be sure to rethink your filing status and embrace any tax deductions or tax credits you might be eligible for.
Maximize your contributions to retirement savings plans and remember that timing is everything when it comes to filing your income taxes- and raking in a larger refund.
There is also one additional thing worth considering if youre looking to maximize your return. While you can definitely do your taxes on your own, a solid tax prep service could help make sure you find every deduction and credit possible. Some well-known options like TurboTax could be worth checking into if youd like assistance with your taxes.
Of course, getting a larger tax refund isnt the only way to keep more money in your pocket rather than relying on a tax refund you may just want to increase the salary you earn throughout the year. Yes, that will increase the amount of taxes withheld but a tax refund is technically your money coming back to you, anyway. Youre waiting for the IRS to pay you back!
Instead, reap the rewards by earning more money without having to wait on the IRS to repay your interest-free loan to them.
That said, theres nothing wrong with wanting a bigger tax refund, either. So, follow the tips and steps listed above and make sure youre getting the biggest tax refund you can!
What Is A Tax Refund
A tax refund is offered when you pay more taxes to the state or federal government than your tax liability. It could happen through payroll withholding, for instance. When this happens, you might feel like its not fair that more money was taken from you for taxes, when in reality your actual tax liability is smaller.
Well, in this situation, the government is going to cut you a check for the amount you paid in addition to your taxes, and thus refund it. Back in 2019, the average tax refund was around $3,000 according to IRSs claims.
Whether or not someone gets a tax refund depends on their financial situation. You can try predicting your tax liability with online tools for tax estimations. If your tax situation is pretty straightforward, then it shouldnt be that difficult to figure out the amount of tax you will have to pay. If you do the estimation, you might be able to find out whether you are going to owe money when tax day arrives, or whether you should get your finances ready for a cash influx.
People should also note that tax returns and tax refunds are different. A tax return is a form you have to file annually that shows the income, investments, expenses, as well as your other tax-related information. If you live in a state with income states, then this is a form you might have to file. On the other hand, tax refunds represent money you get back when you overpay your taxes. Make sure you dont confuse the two.
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Pay And File Your Taxes On Time
Delays in paying and filing your taxes can be costly. The penalties for late filing range from 4.5%/month to 22.5% of owed taxes.
For payment delays, you risk penalties from 0.5%/month to 25% of owed taxes.
The only thing you can do to avoid late payment penalties is to plan your budget better and pay your taxes on time.
When it comes to avoiding late filing fees, the solution is simple: Form 4868. If you file it by April 15, 2019, you gain a six-month extension.
This means you can file your taxes until October 15, 2019. It should give you more than enough time to gather and organize the necessary documents and implement the strategies below.
Federal Tax Deductions For Charitable Donations
You may be able to claim a deduction on your federal taxes if you donated to a 5013 organization. To deduct donations, you must file a Schedule A with your tax form. With proper documentation, you can claim vehicle or cash donations. Or, if you want to deduct a non-cash donation, you’ll also have to fill out Form 8283.
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Understand Tax Credits Vs Tax Deductions
Both tax deductions and tax credits can help you get a bigger tax refund, but it helps to understand the differences.
Tax credits reduce your tax liability on a dollar-for-dollar basis. If your tax liability is $10,000, but you then claim a $5,000 tax credit, you only owe $5,000.
In contrast, a tax deduction reduces your taxable income. For example, a $5,000 deduction could reduce taxable income of $60,000 down to $55,000. That helps because your tax liability is based on a percentage of your taxable income, depending on tax brackets. At the 22% tax bracket, a $5,000 tax deduction would ultimately reduce taxes owed by $1,100.
“Credits are generally more powerful than deductions so a taxpayer should be sure to seek out all the applicable ones for their particular situation,” says Mullins Thompson.
Still, both tax credits and tax deductions are useful. In both cases, understanding how to fully maximize deductions and credits can help you reduce your tax liability to the greatest extent possible.
“Examples include putting the maximum amount you can into savings accounts such as a 529 plan or Health Savings Account,” says Cheryl Prout, CPA, partner at The Bonadio Group. “In addition to maximizing deductions, look to maximize tax credits for things such as energy efficient improvements and purchase of electric vehicles.”
There Are Lots Of Effective Ways To Shrink Your Tax Bill And Get A Bigger Tax Refund
In fiscal 2016, the IRS processed more than 244 million tax returns, collected more than $3.3 trillion in tax dollars, and sent out more than 122 million refunds totaling more than $426 billion. Tax refunds to individuals totaled about $369 billion, with the average refund around $3,000.
There’s a good chance that whether your refund was bigger or smaller than $3,000, you would like it to have been larger than it was. Here, then, are seven ways to get a bigger tax refund.
Image source: Getty Images.
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Remember Timing Can Boost Your Tax Refund
Taxpayers who watch the calendar improve their chances of getting a larger refund. Look for payments or contributions you can make before the end of the year that will reduce your taxable income. For example:
- If you can, make January’s mortgage payment before and get the added interest for your mortgage interest deduction.
- Schedule health-related treatments and exams in the last quarter of the year to boost your medical expense deduction potential.
- This could be the time to make some charitable contributions but make sure its a qualified charity and be sure to keep track of your expenditures in your records.
- If youre self-employed, look at any purchases youll need to make that can qualify for deductions. Buy things like office equipment and software before the end of the year to help boost your refund.
- If you are able to claim the home office deduction, you can even deduct the cost of painting your home office if you want to start the new year with a fresh new look in your workspace.
Plan Ahead For Next Year
If you were disappointed at not getting a bigger tax refund this year, its never too soon to consider your tax planning efforts for next year. Here are some tips for pumping up your refund or minimizing the odds of owing money:
- Contribute to a health savings account if you have a high deductible health plan, since those contributions lower your taxable income.
