Thursday, July 29, 2021


The American Rescue Plan made changes to the Child and Dependent Care Credit for 2021. 

You may be able to claim this credit if you paid expenses for the care of a dependent child under the age of 13, or a dependent of any age or spouse who is incapable of self-care and who lives with the taxpayer for more than half of the year, to enable you (and your spouse, if filing a joint return) to work or actively look for work.  

Qualifying expenses include the cost of after-school care and summer day camp.  Day camp expenses qualify even if even if the camp specializes in a particular activity, such as computers or soccer.  Only day camp expenses qualify for the credit; the cost of an overnight camp does not qualify.

You can claim the credit on expenses incurred up to the child’s 13th birthday. If your son turns 13 on November 18th you can still claim the credit on day camp expenses incurred during the summer or after-school care costs through November 17th.

For 2021, eligible taxpayers can claim the credit on qualifying out of pocket employment-related expenses up to $8,000 for one dependent (up from $3,000 in prior years) or $16,000 for two or more dependents (previously $6,000).  Expenses paid by employer-provided benefits, such as those provided through a Dependent Care Flexible Spending Account (FSA), are not eligible for the credi 

The maximum credit for 2021 is 50% (previously 20%) of the qualifying expenses - $4,000 for one qualifying individual or $8,000 for two or more qualifying individuals.  The percentage is reduced once Adjusted Gross Income exceeds $125,000, regardless of filing status.  No credit is allowed for a taxpayer with AGI over $438,000, again regardless of filing status. 

The credit is fully refundable for 2021.

The maximum amount an employee can contribute to an employer-sponsored Dependent Care FSA is increased to $10,500 (up from $5,000), but only if the employer plan is revised to allow this increase.  Contributions to such a plan are considered “pre-tax” for federal income tax purposes.  If you contribute $10,500 to a revised employer plan your federal taxable wages, reported in Box 1 of the Form W-2, will be reduced by $10,500.   

Be sure to get the federal Employer Identification Number of the care provider if it is a “for-profit” business.  You must report this number on the Form 2441 - the IRS will disallow the credit if you do not provide an ID number. However, according to the IRS, “You do not have to show the taxpayer identification number if the care provider is one of certain tax-exempt organizations (such as a church or school). In this case, enter ‘Tax-Exempt’ in the space where the tax form calls for the number.”


Tuesday, July 27, 2021


I very seriously and sincerely believe no intelligent person could ever support, defend or vote for Trump.  Not in 2016.  Not in 2020.  And not now.

I very seriously and sincerely believe the only reasons anyone could support Trump is because (1) he/she is a complete moron, (2) Trump affirms and “legitimizes” his/her racist and bigoted beliefs, or (3) he/she has no conscience.

I very seriously and sincerely believe anyone who continues to support Trump is truly a clear and present danger to America, American values and American democracy.

Wednesday, July 21, 2021


In reaction/response to the COVID-19 pandemic the Internal Revenue totally closed down all operations and offices for many months in 2020.  During this period, the IRS did not process tax returns – current and amended – and did not process taxpayer and tax professional correspondence.  I do not know the extent to which payments made during this period were acknowledged and processed.
The “correctness” of the extent and duration of the IRS closure is open to interpretation.  But it happened and we must now deal with the consequences. 
When the IRS finally opened up again its system continued to spew out automatic intimidating balance due notices based on the information in the system prior to the closure.  However, much of the backlog of unopened and unprocessed correspondence were responses by taxpayers and tax professionals to erroneous balance due assessments, explaining the IRS error or correcting a taxpayer error.
Taxpayers in general are truly intimidated by continual, however erroneous, IRS notices.  And they will pay the requested balance due although they know the amount requested being wrong.  Many taxpayers paid the IRS what it asked for, despite having previously written, or had their tax professional write, to the IRS to explain errors in the assessment.
The IRS has acknowledged the backlog of returns and correspondence.  But it continues to automatically issue balance due notices, regardless of the fact that it is aware that the taxpayer may have previously responded to the notice providing information and documentation.  These continued notices assume the taxpayer had totally ignored all previous notices, which is often not true.
Responses to the continued erroneous mailings create more correspondence and increase the already humongous backlog.  And taxpayer erroneous overpayment of incorrect assessments must be addressed by taxpayers and tax pros, creating more correspondence to add to the pile.  This only compounds the problem.
What the IRS should have done, and should do now, is put a temporary hold on all open balance due accounts and cease from sending out automatic notices and other collection activities for these accounts until the backlog of correspondence is processed.  As correspondence regarding a taxpayer notice is acknowledged in the IRS system the hold must be continued until the issue is resolved.
Tax professional membership organizations should join together to urge the IRS to do this now.

