Tax changes you should know about before filing this year

The tax filing season for income earned in 2021 is upon us. Tax preparers are gearing up for a busy season.

Not only because of changes to the tax code, but because the industry itself has been affected by the pandemic.

"A lot of tax offices closed," said Dennis Christensen at the Riverside Tax Team." "The guy next door was in a tax office, and he lost a lot of people."

Christensen has helped people file their taxes at his Riverside location for 15 years. He said every tax year is different, and this year is no exception.

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The IRS will begin accepting tax returns, and unlike the past two years, there will be no COVID-19 extensions.

"Every year there's something new. There were several new things last year, and new things this year," Christensen said.

Christensen said one of the main items that might catch some people by surprise is that the amount of unemployment compensation that was tax free in year 2020 might not be the same in 2021. For example, the Internal Revenue Service allowed up to $10,200 in unemployment compensation to be tax free in 2020.

But that might not be the case for 2021.

"We have not heard that this year," said Christensen. "However, it did go into March (2021) before the IRS made that decision. My personal opinion is they are going to do it because the pandemic money went through September of 2021."

The other item that Christensen is reminding people to pay close attention to is the child tax credit. Last year, the IRS began making direct deposits into the bank accounts of taxpayers for child tax credits, but those payments were actually prepayments of money that would typically come in the form of a tax refund.

"It basically gave you a portion of what your refund would have been this year, but you got it last year," said Christensen.

He said it's something that's catching many people by surprise.

"Unfortunately, nobody gets money for free," said Christensen. "And that's what they thought, they thought it was free money. But it's not."

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