Karen Russell: So I see it is the top of the hour. And for those of you just joining welcome to today's webinar, Tax Changes from a Forms Perspective - Tax Year 2021. We are glad you're joining us today. My name is Karen Russell, and I'm a Senior Stakeholder Liaison with the Internal Revenue Service. And I am the moderator for today's webinar, which is slated for 75 minutes. Before we begin, if there is anyone in the audience that's with the media, please send an email to the address on this slide. Be sure to include your contact information and the news publication you're with. Our media relations and Stakeholder Liaison staff will be happy to assist you and answer any questions you may have. And as a reminder, this webinar will be recorded and posted to the IRS Video Portal in a few weeks. The portal is located at www.irsvideos.gov. 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Please do not enter any specific or sensitive taxpayer information, please don't do that. Button next to that selection and then clicking Submit, you may not receive the polling question and this could be because you have your pop up blocker on. So now is a good time to disable your pop up blocker so that you can answer the questions. Again, I want to welcome you to today's webinar. We're glad you joined us. Before we move along with the session, let's make sure you're in the right place. Today's webinar is Tax Changes from a Forms Perspective - Tax Year 2021 and this webinar is scheduled for approximately 75 minutes. Let me introduce today's speakers. They are Richard Furlong and Philip Yamalis, who are both Senior Stakeholder Liaisons in the Communications and Liaison division. And you may recognize them as frequent speakers and moderators on IRS webinars. So I'm going to turn it over to you Philip to begin our presentation. Philip Yamalis: Thank you, Karen. Happy New Year everyone. Hopefully everyone is staying safe and healthy in these days. Welcome to the 2021 edition of Tax Changes from a Forms Perspective. Today we're going to talk about legislative pandemic relief as well as other tax law changes for tax year 2021, including two new pieces of legislation with significant tax law provisions that were recently signed into law. The first we have the Consolidated Appropriations Act of 2021 enacted in December of 2020, as well as the American Rescue Plan Act of 2021, also known as the American Rescue Plan for short. That was enacted in March of 2021. So we're glad to have you with us as we discuss how these two new laws will impact the 2021 tax forms that you'll use for the upcoming filing season. First, let's turn our attention to our objectives today. For today's session, we want to make you aware of the major tax changes for individual taxpayers, as well as employers for tax year 2021. We'll do that while we talk about the major changes to the forms for individuals, as well as employers. We'll also discuss some of the new tax forms for 2021. And also today, we'll tell you about tax products that are available for taxpayers with limited English proficiency. Now, you might be wondering why we're highlighting tax law changes from a forms perspective. The answer is that the IRS tax forms are really where the rubber meets the road, as we like to say, so to speak for most of the tax law changes. They are the primary vehicle through which the general public interacts with tax law. So essentially, by reviewing the changes to tax forms from 2020 to 2021 and by discussing new tax forms, we're really covering almost all of the tax law changes that will impact you in the upcoming filing season. Now, when the IRS implements new tax law, you all know it also develops legal guidance to help taxpayers and you as tax professionals to understand and navigate these new tax laws. This guidance in turn really drive the changes to the forms, to the instructions, as well as the publications and leads to the creation of new tax forms. Now, before we jump into tax law changes for this upcoming year, I want to take just a moment to mention that you can learn about changes to the forms, both before the final release of the forms and after the final release. First, let me point you to our draft forms web page, as you could see on this slide at irs.gov/draftforms. This is the place where we post the draft versions of all our forms instructions, as well as some publications. These drafts are very close to the final version, but they're not yet final. And they're not intended for immediate public use. We post drafts online so that our industry partners can review the drafts in advance and provide comments and feedback on the content of the form. This is very important when new legislation causes a change to the form or instructions. I imagine that some of you have provided comments and feedback on some of these draft forms over the years, we continue to welcome that feedback. Now you can comment on draft forms at irs.gov/formcomments. You can also find the final version of the forms on irs.gov, https/www.irs.gov/forms-instructions or as you could see on the slide that addresses irs.gov/allforms.

