The tax rules continue to evolve at a record pace. Below are some reminders for you as we enter the 2022 tax filing season.
Advance Child Tax Credit Payments. For qualified taxpayers that will receive advance Child Tax Credit payments from July – December 2021, the IRS plans to send taxpayers Letter 6419 in January 2022. This IRS form letter will provide taxpayers the total amount of advance Child Tax Credit payments that were disbursed to taxpayers either via check or direct deposit during 2021. Please retain this letter for your records and provide it to your tax preparer with your other tax documents this coming winter as the amount reported on this letter will be needed to prepare your 2021 tax return accurately.
Third Economic Impact Payments (EIP). In January 2022 the IRS plans to send out Letter 6475 to taxpayers that received the third EIP earlier in 2021. This letter will state the amount of this third stimulus payment received by taxpayers. Please retain this letter for your records and provide it to your tax preparer with your other tax documents this coming winter as the amount reported on this letter will be needed to prepare your 2021 tax return accurately.
Identity Protection Personal Identification Number (IP PIN) reminder. For taxpayers who receive an IRS IP PIN annually, be on the lookout in January 2022 for a letter from the IRS with your 2021 IP PIN number. These letters, IRS Notice CP01A, are sent out annually to taxpayers via the US mail. Be sure to retain this notice with your other annual tax documents and provide a copy to your tax preparer this winter as the IP PIN is needed to file your tax return electronically.
The purpose of the IP PIN is to enhance security when electronically filing your tax return. The 6-digit number prevents someone else from filing a fraudulent tax return using your social security number. Each year the IRS will send taxpayers a new 6-digit code to be used on their individual tax return. Prior to January 2021, IP PINs were only available to taxpayers that had a prior year tax return fraudulently filed using their social security number. Beginning with personal tax returns being filed for the 2020 tax year, the IRS expanded their security program by allowing all taxpayers to obtain an IP PIN.
- Taxpayers can obtain their own IP PIN at the IRS link at: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
- Or if you never received your annual IRS Notice CP01A from the IRS or lost your copy of the notice, you can retrieve your current year IP PIN at the IRS link at: https://www.irs.gov/identity-theft-fraud-scams/retrieve-your-ip-pin
Charity deduction for taxpayers that do not itemize their tax returns. For the 2021 tax year, the IRS is again allowing taxpayers that file their tax return using the standard deduction to claim a charity deduction on their tax return. The maximum allowed charity deduction for non-itemizers is $300 for single, head of household and married filing separate filers. Joint filers are allowed a maximum deduction for charity in the amount of $600 over and above the standard deduction of $25,100. Only cash (cash, checks, and credit or debit card payments) qualify for this $300/$600 deduction. Cash payments to a Donor Advised Fund do not qualify for this special charity deduction, nor do in-kind contributions.
Record keeping rules for charitable donations of cash (and check and credit card payments) and marketable securities. In order to claim a cash charitable deduction, taxpayers must keep records in the form of bank records or written acknowledgement from the charitable organization.
- Donations less than $250 in any one day – taxpayer must keep a copy of a bank record such as a cancelled check or bank statement, or a written acknowledgement from the charitable organization stating the dollar amount and date of the charitable donation.
- Donations of $250 or greater in any one day – taxpayer must maintain written acknowledgement from the charitable organization noting the amount and the date of charitable contribution.
For donations of stock and other marketable securities, the charity should send the donor an acknowledgement letter that describes the security, the number of shares and the date of the donation
(i.e., “Thank you for your donation of 100 shares of XYZ Corporation on December 15, 20XX”) but does not place a monetary value on the shares. The letter should also state that “no goods or services were provided by the organization in exchange for the gift”. It is recommended that the charity send the donor a separate receipt that reports the quantity and value of the donated shares on the date of the gift. While this receipt is not required, the donor will want this information for his/her own records. The value of a gift of publicly traded stock is the mean of the highest and lowest quoted selling prices on the date of the gift (excluding weekends or holidays). Neither the acknowledgment letter nor receipt need to report to the donor the proceeds from the sale of the donated securities.