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IRS Reminds Taxpayers of American Rescue Plan Benefits

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What You Need to Know

  • The IRS describes many of these expanded tax benefits in its new fact sheet.
  • The benefits are available only to people who file a 2021 federal income tax return.
  • Under the law, the IRS cannot issue EITC refunds before mid-February.

The Internal Revenue Service on Tuesday reminded taxpayers of the key tax benefits included in the American Rescue Plan and other recent legislation — such as a new deduction for gifts to charity and the recovery rebate for those who missed out on last year’s third round of economic impact payments.

In a new fact sheet, FS-2022-10, the IRS describes many of these expanded tax benefits.

The IRS emphasized that these benefits are available only to people who file a 2021 federal income tax return.

Benefits include:

  • An expanded child tax credit: Families can claim this credit, even if they received monthly advance payments during the last half of 2021.
  • An increased child and dependent care credit: Families who pay for day care so they can work or look for work can get a tax credit worth up to $4,000 for one qualifying person and $8,000 for two or more qualifying people.
  • A more generous earned income tax credit: The American Rescue Plan boosted the EITC for childless workers. There are also changes that can help low- and moderate-income families with children.
  • The recovery rebate credit: Those who missed out on last year’s third round of economic impact payments (EIP3), also known as stimulus payments, may be eligible to claim the RRC. This credit can also help eligible people whose EIP3 was less than the full amount, including those who welcomed a child in 2021.
  • A deduction for gifts to charity: The majority of taxpayers who take the standard deduction can deduct eligible cash contributions they made in 2021. Married couples filing jointly can deduct up to $600 in cash donations, and individual taxpayers can deduct up to $300 in donations. Itemizers who make large cash donations often qualify to deduct the full amount in 2021.

The IRS reminds early filers that by law, the agency cannot issue EITC refunds before mid-February.

The same rule applies to refunds that include the additional child tax credit.

In 2022, the ACTC will typically be claimed by U.S. citizens abroad who did not have a main home in the United States for more than half of 2021, the IRS explains.

“Normally, the mid-February restriction does not apply to the Refundable Child Tax Credit (RCTC) claimed by people who had a main home in the U.S., unless they also claim the EITC,” the IRS said.

Another reminder: Everyone should make sure they have all their year-end statements in hand before filing their 2021 return.

“Besides all W-2s and 1099s, this includes two statements issued by the IRS — Letter 6419, showing their total advance Child Tax Credit payments, and Letter 6475, showing their total EIP3 payments,” the IRS said.