So with that, ladies and gentlemen, let me turn it over to my colleague in Philadelphia to tell us more about these two new statutes that we've mentioned, Richard? Richard Furlong: Thank you, Philip and good day, everyone. It's a pleasure to be with you today. So as Philip mentioned, we will focus on the two new pieces of legislation that you see on your screen and their impact on the forms, the instructions and the publications for the tax filing season, that we'll be getting underway in the very near future on January 24. So first, we have the Consolidated Appropriations Act of 2021 also referred to as Public Law 116-260 and this was signed into law on December 27th of 2020. This law made certain tax provisions permanent, it extended other provisions, and it also included some clarifications and technical corrections to the CARES Act. You remember the CARES Act was passed in March 2020 and it provided some certain disaster relief provisions all under CAA. The second law that is the American Rescue Plan Act of 2021. And that is Public Law 117-2, you will recall that the American Rescue Plan and we sometimes refer to it by the acronym ARP or ARP, this legislation was enacted on March 11th of 2021 and incidentally, that was the one year anniversary of the day that the World Health Organization declared COVID-19 a global pandemic. But the American Rescue Plan provided both immediate tax relief for tax year 2020 and also tax relief for tax year 2021 and beyond. The immediate relief includes, among other things, that third round of economic impact payments that went out this year. ARP also included several important provisions for tax year 2021. And those include temporary enhancements to the child tax credit, to the earned income tax credit, to the child and dependent care credit and also to the Affordable Care Act premium tax credits. ARP provided an extension of payroll tax credits for employer provided paid sick and paid family leave, and then equivalent credit for self-employed individuals and it also provided for a further extension of the employee retention credit. So now let's dive into the details of each law one at a time. And first, I'll focus on the Consolidated Appropriations Act of 2021, which contains a number of individual and business tax provisions.

Now, these tax provisions are generally found within two areas of the law and you see them on your screen in Division N of the law, which is subtitle B to title II, and that is called The COVID-Related Tax Relief Act of 2020. Now, as the title suggests, this is where much of the COVID related provisions reside. And those will include the additional 2020 recovery rebates for individuals, along with the extension of credits for paid sick and paid family leave. Now, we will discuss more on the COVID-Related Tax Relief Act of 2020 later in today's webinar, when we review the tax form changes for 2021 and then Division EE of the law is called the Taxpayer Certainty and Disaster Tax Relief Act of 2020. Now, this part of the law houses the expiring provisions that were made either permanent or extended, along with technical improvements to the CARES Act provisions, certain disaster relief related provisions and other tax relief provisions. So with that, Philip can you start us off by explaining a few highlights of that Taxpayer Certainty and Disaster Relief Act of 2020. Philip Yamalis: I'll be glad too, Rich. First in the Taxpayer Certainty and Disaster Tax Relief Act of 2020, the reduction in the medical expense deduction floor from 10% to 7.5% of adjusted gross income that was made permanent. Next with regard to education tax benefits, the Act repealed the above the line deduction for qualified tuition and related expenses. But on the flip side, the tax law increased the income phase out levels for the Lifetime Learning Credit. So next, we have the business meals deduction for tax years 2021 and 2022. This law provides for a temporary 100% deduction for expenses paid or incurred for food or beverage, which is provided by a restaurant. For all other business meal expenses, the 50% limitation continues to apply. Now the next item in this act is the charitable contributions deduction for those that do not itemize, which was first enacted under the CARES Act and was set to expire in 2020. This legislation however extended charitable deduction protects your 2021 with a few changes, married filing married taxpayers that are filing joint returns may deduct up to $600 now and all other filers will still deduct up to $300 of charitable contributions and the deduction for 2021 is a below the line deduction. So accordingly, we move the deduction down a few lines on the 2021 Form 1040 and we'll talk about that again soon when we discuss the actual Form 1040 changes just a little bit later. Now the last bullet on this slide mentions the temporary changes to health and dependent care flexible spending accounts, otherwise known as FSAs, this legislation allows employers to amend their plans to permit extended grace periods or expanded carryovers for unused amounts from the plan years ending in 2020 as well as 2021. It really allows plans to extend the maximum age of eligible dependents from 12 years of age to 13 years of age, among other