Tuesday, July 20, 2021


* Attention NJ taxpayers – you may soon be getting a check in the mail from your Uncle Phil for up to $500 (highlight is mine) -   
Beginning July 2, 2021, the Middle Class Tax Rebate will be issued to eligible New Jersey residents that file a 2020 resident Income Tax return (NJ-1040) with a tax balance of $1 or more. There is no need to apply for this rebate. A rebate will be calculated automatically for eligible taxpayers when you file your NJ-1040.”
For more information go here.
* Kay Bell provides a “Guide to IRS online ways to get, track or change Advance Child Tax Credit payments” at DON’T MESS WITH TAXES.
She prefaces the post with a warning –
Don't fall for scammers who falsely say they can help you get, or get more, of the enhanced Child Tax Credit amounts that started going out this week. Instead, get help from a tax pro or use the Internal Revenue Service's online tools.”

* The recent report by the National Taxpayer Advocate reported that at the end of the 2021 tax filing season the IRS faced a backlog of over 35 million individual and business income tax returns that require manual processing.  This includes about 16.8 million manual (paper) returns waiting to be processed and about 2.7 million amended returns awaiting processing.  And that does not count the backlog of correspondence.


Russ Fox emphasizes what you need when waiting for a federal refund or a response to correspondence in “At Least I’m Not Classified as “Dead” at TAXABLE TALK -


The overall theme when dealing with the IRS remains the same: patience.  You need it when dealing with the IRS.  I do expect things to slowly improve once the IRS moves employees back to the Service Centers (probably this Fall), but given the humongous backlog it will takes years for the IRS to be back to normal.”


There is hope for those waiting for refunds.  I have heard from 3 clients recently who have finally received their 2020 refunds.


BTW – a few years ago I also had a client who received a letter from the IRS telling him the Service was not issuing his requested refund because he was dead.  Thankfully it did not take 7 years to fix.



{Once again I DID NOT enter the first few paragraphs in all caps. The Blogger system is apparently totally FU-ed and automatically does this - I have no idea why.}

Tuesday, July 6, 2021


* Kay Bell tells usMost U.S.taxpayers believe tax cheating is wrong” at DON’T MESS WITH TAXES –


87 percent said it is not at all acceptable to cheat on their income taxes.


Even more, 94 percent, believe it is a civic duty to pay their fair share of taxes.


Another 91 percent said everyone who cheats on their taxes should be held accountable.”


* And Kay outlines “3 Advance Child Tax Credit moves (& more!) to make in July”.


* Following up on an earlier post titled "The Tax Field Is Broken" Jason Dinesen provides his thoughts “On Clients Hating TheirTax Pro”.


Jason makes an excellent point about the task of today’s sincere and ethical tax pro -


Taxes are hard — I used to be fascinated by the complexity of taxes; now the complexity simply scares me. I spend so much time trying to get things right on tax returns and deal with the constant changes and the complexity and the risk . . .”


* The WASHINGTON POST reports “IRS faces 35 million unprocessed tax returns as backlog swells, watchdog says” -


The Internal Revenue Service closed the most recent filing season with more than 35 million in unprocessed tax returns, as the agency’s backlog grew markedly amid a crush of challenges related to the pandemic and economic relief efforts, a government watchdog said Wednesday.


Erin Collins, the National Taxpayer Advocate, said in her report that about 17 million paper tax returns are still waiting to be processed and approximately 16 million additional returns have been placed on hold because they require further review manually. Another 2.7 million amended tax returns have not been processed.”


* A reminder – don’t call or email your tax preparer to ask where your refund is.




If you are not part of the solution you are part of the problem.


Every single Republican who does not vocally oppose, denounce and disavow Trump and his lies is equally as responsible as Trump and the current Republican leadership for the damage being done to America, Americans, American values and American democracy.




{editorial note - I have no idea why the blogger system printed the first item in all caps and all italics and the second item in all caps.  This is not how I entered the text.  Blogger is FU-ed - or it really likes Kay Bell.}




Sunday, July 4, 2021


America truly has a reason to celebrate this July 4th.  

Thankfully we now have a President with intelligence, integrity and humanity - something that was truly lacking on the past four July 4ths.