- Funnel tax-free money into your flexible spending account if you have one of those instead.
- Open a traditional IRA or bump up contributions to your 401, both of which can reduce your taxable income.
- Increase your charitable giving efforts to take advantage of the larger deduction for those contributions.
- Use the IRS EITC Assistant tool to determine whether youre eligible for the Earned Income Credit.
- Harvest losses in your taxable investment account to offset any taxable capital gains.
Keep in mind that the changes enacted under tax reform are only effective through 2025 . Its a good idea to revisit your tax strategy each year to make sure youre always getting the biggest refund possible.
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Tax That Was Already Withheld
Whatever you do, dont not take credit for money you already had withheld for taxes. There are some situations in which you may have held taxes withheld and you can claim these the following year.
You can see whether that is the case by looking at Form 1099-R youll get this form from whoever paid out the benefits, as there is a box that must be checked.
Home Improvements For Medical Needs Can Be Deducted From Your Taxable Income
Medical expenses can be a major tax deduction, but only if they go over 7.5% of your adjusted gross income, which is essentially your taxable income. Any home improvements — safety bars, accessibility ramps, wider doorways, railings and lifts, for example — related to medical conditions can be included in your tax deductions for medical expenses.
Keep all your receipts and invoices and include the total cost of the improvements or additions with all of your additional medical and dental expenses on Line 1 of 1040 Schedule A.
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Tax Refunds Vs How Much You Pay
Getting a refund doesn’t mean you’re paying less in taxes. A tax refund simply means you had too much withheld and, in effect, gave the government a zero-interest loan the prior year. In the same way, if you have to pay taxes when filing, it doesn’t mean you’re paying more. It just means you had less withheld than you owed the prior year.
So rather than focusing on a refund, your main focus should be on your total tax bill and what you can do to potentially reduce the taxes you pay. Here are some suggestions.
Do I Have To Itemize Deductions To Deduct Student Loan Interest Paid In 2021
No. You can deduct interest paid on a student loan in 2021 without itemizing your deductions. You can deduct such interest and still claim the standard deduction. Remember that this deduction is limited to necessary educational expenses for tuition and fees, room and board, and required books it is subject to a maximum of $2,500 per student and phases out at higher income levels. If you are married, you must file a joint return to claim the credit, and you and/or your spouse cannot be claimed as a dependent on someone elses return.
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Determine If A Standard Deduction Or Itemized Deduction Will Give You The Best Returns
Standard deductions are fixed dollar amounts that reduce the income you are taxed on. They vary depending on your filing status. For example, those filing as single receive a deduction of $12,200, whereas the head of household taxpayers get a standard deduction of $18,350. Approximately two out of all three returns use standard deductions because of their ease of use. They dont require you to itemize deductions like medical expenses or donations and give you a deduction despite having no expenses that qualify for itemized deductions.
Itemized deductions, on the other hand, reduce your taxable income but are not a fixed dollar amount. They are tax deductions you receive for various expenses you incurred throughout the tax year. Some common itemized deductions include charity donations, large, out-of-pocket medical or dental expenses, mortgage interest, and real estate taxes. If your itemized deductions exceed the standard deduction for your respective filing status, it might be worth putting in the extra work to maximize your tax return.
Which Is Best The Choice Is Yours
Whether you pay all your taxes and then some from paycheck to paycheck, or balance what you pay so that you break even, your money habits are yours to choosejust know that if you pay less than your tax liability, the rest will be due by the tax deadline, and paying after the deadline means failure-to-pay fees will be added.
You have some degree of control over how much you pay or dont pay during the year by using a W-4 to adjust your withholding.
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Casualty Disaster Or Theft Losses
You may be eligible to deduct casualty losses relating to your home, household items, and vehicles if the damage is due to a disaster declared by the president of the U.S. For example, residents of Kentucky and Ohio counties who suffered losses due to severe storms, straight-line winds, flooding, and tornadoes that hit their areas beginning Dec. 10, 2021, will be eligible for tax relief. The Internal Revenue Service posts information about specific federally declared disasters whose victims may receive tax relief on its website.
You can also claim deductions for personal and business theft losses. To qualify as a theft loss, the taking of your money or property must have been illegal under state law. Special rules apply for determining the deductible amount. Generally, the deduction must be adjusted for any insurance recovery or other reimbursements.
These are many other items for which taxpayers may claim a deduction if eligible. The IRS provides special requirements for some deductions. As a taxpayer, it’s in your best interest to refer to IRS publications to ensure you are eligible before claiming any of these items on your tax return.
A Temporary Expansion Of The Child Tax Credit
The maximum value of the child tax credit is temporarily $3,000 per child ages 6 through 17 and $3,600 per child ages 5 and under.
Unlike in prior years, the credit is fully refundable for 2021, meaning you can get the maximum amount of the credit even if it exceeds your federal income tax liability for the year.
Except for the wealthiest households, anyone with children ages 17 and below is likely eligible to claim the child tax credit, Pickering said.
And for the first time, the IRS made advanced monthly payments on that credit, from . So you may already have received about half of your credit and can claim the other half on your return. To help with that calculation, the IRS will send you a letter detailing the amount youve already received, which you should use to reconcile how much more you are due. The amount may be different than you expect.
Heres why: The advanced payments were calculated based on your 2020 or 2019 income and family situation. But the final calculation will be based on your 2021 information, which may change how much youre eligible for.
For instance, if you had another child in 2021 you may be entitled to more than your advanced payments reflect.
Those making less than $40,000 get full repayment protection. But if youre making more than $80,000 you may have to repay.
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