temporary benefits and stay tuned. We have more changes related to dependent care assistance programs just a little later in this presentation. So before we highlight those, let me turn it back over to Karen as I believe it's time for our first polling question, Karen? Karen Russell: Thanks, Phil. Yes, it is. It's time for our first polling question audience. So here it is. I'm only going to read the question once and the possible answers once. Here we go. So which of these changes to charitable deductions is included in the Taxpayer Certainty and Disaster Relief Act of 2020? A, retains the maximum $300 above the line deduction for non-itemizes. B allows a maximum above the line deduction for married couples, excuse me, allows a $600 maximum above the line deduction for married couples filing jointly. C requires all taxpayers itemized deductions to claim a deduction for charitable contributions, or D allows a $600 maximum below the line deduction for married couples filing jointly. So take a moment and click the radio button next to the response that best answers this question. And click Submit, I'll give you a few more seconds to make your selection. Okay, let's go ahead and stop the polling and share the correct answer on the next slide. Okay, and I hope our audience got this 100% accurate. So the correct response is D, allows a $600 maximum below the line deduction for married couples filing a joint return. And 58% of the audience got that correct. Now that could be because we may close the polling out too quickly. But just in case, there's some confusion. Phil, would you like to just briefly go over why D is the correct response? Philip Yamalis: Sure, I'd be glad to Karen. So let's look at why the others aren't right, it retains the maximum $300 above the line deduction.

Remember what I said? It's a below the line deduction for non-itemizers, a $600 maximum above the line deduction for married couples filing jointly. It's a below the line deduction. So let's keep that in mind, requires that all taxpayers itemize deductions no, you don't have to itemize. Look, The Disaster Tax Relief Act allows those who don't itemize their deductions, a deduction of up to 300 for cash deductions made during '21. But married couples filing jointly are allowed a deduction of up to $600 and again, these are a below the line deduction. So I hope that adds a little clarification Karen, what do you think? Karen Russell: I do, I think that that was a great explanation. I appreciate that. And just to let the audience know to make sure that you submit your responses. Okay, so Rich, it looks like you're going to continue with expiring tax provisions. Would you like to take over now? Richard Furlong: Thank you, Karen. I am indeed. So on this slide, we've listed some of the provisions that were set to expire in 2021. But then were extended by the Taxpayer Certainty and Disaster Tax Relief Act of 2020. So first the law extended many energy related tax credits through December 31 2021. And those would include the credit for non-business energy property, the credit for alternative fuel vehicle refueling property, and also the energy efficient homes credit. Also the mortgage insurance premium deduction that was extended through December 31 of 2021. So that's available this year, and also the exclusion for canceled mortgage debt income that has been extended through 2025. And finally, the Health Coverage Tax Credit or HCTC, this is a credit for health insurance cost of eligible individuals, this credit was extended through December 31 of 2021. Now turning to our next slide. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 get expanded on disaster tax relief provided the previous year in the Taxpayer Certainty and Disaster Tax Relief Act of 2019. Now, I do want to emphasize that this part of the 2020 legislation applies to certain presidentially declared disaster areas for major disasters. But this provision does not apply to areas for which a major disaster has been declared only by reason of COVID-19. So now, the 2020 legislation relief provides special rules for retirement plans, and those include an exception to the 10% additional tax for early retirement plan withdrawals for qualified disaster distributions up to a maximum amount of $100,000. The law also allows distribution amounts to be included in income over a three year window, and amounts can be re-contributed to the plan to avoid taxable income. The legislation also permits re-contribution of amounts withdrawn for the purchase or construction of a home that might have been cancelled because of a qualified disaster. And it also allows for suspending repayments and then increasing the amounts available for a qualified plan loan. Now with regard to qualified disaster related personal casualty losses, the legislation eliminates the requirement that the taxpayer must itemize to claim a disaster loss deduction, and that the losses must exceed 10% of adjusted gross income. The law also includes an employee retention credit for employers in disaster affected areas, and then includes an option for tax exempt entities to claim this employee retention credit against their payroll taxes. However, I do want to emphasize please don't confuse this employee