Money and finance news summary | 28 January
Headlines
- Substantial economic growth in 2021 means there will be no fourth stimulus check in the near future
- Gross Domestic Product (GDP) increased by 5.7% in 2021, the fastest annual growth since the Reagan administration
- Bipartisan talks continue in Congress over the fate of the Child Tax Credit expansion
- US unemployment falls to the lowest rate since the start of the pandemic at 3.9%
- President Biden on positive economic news: "We are finally building an American economy for the 21st Century"
- It's not too late to claim the full value of the expanded Child Tax Credit
- How long do you have to file your taxes in tax season 2022?
- Payment schedule for Social Security checks across 2022 released
- IRS boss Chuck Rettig warns of tax refund delays: "Avoiding a paper tax return is more important than ever this year"
- You can now use SNAP food stamp benefits in US restaurants
Useful information & links:
Child Tax Credit
- Congress let the Child Tax Credit expansion expire in December, withdrawing payments for millions of families
Social Security
- How to calculate the full entitlement in Social Security benefits
- SSA announces payment structure for retirees?
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One major reason that cryptocurrencies aren’t widely accepted for payment is that they can be a risky asset to have with the frequent fluctuations in value. That has been shown once again recently with Bitcoin, the dominant cryptocurrency dropping to its lowest level since last summer.
The slim chance of another federal direct payment has passed as the economy has defiantly rebounded, despite high levels of covid-19 that continue to ravage the US.
Nonfarm payroll employment up in 2021 in all but two states
Unemployment drop to record lows in 2021 as people were able to go back to work. At the end of the year 48 states and the District of Columbia saw nonfarm payroll employment gains and was essentially unchanged in 2 states with South Dakota and Wyoming reporting less than a one percent increase.
California, Florida and Texas saw the highest increase in absolute numbers. While Hawaii, Massachusetts and Nevada saw the highest increase by perecentage.
No waiver on tax returns for unemployment benefits in 2021
Despite a recent uptick, unemployment has fallen to record lows since spiking at the beginning of the covid-19 pandemic. Even so, millions of Americans have collected unemployment benefits over the course of 2021.
When Democrats passed the American Rescue Plan last year a $10,400 waiver was given to taxpayers that collected unemployment compensation in 2020. However, neither that legislation, nor any since, has granted the same benefit to those who received the financial assistance in 2021.
With the 2022 filing season underway, taxpayers will need to keep that in mind as they fill out their 2021 tax returns.
Build Back Better is essential but 1 March deadline is "an aspiration"
House Speaker Nancy Pelosi won't commit to a date to pass the Build Back Better Act that is awaiting Senate approval. The legislation passed the lower chamber in November but has languished in the Senate since then.
The Progressive Caucus renewed calls for its passage by the upper chamber urging Democratic senators to get it to President Biden's desk by 1 March. They see it as an opportunity for Biden to tout the benefits of the bill to the nation when he gives his State of the Union address scheduled for the same date.
Speaking in San Francisco, Pelosi said that there is no deadline set for pass the sweeping social and climate policy bill. She did say though that the House has several other pressing pieces of legislation that need to voted on including the Omnibus bill for 2022 spending. Failure to get an agreement by early next month would require another stopgap spending bill.
Don’t miss out on tax credits for children to get larger refund
The American Rescue Plan, besides approving a third round of stimulus checks to every eligible American for up to $1,400, enhanced and expanded several tax credits for the 2021 fiscal year. Households with children could especially benefit from these changes resulting in a larger tax refund when they file this year.
A few of the tax credits the legislation enhanced include the Child and Dependent Care Credit, the Earned Income Tax Credit and the Child Tax Credit, which also came with an advance payment scheme in 2021. Households that welcomed a new member to the family last year could potentially see another $1,400 stimulus check. But you will need to file a 2021 tax return in order to take advantage of the changes.
Can you request a tax return extension?
In the past two tax seasons the IRS has been forced to push back the deadline for tax returns due to pandemic-related disruption. This time around the agency hopes to be better prepared for the avalanche of paperwork and has stated that it will not be offering universal extensions.
However an exception is granted for Tennessee residents after the winters storms and tornados destroyed homes and livelihoods. Here's what you need to know about tax return extensions...
