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2021 tax reliefs and extensions for US individuals

Various extensions have been announced to reduce the number of US taxpayers incurring interest and penalties due to COVID-19. The US government is also providing relief in the form of stimulus payments and child tax credit advance payments.
Deadline extensions

Deadline extensions

Automatic extension to the 2020 Federal tax return

Automatic extension to the 2020 Federal tax return

If you’ve found it difficult to stay on top of your tax filings throughout the pandemic, you’ll be glad to hear that the Treasury and the IRS have announced an automatic extension to the 2020 Federal income tax return filing and payment deadline for individuals. Instead of 15 April 2021, the deadline is now 17 May 2021.

If you’re a US taxpayer living outside the US at 15 April 2021, you’re automatically entitled to a filing extension deadline of 15 June 2021. However this announcement is for both the filing and payment deadline, so it’s a welcome relief for all.

About the authors

Allan Wilkinson

+852 3192 7083
wilkinsona@buzzacott.hk
LinkedIn

Virginia Zee

+852 3192 7084
zeev@buzzacott.hk

Automatic extension to the 2020 Federal tax return

If you’ve found it difficult to stay on top of your tax filings throughout the pandemic, you’ll be glad to hear that the Treasury and the IRS have announced an automatic extension to the 2020 Federal income tax return filing and payment deadline for individuals. Instead of 15 April 2021, the deadline is now 17 May 2021.

If you’re a US taxpayer living outside the US at 15 April 2021, you’re automatically entitled to a filing extension deadline of 15 June 2021. However this announcement is for both the filing and payment deadline, so it’s a welcome relief for all.

2020 State tax returns

2020 State tax returns

35 states have also confirmed that tax returns will follow the extended Federal tax filing and payment deadline, including California, Connecticut, New York and New Jersey.

2021 US first estimated tax payment

2021 US first estimated tax payment – no extension

The IRS has confirmed that the 2021 US tax return first estimated tax payment remains 15 April 2021. If you have income that’s not subject to withholding tax, and where there is insufficient foreign tax credits to reduce the US tax to nil, it’s likely you’re due to pay estimated tax. We suggest that instead of holding out for an extension, you prepare your tax returns as much as possible to establish your first estimated tax payment, ready for the April deadline.

Other key extended deadlines

Other key deadlines extended from 15 April 2021 to 17 May 2021

  • The Federal income tax filing and payment deadline for foreign trusts and estates that file Form 1040-NR.
  • Contributions to individual retirement accounts (IRAs) and Roth IRAs - the maximum contribution stays at the same level, but you have more time to consider a payment.
  • Statute of limitations - individuals normally have three years from the date of the original tax return deadline to claim any refund, but now have an extra month if those three years were due to end on 15 April 2021.
  • S.965 transition instalment payments (paid by US shareholders on the untaxed earnings of certain specified foreign corporations), as previously calculated on the 2017 US tax return. 
Tax relief

Tax relief

Third stimulus payments

Third stimulus payments

Under the American Rescue Plan Act of 2021, the IRS will be sending Americans another round of economic impact payments of up to $1,400 ($2,800 for joint filers), plus an additional $1,400 for each dependent child. As your income increases, you’ll receive less payments. So if your adjusted gross income (AGI) exceeds $75,000 ($150,000 for joint filers and $112,500 for head of household filers) the payments are phased out to lower amounts. If your AGI reaches $80,000 ($120,000 for joint filers and $160,000 for head of household filers) these payments will be phased out completely.

To determine whether you will receive this payment, the IRS will use your 2019 or 2020 (if filed) tax return. But the payment will actually relate to the 2021 calendar year. If based on your 2021 US tax return the payment should have been higher, the difference will be refunded to you, so be sure to keep a record of the amount you receive.

Child tax credit advance payments

Child tax credit advance payments 

For households with children, US taxpayers will be able to claim an increased credit of $3,600 per child under the age of six and up to $3,000 for children ages six to 17 under the American Rescue Plan. This also applies if you live in Hong Kong, as long as at least one of the household adults is a US taxpayer and the child or children claimed are US citizens, nationals or residents.

In addition, from July 2021, the IRS will advance 50% of the 2021 estimated child tax credit payment with the remainder paid out when you file your 2021 US tax return. The child tax credit will be based on your 2019 or 2020 (if filed) tax return. The payments are phased out for individuals whose adjusted gross income (AGI) exceeds $40,000 ($60,000 for joint filers and $50,000 for head of household filers) and is completely phased out once AGI reaches $80,000 ($120,000 for joint filers and $100,000 for head of household filers). 

What should you do?

What should you do?

You may have an extra month to file your 2020 US tax return and pay your tax liability. However, as there is no extension to the first 2021 US estimated tax payment, we would not recommend delaying the tax return preparation as you will want to ensure tax payments are made on time and manage your cash flow position.

You now also have extra time to consider next steps, whether it’s making an IRA contribution or a refund claim for prior years, but we recommend that you speak to your usual Buzzacott contact before taking any action.

If you are due a tax refund, you should also file as soon you can, to avoid any potential delays. Keep a note of any stimulus and child tax credit payments you receive, as your tax preparer will need this information to file your 2021 US tax return.

Get in touch
Get in touch

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