retention credit under this Disaster Relief Act with the other employee retention credit available for employers that were impacted by COVID-19. And that was initially created in the Cares Act back in March of 2020. Now we will talk about the Cares Act, employee retention credit a bit later, and we'll highlight how the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended and expanded that cares employee retention credit. And with that, let me turn it back over to you Philip. Philip Yamalis: Thanks, Richard. Thanks for your excellent explanation on that. So let's go ahead and switch gears a little and discuss this American Rescue Plan in greater detail. As we said earlier, this legislation was enacted in March of 2021. It provided more pandemic tax relief, including immediate and direct relief to individuals with a third round of those economic impact payments. So for individuals who received a third payment in 2021, but did not perhaps receive the maximum amount that they thought they were eligible to receive, they can claim the difference as a Recovery Rebate Credit under '21 tax return. We've included a worksheet in the Form 1040 instructions to go ahead and figure that credit out. And for individuals who received the third payment in 2021, they should have received the notice 1444-C, which provides important information such as the actual amount of the payment, and how the payment was made, whether it was made by direct deposit, by check or other means. Irs.gov/eip has more information including some frequently asked questions about economic impact payments, as well as the recovery rebate credit. Additionally, the American Rescue Plan made significant but temporary enhancements to certain credits. These credits are the child tax credit, the child and dependent care credit. The earned income credit as you see on the slide, as well as the premium tax credit.

Furthermore, the plan extended the credits for paid sick and paid leave that were originally provided by the Families First Coronavirus Response Act. It expanded the Cares Act Employee Retention Credit and it provided for COBRA continuation coverage premium assistance, among other things. We'll touch on those provisions in the next few slides. Now the American Rescue Plan expanded the Child and Dependent Care Credit for 2021 in several ways as we all know. First of all, the credit is a refundable credit for taxpayers who had a principal residence in the United States for more than half of 2021. Now in the case of a joint return, only one spouse needs to satisfy the principal residence requirement. For taxpayers who do not meet this requirement, they did not live in the United States for more than half of 2021. The credit would become non-refundable, as it was previously in 2020. Now, secondly, for 2021, the amount of the credit has been increased to 50% of employment related expenses, and the dollar amount on qualifying expenses has been increased to $8,000 for one child, and $16,000 for two or more children. The 50% credit rate is subject to a two part phase out. The credit is fully phased out when adjusted gross income reaches $438,000. Additionally, for taxpayers who receive dependent care benefits from their employer, the dollar amount of the exclusion amount increases to $10,500 or $5,250 for married couples filing separate returns in 2021. Now the American Rescue Plan also enhanced the Child Tax Credit for 2021 in a number of significant ways. The scope has been expanded to cover qualifying children 17 years of age and younger instead of 16 years of age and younger. The credit now is fully refundable for taxpayers, as I mentioned, who lived in United States for more than half of 2021.

For taxpayers who don't meet this residency requirement, their credit will be a combination of a non-refundable child tax credit and a refundable additional child tax credit that is limited as it was the case prior in 2020. Now the maximum credit amount has been increased from $2,000 per child to $3,600 per child for children under the age of six. And it's increased to $3,000 per child for children ages six to 17. Let me repeat that, it's been increased from $2,000 to $3,600 per child, for those that are have children under the age of six, but it goes from $2,000 to $3,000 per child for children ages six through 17. The enhanced amount of the credit, the $3,000 or the $3,600 will decreased to $2,000 for each qualifying child at certain modified adjusted gross income thresholds. And those thresholds are $150,000 for married joint filers, a $1,12,500 for head of household and $75,000 for all other filing status. Now, as was the case in 2020, the unenhanced $2,000 credit amount will phase up to zero when modified adjusted gross income exceeds $400,000 in the case of a joint return, or when it exceeds $200,000 in all other cases. Additionally, the American Rescue Plan provides or an advance payment of the Child Tax Credit right. This means the credit amounts were already paid to taxpayers in periodic payments from July 2021 through December 2021. As Karen mentioned, at the top of the hour, the advanced payments make up half of the expected Child Tax Credit for 2021. And the remaining half will be claimed on the 2021 tax return.

