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U.S./Israeli Income Tax Update for Year 2021 (2020 Tax Year)

During tax year 2020 there was no major tax legislation introduced by the U.S. or Israel except for the previous stimulus relief packages. However, now that President Joe Biden and the Democrats have control of the executive and legislative branches of the government you can expect a flurry of tax legislations during tax year 2021 especially potential rollbacks of the Trump tax cuts. Follow new potential tax legislation and familiarize yourself with the existing tax rules and regulations which permeate both the U.S. Internal Revenue Code and the Israeli Tax Ordinance and contact your tax advisor accordingly.

The Recovery Rebate Credit (Stimulus)

The Recovery Rebate Credit is a tax credit against your 2020 income tax. When claimed on your 2020 U.S. tax return, generally, this credit will increase the amount of your tax refund or decrease the amount of the tax you owe.

The Recovery Rebate Credit was eligible to be paid in advance payments during 2020 and early 2021. These advanced payments of the Recovery Rebate Credit are referred to as the first and second Economic Impact Payments (Stimulus).

Individuals who received the full amounts of both Economic Impact Payments do not need to complete any information about the Recovery Rebate Credit on their 2020 tax returns.

To determine if you received the full amounts of both Economic Impact Payments if:

  • Your first Economic Impact Payment was $1,200 ($2,400 if married filing jointly for 2020) plus $500 for each qualifying child you had in 2020; and.
  • Your second Economic Impact Payment was $600 ($1,200 if married filing jointly for 2020) plus $600 for each qualifying child you had in 2020.

*A qualifying child is a U.S. Citizen with a Social Security number, claimed on your tax return and under the age of 17 on December 31, 2019.

Claiming the Recovery Rebate Credit (Stimulus)

Many disruptions in the international mail systems due to Corona caused significant delays in receipt of the First Economic Impact Payment checks.

Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 Form 1040.

You must file the 2020 Form 1040 to claim the Recovery Rebate Credit even if you are normally not required to file a tax return.

To see the ENTIRE UPDATE click http://www.ardcpa.com/2021taxupdate.pdf 

 

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Tuesday, 21 September 2021

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