'Inflation' was the word on everyone's lips for the latter months of 2021 as the overheated American economy experienced a prolonged period of growth, bringing about price rises and inflation. The economic growth experience in the past six months shows that President Biden's stimulus efforts do appear to have worked, but there are certain issues to have arisen as a result.
We take a look at how inflation could affect your tax return for 2021...
Claim a missing stimulus check in your tax returns
Last year the IRS sent out the third, and most likely last, round of federal stimulus checks to the American people. It is thought that close to 170 million people benefitted from that round of payments but not everyone who was entitled to the support has received one. If you feel like you have been missed out of the distribution process it is not to late to claim an outstanding stimulus check and get the money added to your tax refund.
IRS confirms that some filers were sent incorrect Child Tax Credit letters
"The IRS is reviewing the situation, but we believe this is a limited group of taxpayers involved out of a much larger set of advance Child Tax Credit recipients. There is no indication to support speculation that this could involve hundreds of thousands of taxpayers. Those in this small affected group could include people who moved or changed bank accounts in December, and their checks were returned as undeliverable or their direct deposits were rejected. We are working this issue, we will provide online resources to taxpayers to make sure they have access to the most up-to-date information when filing their returns."
"We continue to encourage taxpayers and tax professionals to thoroughly check their records before filing their taxes. For any recipient who doesn't receive their letter or is unsure of the amount they received in 2021, there are options to help. In addition to the letters being mailed, the IRS encourages people to check their Online Account on IRS.gov beginning January 31."
While previous waves of the virus, have been associated with a discussion of another round of stimulus checks, a fourth one will not be coming. This comes as many households feel with the effects of historic inflation and the vast majority of economic programs to support households have expired.
There has been no noise out of the Biden administration on the matter for some time as the president's hopes are pinned upon passing his Build Back Better legislation. That was supposed to include lots of support for families affected by covid-19, but is no closer to being passed than when it was first mooted in March 2021.
The IRS is working through a massive backlog of unprocessed tax returns from previous years but has recently began accepting filings for tax season 2022. The tax agency has sent out letters to households who received Child Tax Credit payments or stimulus checks during 2021, advising them how to include the payments in their return. However the IRS has admitted that some versions of the Letter 6419 contain mistakes that could affect your filing.
Could the Child Tax Credit be passed as a stand-alone bill?
There are reports that bipartisan negotiations are ongoing in Congress in search of a compromise on the Child Tax Credit extension. Last month the expanded programme came to an end after Congress was unable to to the Build Back Better bill. The Child Tax Credit was just one feature of the huge package which was the subject of disagreement within the Democratic Party but there is hope that a stand-alone bill for the Child Tax Credit might secure sufficient bipartisan support.
We're just five days into tax season 2022 but the IRS is already imploring filers to utilise the online options when submitting their tax returns to avoid a signficant delay. The agency is already working through a significant backlog of unprocessed tax returns from previous years and IRS chief Charles Rettig has called on filers to do their bit to ease the workload.
In a recent statement Rettig wrote: "The pandemic continues to create challenges, but the IRS reminds people there are important steps they can take to help ensure their tax return and refund don't face processing delays. Filing electronically with direct deposit and avoiding a paper tax return is more important than ever this year.”
One important letter that you should have received from the Internal Revenue Service (IRS) is Letter 6475. If you received a 'Third Economic Impact Payment', better known as a stimulus check, in 2021, then the letter will tell you whether you are eligible for some more money in the form of the Recovery Rebate Credit.
This payment is available for people that were eligible for the stimulus check but missed it when it was sent back in March, or if they received less than the correct amount. This year's tax season gives these people the opportunity to file their taxes and receive the money as a tax deduction or refund.
Build Back Better: "back to the drawing board"
One month in to 2022 and there is still no forward motion on any Democrat legislation.
“We’ll have to go back to the drawing board,” Majority Leader Steny Hoyer told Politico during a virtual news interview Tuesday. He said he believes Democrats can still pass significant portions of the legislation
When Congress passed the American Rescue Plan in March 2021, the structure and amount of the child tax credit was altered. The legislation mandated that the Internal Revenue Service (IRS) distribute a monthly advance of the payment between July and December 2021.
