Question: Erin’s 2020 Form 1040 was extended. She is eligible for the child tax credit (CTC) and will claim the credit on her 2020 return. If Erin’s tax return does not get filed until October 2021, is she eligible for the advance CTC payments in 2021?

Answer: Yes, advance payments will be estimated from information included in an eligible taxpayer’s 2020 tax returns, or their 2019 returns if the 2020 returns are not filed and processed yet.

For tax year 2021, families claiming the CTC will receive up to $3,000 per qualifying child between the ages of 6 and 17 at the end of 2021. They will receive $3,600 per qualifying child under age 6 at the end of 2021.

Advance payments of the 2021 CTC will be made regularly from July through December to eligible taxpayers who have a main home in the United States for more than half the year. The total of the advance payments will be up to 50% of the CTC.

Taxpayers, and by association their tax professionals, may face two major issues this post-tax season: IRS refund adjustments and estimated tax payments for the 2022 tax season.

The IRS is currently recalculating taxes on unemployment benefits for 2020 based on recent tax law passed during the 2021 tax season. The IRS began issuing refunds the week of May 14 to eligible taxpayers who paid taxes on 2020 unemployment compensation that was later excluded from taxable income due to the American Rescue Plan. Tax pros should confirm these recalculations were done correctly for their clients. In some instances, if a client did not originally claim the earned income credit or other credits, but is now eligible, an amended return will need to be filed.

The IRS will send taxpayers a notice explaining the corrections, which they should expect within 30 days of when the correction is made. Taxpayers should keep any notices they receive for their records. Taxpayers should review their return after receiving their IRS notice(s).

Corrections to any earned income credit (EIC) without qualifying children and the recovery rebate credit are being made automatically as part of this process. However, some taxpayers may be eligible for certain income-based tax credits not claimed on their original return, such as the EIC for their qualifying children. If so, they should file an amended tax return if the revised adjusted gross income amount makes them eligible for additional benefits.

Additionally, making estimated tax payments throughout the year prior to filing their return can help taxpayers reduce that end-of-season sticker shock some face when they realize they owe a significant amount of money (and avoid penalties and interest). Many taxpayers may be required to make estimated tax payments if their income is drastically different from prior years.

To help tax professionals with this post-tax season information, the National Association of Tax Professionals (NATP) is offering two completely free webinars that will detail these topics and help tax professionals determine what they can and should be doing now to help their clients.

Filing Form 1040-X After IRS Calculations — As the IRS recalculates taxes on unemployment benefits, it’s important for you to confirm that it was done correctly. For example, if your client did not originally claim the earned income credit or other credits, but is now eligible, you’ll need to file an amended return.

Calculating Estimated Tax Payments — With the economy opening back up, your client’s income may look drastically different from last year. There are tools available to you to help calculate estimated tax payments and minimize penalty abatement for your clients. We also discuss the new proposed legislation, Tax Deadline Simplification Act.

To learn more and register, visit natptax.com/help.

These webinars are available to anyone interested, not just NATP members.

Question: In March 2020, Roberta lost her full-time job and was no longer able to afford the rent on her apartment in New York City. Roberta decided her best option was to move into her childhood home with her elderly parents. During the first three months of 2020, Roberta earned $12,000 (as reported on her W-2), most of which was used for her living expenses until May 2020, when she moved to Kansas. When her parents file their 2020 tax return, due in October, can they claim Roberta as a qualifying relative?

Answer: No. Although the parents may have provided over half of Roberta’s support for 2020, her W-2 wages exceed the threshold amount. A qualifying relative must meet four requirements, one of which is gross income for the year has to be less than the exemption amount without regard to the reduction to zero for 2018-2025 ($4,300 for 2020) (Rev. Proc. 2019-44).