To taxpayers who received more in advance payments than they were particularly eligible for in 2021. They'll generally have to repay some or all of that overpayment. The advance payment amounts will be based upon 2020 income tax data, or if the 2020 wasn't available, then we made it available on the 2019 income tax data. So what changes did we make to the tax forms to display this? We overhauled the Schedule 8812 of the Form 1040 in 2021 to implement these changes under the American Rescue Plan. The 2021 Schedule 8812 is intended to be filed by all taxpayers who claim a credit or are reconciling the advanced payments. We expanded the schedule to accommodate filers with different types of circumstances. Expansion is intended to incorporate all of the worksheets to incorporate all of the worksheets, the relevant instructions contained in the Form 1040 instructions into one simple place and be the single source for everything related to the child tax credit. We've also changed the title of the schedule from additional child tax credit to credits for qualifying children and other dependents. And finally, we created a new worksheet to help all filers figure their initial child tax credit amount. The remaining worksheets are substantially similar to those used by taxpayers in 2020, to figure their child tax credit, or the credit for other dependents. All of these worksheets, again, will be located in the instructions for Schedule 8812. So with that, Karen, let me ask you is it time for another polling question?

Karen Russell: Yes, it is. And I want to tell my audience that I will not close out the polling as quickly as I did last time. I my bad, so we'll go a little slower this time. So the question is, which of these statements is true? A, qualifying children for the child tax credit can be up to age 17 in 2021. B, the 2021 child tax credit has increased by $1,000. C, in 2021 there were advanced payments issued as part of the enhanced child tax credit. D, the 2021 child tax credit is fully refundable for taxpayers who lived in the U.S. for more than half a year, or E, all of the above. So which of these statements is true or they all true? Take a moment and click the radio button next to your response. Again, which of these statements is true? I'll give you a few more seconds to make your selections or selection I should say. Okay, hopefully you've had enough time to respond to this polling question. If not send in your send something in and I'll be told. So we're going to stop polling now. And we're going to share the correct response on the next slide.

And the correct response is E all of the above, every single statement in that or this question is true. So let's see how everyone did. Oh, and the response rate was 3%. Oh, my. Okay. Phil, let's give the audience a little more detail about why all of the Philip Yamalis: Let's do it, Karen.

Karen Russell: Let's do it. Philip Yamalis: I thought I can actually hear the Jeopardy theme playing in the background as you're waiting. I have a strong feeling that that's probably a technical mix up there. But though the correct response is all of these statements and I just saw our producers send something in that 86% of you responded correctly. Karen Russell: I'm sorry. Its 86%. Philip Yamalis: Yes. So really, it's as simple as looking at all four of the statements.

They're all true. They're all correct responses. Not just one of them. Not just two of them, but all of them. So take it back. Karen Russell: Thank you. Okay, Rich. Okay. Audience I'm so glad that that 86% came in for accuracy rate way to go. Okay, Rich you're up. Let's continue with the changes to the Earned Income Tax Credit. Please. Richard Furlong: So, Karen, I knew we had a smart, attentive audience today. And they would get a passing grade on that somewhat tricky question. So now let's turn to the American Rescue Plan, which made several significant enhancements to the earned income tax credit for 2021. And that would include a temporary expansion of the so called childless EITC. So overall, ARP or the American Rescue Plan made the credit more widely available by broadening the age, age range for eligibility. So for filers claiming the credit without a qualifying child, those are the childless EITC claimants the minimum age to claim the credit has been lowered to age 19. However, for former foster youth or qualified homeless youth, the minimum age is now reduced to age 18. And for specified students, the minimum age to claim the EITC was lower to age 24. Additionally, the law eliminated the maximum age to claim the credit. So now, filers no longer need to be under age 65 to claim the credit without a qualifying child in 2021. And for childless EITC in 2021, the American Rescue Plan temporarily increased the credit and the phase out amount to 15.3% of income, it increased the maximum earned income amount to $9,820 for the childless EITC. And it also increased the phase out amount to $11,610. The law also provides special rules for separated spouses to claim the earned income tax credit, and this is