The value of the credit was increased from a non-refundable $2,000 credit, to a fully refundable credit worth $3,600 ($300 per month) for children under six, and $3,000 ($250 per month) for children between six and seventeen.
How did people spend the Child Tax Credit?
Researchers at Magnify Money by LendingTree said 90 percent of their study respondents used it to cover day-to-day expenses.
For families who make less than $25,000 a year, 88.6 percent of recipients used it for those top 10 reasons. By the time you get to the $75,000 to $99,999 income range, 73.9 percent used it for necessities.
Last year, millions of taxpayers experienced serious delays in receiving their tax refund from the Internal Revenue Services (IRS). The IRS began accepting tax returns on 24 January and are encouraging people to submit their returns in a timely manner. Additionally IRS Commissionaire Chuck Rettig advised filers "carefully review their taxes for accuracy before filing."
For the vast majority of filers, the deadline is 18 April. A few states that have experienced natural disasters over the last few months, the IRS has offered an extension.
White House issues correction after making growth seem larger
The White House twitter had added the value 5.5 on the y-axis, but in the position of 6.0 on this graph. This had given the impression of a much higher increase in GDP growth compared to previous years.
Whether it was a mistake or intentional bluff, the official twitter posted the change.
The Child Tax Credit, widely hailed as a significant measure in reducing childhood poverty, is awaiting its final rollout with the filing of this year's tax returns.
While millions of children benefitted from the expanded scheme, Congress has effectively killed its extension. If the president wants it to happen, he will need to pull out all the stops, or risk putting huge economic pressure on families, as well as likely losing the November midterm elections.
Sanders has his say on the Child Tax Credit
Sen. Bernie Sanders has outlined his support for the Child Tax Credit expansion in this video on his Twitter account, venting his frustration at Congress' inability to secure an extension to the programme last month. He still maintains hope of passing the Build Back Better bill in some form, but it remains to be seen if the Child Tax Credit will be included in the final package.
In recent weeks the IRS has sent out millions of letters to eligible households offering guidance on exactly that. Letter 6419 has been sent out to families who received the Child Tax Credit in 2021 and it explains how the advance tax credit will affect your filing this year.
Watch out for incorrect Letter 6419 form the IRS
To aid Americans through a busy and potentially confusing tax season the IRS has sent out letters to millions of households, explaining elements of the tax filing process that they may not be aware of. The introduction of stimulus checks and the Child Tax Credit monthly payments have complicated the tax situation for some filers and the IRS have tried to ease that confusion. However the agency has confirmed that some people may have received incorrect information in the Letter 6419.
In a recent press release the Internal Revenue Service put out its annual report highlighting the efforts of its employees in 2021. One of the accomplishments touted by the agency has been successfully delivering “more than $1.5 trillion to people across the nation through Economic Impact Payments, tax refunds and advance Child Tax Credit payments.” Here's a look at the three Economic Impact Payments, better known as stimulus checks.
Fastest economic growth in 38 years
President Biden is touting the latest economic numbers reported by the Commerce Department on Thursday. The nation's gross domestic product, a measure of all goods and services produced, expanded by 5.7 percent last year, the fastest rate since 1984.
The caveat for this is there was really no alternative after two years of economic stagnation from covid-19. Any growth less than a record would be considered a failure.
Progressive Caucus wants Build Back Better before State of the Union address
In a press release on Thursday, Representative Pramila Jayapal, Chair of the Congressional Progressive Caucus renewed calls for passage of the Build Back Better Act in the Senate. “In the months since negotiations around the Build Back Better Act stalled, the case for this legislation has only become more urgent,” the statement read.
The group would like to see the bill passed by 1 March, "so the President can use the power of the State of the Union platform to share with the nation the relief that people will soon receive."
The legislation has been stalled in the Senate since November over objections by Senator Joe Manchin to the cost and lack of means testing in programs like the Child Tax Credit.
Good morning! Welcome to the AS USA personal finance live feed, giving you all the latest news on direct payments and other forms of financial relief available in the United States. We will also keep you up to date on the ongoing tax season 2022 with tips on how to complete your filing.