Stonitsch Financial Consulting, LLC

02/21/2022

Does HUD Owe You A Refund?
If you had an FHA-insured mortgage, you may be eligible for a refund from HUD/FHA. Takes just seconds to check.

02/12/2022

If you're feeling like it is taking forever to get your tax return issues resolved, the IRS is behind on processing 24 million tax returns left over from the 2020 tax year. It's especially bad if you needed to send something to them via the mail vs. electronically filing. The pandemic is to blame, as is a serious lack of proper funding both historically and currently.

Historically, since decades of underfunding left them with antiquated computer systems. When many non-IRS employees were asked to work from home, they could use their laptops and access their companies' info via cloud-based databases and software programs. Due to historical underfunding, the IRS hasn't been able to modernize in decades. So, when they sent people home, they couldn't do any work and mail piled up in *trucks* at their office buildings.

Congress has been unable to agree to increase funding. As always, I try to avoid taking political sides. The facts are some think choking off funding is a good idea since the IRS is viewed as the bad guy. Others want to increase funding to help them modernize, backfill vacant positions, and even increase staffing to get caught up and attempt to beef up enforcement. Whatever your point of view, the consequence of underfunding are now laid bare.

Your friendly tax-preparer is doing their best to help you if you’re caught in a long delay or are getting notices about things that you thought you had addressed in letters sent via the mail. Best to grant them a Power of Attorney to get through on a special hotline and attempt to speed things along. But really, my efforts are met with otherwise friendly people at the IRS who have a 10–20-foot stack of envelopes and packages that they haven’t opened and can’t give me any more information they can give you.

Moral of the story is “get your filings right the first time and do it electronically.” Otherwise, I can help fix things, but it will be a 6-12 month wait.

The inventory of unprocessed returns and related correspondence was provided by the IRS’s taxpayer advocate service to the tax-writing committees in Congress. The Treasury Department, the IRS’s parent agency, warned in January that it expected its response to be subpar this year.

12/15/2021

Attn parents/ guardians that qualify for the "expanded" child tax credit, which was made refundable in 2021 and many people are receiving the advanced credit via monthly deposits: The CTC is reverting back to prior rules as of 12/31/2021 if the Build Back Better legislation is not passed. It cleared the House and observers think it is uncertain to pass the Senate. If it's doesn't, your monthly checks will stop and any CTC for which you may still qualify will be credited to your 2022 taxes when you file in 15 months - April 2023.

As is my usual practice, I prefer to not discuss my own personal opinions on political matters that impact my business practice. I bring this to your attention solely as a heads up about this assistance possibly being reduced. Similarly, I ask that commenters also refrain from a political debate here.

11/05/2021

2022 tax update: For those fortunate enough to contribute the max to their 401k, 403b, etc. the limits are increasing next year, so talk to your HR dept at work. IRS: "The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased to $20,500, up from $19,500." There are also some adjustments to the earnings amounts that make your IRA contributions qualify for a deduction. The limit for IRA contributions is still $6,000 (or $7,000 if you're over age 50). See

IR-2021-216, November 4, 2021 — The Internal Revenue Service announced today that the amount individuals can contribute to their 401(k) plans in 2022 has increased to $20,500, up from $19,500 for 2021 and 2020.

10/19/2021

IRS Mailing Letters to Advance Child Tax Credit Recipients

IRS to mail Letter 6419 in January 2022 to taxpayers who opted for advance payments; taxpayers should present letter to tax professional

IRS to mail Letter 6419 in January 2022 to taxpayers who opted for advance payments; taxpayers should present letter to tax professional

07/12/2021

If you have children and have previously received the child tax credit, the government has increased the credit amount AND switched to sending you monthly payments instead of needing to wait until you file your tax return next April. If you would like some help with this, please send me a private message.

Melinda Williams, a married mother of five, didn't think her family qualified for the child tax credit since they don't earn enough to file income tax returns. So the New York City resident didn't pay much attention to Congress' historic increase of the benefit earlier this year.

06/22/2021

Important information here if you are eligible for the child tax credit: (1) The amount is increased, and (2) more importantly, you can receive the credit on a monthly basis instead of waiting until April when you file your tax return.

CAUTION: Many people eligible for the CTC are used to getting a nice refund due to the CTC. So if you start receiving the automatic payments each month, your refund will shrink accordingly.

As always, PM me if you would like some help deciding what to do.

This tool, an update of last year’s IRS Non-filers tool, is also designed to help eligible individuals who don’t normally file income tax returns register for the $1,400 third round of Economic Impact Payments (also known as stimulus checks) and claim ...

05/11/2021

Important info for those you use (or should use) Healthcare Flexible Spending Account and/ or Dependent Care Flexible Spending Accounts (FSAs). New rules significantly relax the use-it-or-lose-it regulations, expand the amounts available for tax exemptions, and, depending on your employer, changes can be made mid-year even without a "Life Event Change". Contact me via PM if you want some help.

Source: Tax Practice Advisor
https://www.taxpracticeadvisor.com/individual-income-taxes/news/21221805/new-twists-to-flexible-spending-accounts

New Twists to Flexible Spending Accounts
Two new federal laws—the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA)—have created new planning opportunities for participants in flexible spending accounts. Generally, the changes are effective for a 2021 plan year.

