Issue 37  February 2nd 2022

Advance Child Credit & Recovery Rebate Credit

Internal Revenue Service is mailing Letter 6419 to parents who the agency says got advance child credit payments in 2021. Taxpayers will need to provide this letter to their tax preparer so that they would be able to appropriately account for the child credit on taxpayer's tax returns. For most, the child credit will exceed the advance payments because IRS made only six-monthly payments in 2021. If this is the case, the taxpayer will be able to claim the excess as a refundable credit on their tax return.

Another letter that taxpayers will receive from the IRS will contain information regarding the third stimulus check of $1,400 ($2,800 for joint filers) plus $1,400 more for each claimed dependent. Do not forget to provide this letter to your tax preparer as well. If you did not receive the third stimulus check or you received the partial amount you will be able to claim it (or part of it based on your adjusted gross income) as a refundable tax credit on your tax return. The stimulus is not considered taxable income to taxpayers.

Paycheck Protection Program (PPP) Funds - Non-Taxable but Reportable

For 2021, taxpayers are required to report to IRS certain information relating to PPP loan forgiveness in form of the statement that will need to be attached to your tax return regardless of what type of entity you are as long as you received the PPP funds, and they were forgiven or will be forgiven. The following information will need to be reported on a statement:

1. Name, Address & Tax ID number,
2. A statement that you are applying or applied section 3.01(1), (2), or (3) of Rev. Proc. 2021-48, and for what taxable year (2020 or 2021) as applicable,
3. The amount of tax-exempt income from forgiveness of the PPP Loan that you are treating as received or accrued and for what taxable year (2020 or 2021) and;
4. Whether forgiveness of the PPP Loan has been granted as of the date you file your return.

Please keep in mind, if PPP funds received were not forgiven those funds are treated as a loan and will have to be repaid with the interest.

World-Wide Income Taxability!

Regardless of where you are in the world as long as you are citizen of the United States of America you will have to pay taxes to Uncle Sam on worldwide income. Is there a way to avoid paying taxes to Uncle Sam? Yes! Based on the current US tax laws, the only way to avoid filing a US tax return and paying US taxes abroad is to renounce US citizenship. Renouncing your US citizenship is a serious and permanent decision that should not be taken lightly. To avoid double taxation, if you pay income tax in a foreign country, you will be able to claim foreign tax credit on your Form 1040.

Please keep in mind, U.S. taxpayers who own foreign financial accounts must report those accounts to the U.S. Treasury Department (if aggregate value is more than $10,000), even if the accounts don’t generate any taxable income. Taxpayers should file a Report of Foreign Bank and Financial Accounts (FBAR) electronically by April 18, 2022.