Journal of Financial Planning: October 2021
Taxes are often seen as the Wicked Witch of the West. Unsightly, frightful, and generally disliked. If only throwing a bucket of water on taxes would make them melt.
We have had a rough year with COVID-19, and it has thrown normalcy around like a tornado. If there was a hero for many in our story, it would likely be the stimulus checks. The third check was sent out earlier this year, and there has been bated breath about a fourth one. Alas, that seems to have fizzled out. Regardless, it is a simple gesture to ensure clients follow up on the third check through the IRS’s “Get My Payment” page if it still managed to slip by. Even if they fail to get it this year, just like on their 2020 tax returns, there should be an option to claim them in 2022 if they just never quite got around to it.
Even if no fourth stimulus check has surfaced, it is nice to see that the IRS sent out almost $15 billion to advance child tax credit recipients. This could help nearly 60 million children across the country, which is 26 million more than who would have received it under the previous law.
But it is important to note that this, unlike the stimulus checks, is not just a gift—it’s an advance credit against their next tax filing. So these taxpayers will get a lower return in the future at an equal rate of what they take in the advance tax credit now. This could cause complications for households that don’t properly plan for this change. The current policy is only planned to work this year, but it may be up for renewal depending on policymakers.
All of this is in addition to lots of new tax laws being discussed. There is a lot going on, and we as a society are still reeling from the whirlwind that was the pandemic. COVID-19 has altered our lives, and it will have far-reaching effects for our economy and taxes going forward. I am sure I speak for all of us when I say, “we’re not in Kansas anymore.”