Two new federal laws—the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA)—have created new planning opportunities for participants in flexible spending accounts. Generally, the changes are effective for a 2021 plan year.
In the wake of these new law provisions, the IRS has provided guidance in Notice 2021-15.

Background: There are two types of FSAs that employers may offer to employees. One applies to healthcare expenses and the other is available for dependent care expenses. The two versions have comparable rules with a few differences.

For starters, both types of FSAs are funded with pre-tax dollars, so there are significant income tax savings for employees. Furthermore, the employer doesn’t have to pay employment taxes on amounts that employees contribute to FSAs.

Prior to the new law changes, the contribution limit for healthcare FSAs was $2,500 ($2,750 for 2021). The limit for dependent care FSAs was higher—$5,000.

Distributions from FSAs made to pay qualified expenses are exempt from tax. But withdrawals used to pay for nonqualified expenses are fully taxable

At the start of the year, employees must decide how much of their wages to allocate to their FSAs. Usually, this decision requires advance planning, especially when you consider the “use-it-or-lose it” rule. Absent other arrangements, any balance left in the employee’s account the end of the plan year is forfeited.

However, an employer may allow a grace period of up to 2½ months after the close of the year for a healthcare FSA (but not a dependent care FSA). Alternatively, it may allow an employee to carry over up to $500 of unused FSA funds to the next year ($550 in 2021). Finally, elections for a plan year made by an FSA participant are irrevocable, unless the participant experiences a change in status.

New rules:

Based on the CAA and ARPA, as well as the new IRS Notice, FSA participants may benefit from the following provisions.
• For a plan year ending in 2020 or 2021, either a healthcare or dependent care FSA program may be amended to allow a participant to carry over the entire balance to the next year. Thus, there is no dollar limit. The IRS guidance clarifies that this change includes any amount carried over from the prior year.
• The new legislation permits an employer to amend its FSA program to reflect a 12-month grace period following plan years ending in either 2020 or 2021. Note that this applies to dependent care FSAs as well as healthcare FSAs. What’s more, an employer may offer both the carryover and grace period benefits. Also, the IRS guidance clarifies that an employer can choose to adopt this change for one type of FSA, but not the other.
• Under prior law, a dependent care FSA could cover qualified expenses of caring for children under age 13. The CAA generally increases this age threshold to 14.
• Allocations to an FSA may be amended mid-year for a plan year ending in 2021 even if the participant has no change in status. This includes enrolling, dis-enrolling and increasing or decreasing contributions. Mid-year changes may be permitted at a specified date or throughout the year.
• ARPA increases the limit for dependent care FSA contributions from $5,000 to $10,500 for 2021. The contribution limit for healthcare FSAs remains at $2,750.

Need more information? Both employers and employees may want to contact their professional advisors.

Two new federal laws—the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA)—have created new planning opportunities for participants in flexible spending accounts. Generally, the changes are effective for a 2021 plan year.

04/28/2021

Preside Biden is rolling out his "American Families Plan" today. It's just a proposal, not yet law, but if passed would help out plenty of students. Main features are:

•Two years of free tuition for community college students.
The new plan would make it possible for first-time students—including workers looking to reskill and Dreamers, or immigrants who arrived in the U.S. before age 16 and who meet certain requirements to gain permanent resident status—to enroll in community college for free. The initiative isn’t restricted by income level. The only parameters are that students graduate within three years, or four years if warranted due to an inability to enroll full-time. This initiative would enable an estimated 5.5 million students to attend community college free of tuition and fees if all states, territories and indigenous tribes were to support the proposed provision.

•More Pell Grant money for students in need.
Pell Grants are need-based federal grants offered to those seeking to attend college for the first time. In Mr. Biden’s plan, low-income students including Dreamers would have access to more money via the Pell Grant award. The American Families Plan would provide an additional $1,400, about a 20% expansion, according to senior administration officials. “It does go a long way toward equalizing that so that low-income students aren’t worse off after they graduate compared to middle- and high-income students,” said Mark Kantrowitz, author of “How to Appeal for More College Financial Aid.”

While the Pell Grant doesn’t cover all expenses, the additional money would help close the gap in the amount of debt low-income students take on in comparison to others, Mr. Kantrowitz said. Pell Grant recipients were more likely to graduate with debt compared with nonrecipients, according to the latest available data from the Education Department for the 2015-2016 year. The average amount of debt at graduation carried by a Pell Grant recipient with a bachelor’s degree was $31,182, while for non-Pell Grant recipients it was $26,715.

03/02/2021

Useful information!

On Feb. 19, the House of Representatives released the full bill text of the American Rescue Act Plan of 2021—and it includes $1,400 Recovery Rebate payments (also known as stimulus payments). The bill could change between now and voting, so certain provisions could change or be excluded completel

10/05/2020

If you are in the mood to learn about pending, but not signed, COVID legislation, take a look!

It's been a long, drawn-out journey toward another round of direct payments. We'll keep the details simple.