Updates to Tax Legislation

American Rescue Plan Tax Updates

Unemployment Benefits

The first $10,200 of unemployment benefits is now nontaxable income. The IRS is updated the returns of taxpayers who received unemployment in 2020, but filed before the legislation went into effect. The IRS has also advised to not submit an amended return unless necessary after the IRS updated. 

Will I need to amend my Federal tax returns after the IRS updates it? Most likely not. However, the IRS will not issue credits that did not exist in the original return. Meaning that you might need to amend if you didn't claim the Earned Income Credit or the Child Tax Credit, but now qualify for the credit. 

However, the Michigan Treasury will NOT be updating your Michigan State return. If you did file before the change of legislation (March 19 if you are a VITA client) and received unemployment benefits in 2020, you may need to amend your Michigan 2020 tax return. You must have already received your corrected Federal refund/notice before you file your amended Michigan return. 

Stay on the lookout for tax correspondence! The IRS or the Michigan Treasury will contact you by mail if they need more information or you need to amend your tax return. Do not respond to emails or calls from a tax department. 

Please contact us, call the VITA Line at 734-677-7235, or email vita @ uwwashtenaw.org. The VITA Team is available to assist existing clients with tax amendments.

 


The Child Tax Credit

The Advance Child Tax Credit (CTC) is an early refund on your 2021 tax return. Taxpayers may receive up to $3,000 for each qualifying dependent between the ages of 6 and 17 and up to $3,600 for each qualifying dependent age 5 or younger. Qualifying taxpayers will receive monthly payments on July 15, 2021 until December 15, 2021.

Eligibility: 

  • Taxpayers can file with a Social Security number or a Individual Tax Identification number
  • Qualifying children must have lived with you for at least half of the year, be age 17 or younger, be claimed as a dependent, and have a valid Social Security Number
  • Use this IRS tool to find out if your dependent is a qualifying child
  • There is no income requirement for this tax credit

Important: 

  • If you are not required to file a tax return or did not claim the Child Tax Credit in 2020, but have qualifying dependents, use the IRS Child Tax Credit Non-filer Sign-up Tool.
  • Similarly, taxpayers will be able to update the IRS on changes to income and family composition through the Child Tax Credit Update Portal.
  • Taxpayers can all opt-out of the monthly payments and receive the refund during the tax season.
  • The income your receive from this credit is nontaxable. However, were you to qualify for a lower refund when you file your 2021 tax return, you may owe some of it back.

 


Click the image to print a PDF version for you or your clients

Please contact us, call the VITA Line at 734-677-7235, or email vita @ uwwashtenaw.org. The VITA Team is available to help answer questions about the Child Tax Credit.

 

Visit our Free Tax Help page for more information about VITA Services at United Way of Washtenaw County