important, and we may address this in the Q&A. It increased the amounts of investment income a taxpayer can receive and still be eligible to claim the credit. So this provision permanently raised the amount of investment income to $10,000, and then provides for annual inflationary adjustments. And finally, and this is extremely important. The American Rescue Plan includes a temporary special rule, for purposes of calculating the credit for 2021. Taxpayers may use their 2019 earned income for their 2021 earned income credit if they're '19 earned income 2019 earned income is greater than the 2021 earned income, and that it could increase the credit. Now, as far as the form goes, we've updated the Schedule EIC which is goes with the Form 1040. It now provides a special checkbox for filers to self-certify that they qualify for the credit under the special rules for spouses who are separated and filing a separate return. So I point you to the new schedule EIC. We've updated the Line 27 on the Form 1040. And we're going to talk a little bit more about this change later. Now moving on to some temporary changes for the Affordable Care Act premium tax credit. So ARP's temporarily expanded eligibility for the premium tax credit by eliminating the phase out for households with annual income above 400% of the federal poverty line. And it also increased the credit amount by reducing the percentage of annual income that eligible households are required to contribute to their health premium. The temporary percentages now range from 0% of household income to 8.5% of household income. However, these changes only apply for tax years 2021 and 2022. Now for 2021 only, the law provides the taxpayers who received unemployment compensation, or were approved to receive unemployment compensation for any week in 2021. These taxpayers are generally eligible to claim the premium tax credit. Also, the amounts of household income taken into account is capped at 133% of the federal poverty line.

Now, all of these changes I just went through are reflected in the revisions to the 2021 Form 8962, which is as entitled premium tax credit. We've added a checkbox for filers to self-attest that they received or were approved to receive unemployment compensation for any week during 2021.

And for those filers with household income above 133% of the federal poverty line, that income will be disregarded in the calculation of the premium tax credit. And finally, we removed the 400% federal poverty line limitation that previously was on Line 6 of the 2020 version of the Form 8960, 62. So that Line 6 is gone, since there is no maximum income limitation for 2021. And with that Phil, let me turn it back over to you. Philip Yamalis: Thank you, sir. I appreciate that. So with that, Richard, let's go ahead and look at the employment tax changes under the American Rescue Plan. As we mentioned earlier, the employee retention credit which was first enacted by the Cares Act and effective through the end of 2020, has been extended and it has been modified.

First, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 amended and extended the employee retention credit through July of 2021. The credit rate was increased to 70% of qualified wages among other major changes, then the American Rescue Plan made further modifications and extended the tax credit through December 31, 2021. However, late breaking news right, the Infrastructure Investment and Jobs Act which was enacted in November of 2021, amended the law so that the employee retention credit applies only to wages paid before October 1 2021 unless the employer is a recovery startup business, so you can find more detailed information on this late breaking change at irs.gov. Simply click on the News tab and go to the news release IR2021-242 for more information and a link to the IRS notice 2021-65 which discusses penalty relief for employers who reduce their fourth quarter employment tax deposits prior to the passage of this legislation in November. Now on the second bullet, we have the credits for paid sick and paid family leave. As you all remember the Families First Coronavirus Response Act which was enacted in March of 2020, that required certain employers to provide their employees with paid sick leave, or expanded family and medical leave for specified reasons related to this COVID-19 stuff. Employers claim these credits on their employment tax returns. But this requirement expired on December 31 2020, then comes in the Consolidated Appropriations Act of 2021, which extended the credit through March 31 of 2021. And then, this American Rescue Plan comes in makes additional changes, such as extending the employer payroll tax credits for paid sick and paid family beyond March 31 2021 through September 30 2021. Expanding the reasons for paid sick and family leave to include for example, leave for employees who receive or recover from a COVID vaccine. It also resets the 10 day limitation on paid sick leave. And finally, for purposes of the family leave credit, increases the eligible wages to $12,000 from the previous $10,000. Now self-employed individuals are also eligible for similar tax credits. The American Rescue Plan modifications to the employer payroll tax credits for paid sick and family leave, also applied to the paid sick and family leave credits for self-employed individuals. And a quick comment on the final bullet of this slide. The American Rescue Plan provides COBRA continuation coverage premium assistance for filers who are eligible for COBRA continuation coverage. The Premium Assistance is not included in gross income. It also created a premium assistance, refundable credit. So with that, Richard that was quite a mouthful for me. Can you continue with some of the major tax form changes that we're going to see? Richard Furlong: I'd be happy too, Phil. We'll give you a little break here. So here's where as Phil said aptly earlier, where the rubber meets the road. So we have three new forms we're looking at here or three revised forms, I should say first the Schedule 8812. So we renamed this schedule for 2021 the credits for qualifying children and other dependents. Of course, that's in connection with the American Rescue Plan enhancements for this year to the child tax credit. We've made extensive revisions so that all taxpayers claiming the credit or reconciling the advanced payments of the credit can use this form to figure this child tax credit and the credit for other dependents. And I should tell you that this form and instructions are on irs.gov, I highly recommend the tax preparers attending today review this schedule and form before you get into tax season. Next we have the Form 461, limitation of business losses. Now for 2021, we've reactivated or resurrected this Form 461. This form had been made obsolete for 2020. And that was because the CARES Act repealed the limitation on business losses for certain taxpayers for three prior tax years, those years would be 2020, '19 and '18 but it's back for 2021. And then finally, the Form 2441, the child and dependent care expenses. Now Philip previously discussed the 2021 Form 2441 when he discussed the ARP enhancements to the child and dependent care credit for 2021. This form also has been significantly revised to allow filers to figure both the refundable and the non-refundable credit using the temporarily increased maximum credit amounts. And the credit rates along with the new AGI phase out chart for 2021. I recommend that you review all three of these forms and their instructions on irs.gov again before tax season gets underway. Now moving on to our next slide that is Form 7202, which is a long title credits for sick leave, and family leave for certain self-employed individuals. We've updated this form to reflect the changes and additions to these credits that are available to certain self-employed individuals. You may recall that these credits were first established by the Families First Coronavirus Response Act that was passed all the way back in early March of 2020. And then this credit was modified and extended by both the Consolidated Appropriations Act and the American Rescue Plan. And finally, on the slide, we have the Form 8962, of course, the premium tax credit. Now, as I mentioned, this form a few slides back, we've revised it to implement the ARP enhancements that will enable filers to purchase coverage through a health exchange or through the marketplace. And that would include filers who for this year have household income greater than 400% of the federal poverty line. The form also allows them to figure their credit using the American Rescue Plans expanded sliding scale, and that again is from 0% to 8.5% of household income. And finally, the revised form provides for the special rule for filers who receive or were approved to receive unemployment compensation during 2021. And with that, Karen, I think we're ready to tee up our third polling question. Karen Russell: We certainly are Rich. Thank you so much. Okay audience, this is our third polling question. And one more to go for this webinar. So which of these forms was reactivated in 2021 after being obsolete in 2020? Was it the Form 8812, that's selection A, was it B Form 461, C Form 2441 or D Form 8962. So which of these forms was reactivated for 2021 after being obsolete in 2020? A Form 8812, B Form 461, C Form 2441 or D Form 8962. So click the radio button next to the correct answer. I will give you a few more seconds. I'm betting that we're going to have 100% accuracy on this. Okay, hopefully you've had sufficient time to answer the question. Let's go ahead and stop the polling and share the correct answer on the next slide and the correct response is B Form 461. Let's see how everyone did, 71% got that correct. Okay, well, I could let Rich, Rich go ahead and just tell everyone why Form 461 is the correct answer, please sir. Richard Furlong: Sure, just briefly. Now the Form 461, it was because of the CARES Act passed in 2020, which eliminated this limitation on excess business losses for three years '18, '19 and '20. But only for those years, we had to bring back the 461 resurrected if you will from storage for the 2021 tax year, Karen. Karen Russell: Okay, all right. So thank you very much for providing that additional information. So Phil, it looks like you're going to discuss the changes to Form 1040 for tax year 2021, sir? Philip Yamalis: That sounds like a plan, Karen. Thanks. Let's go ahead and discuss the most visible changes to the 21 Form and compared to the 2020 the changes to the 21 Form and compare to the 2020 Form. The first noticeable change to the 21 Form 1040 pertains to that charitable contribution deduction that I mentioned earlier. For 2020, the deduction was above the line, the deduction reduced adjusted gross income, it was located on Line 10B. For 2021 as I mentioned earlier, the Taxpayer Certainty and Disaster Tax Relief Act extended the deduction to 2021 but it modified it, making it a below the line deduction. So because of that law change, we moved the deduction to Line 12B for 2021. So, Line 12 is divided into three parts, Line 12A where standard deduction or itemized deductions from Schedule A, 12B is for charitable contributions if you take the charitable deduction, if you take the standard deduction, you'll put the charitable contributions on 12B, and then 12C to add these, the other two lines together. So then moving down the form, we've revised Lines 19, and 28 for clarity by distinguishing between the non-refundable and the refundable child tax credits for 2021. We updated Line 27 by expanding it into three parts 27A allows qualified former foster youth and qualified homeless youth to self-certify that they satisfy the requirements for claiming the earned income credit, 27B allows filers to include their non-taxable combat pay if they elect that amount when figuring their earned income credit. And then 27C finally allows filers to include their 2019 earned income if they elect to use that amount when figuring their earned income credit as Rich explained earlier. Now on the next slide, we've highlighted the changes to Schedule 1 for tax year 2021. Schedule 1 of the Form 1040. Since we introduced the numbered schedules to Form 1040 in, I think it was 2018, we've continued to revise and restructure them to improve tax administration and make them more user friendly and less burdensome on filers. This year, we're focusing on the concept of a line for everything, and everything on a line right. This concept has demonstrated on Schedule 1 by the expansion of Line 8, which is the line for other income, and the addition of new lines for other adjustments. For other income on Line 8, we have separate lines for about 16 other items of income that range from Lines 8A through 8P previously these items were right in entries on the other income line. For other adjustments, we create Lines 24A through 24K to capture some specific adjustments to income that were previously right in entries on Line 22 of the 2020 Schedule 1. We've also added a new line on the schedule for the Archer MSA deduction, that line is Line 23. And finally, we removed the tuition and fees deduction from the schedule as a result of the Taxpayer Certainty and Disaster Tax Relief Act, which of course repealed the qualified tuition deduction and it replaced it by increasing the phase out limits on the Lifetime Learning Credit as we discussed earlier. So Rich, I just given a synopsis of Schedule 1, how about Schedules 2 and 3 of the Form 1040? Richard Furlong: Thanks, Phil. So yes, first, let's move on to Schedule 2. Now we've also expanded and redesigned Schedule 2 to include separate lines for specific additional taxes rather than rely on a few lines with checkboxes and catch line for various additional taxes as we did previously. And by the way, Schedule 1 as you probably already know is entitled additional taxes. So we revamped for 2021 Schedule 1 to Line 5 and we've created separate Line 6 and 7 for specific items of Unreported Social Security and Medicare Tax instead of as we did last year, incorporating them on a single line with multiple checkboxes. So for 2021, the new lines are five, six and seven, five is for the Form 4137, it brings into Line 5 of Schedule 1, the Social Security and Medicare tax, on unreported tip income which is reported or calculated on Form 4137. Line 6 is for pulling in the Form 8919, the dollar amount that is the uncollected Social Security and Medicare Tax on Wages.

And then Line 7 is a summary line for Lines 5 and 6. We've also revised the Line 8 of the Schedule 1 in the same way, so that various additional taxes are listed individually on new Lines 11 through Line 16. And then we've added to Line 17A through 17Z for individual items of additional tax, and they're all under the category of other additional taxes. And finally, we've added a new Line 19 for the additional tax that's calculated on the Schedule 8812. So this is a tax and it can be an important tax because it's a new tax for certain filers who received excess advance payments of the child tax credit in 2021, calculated on Schedule 8812 and then pulled into Line 19 of the Schedule 2. Now moving on to line on to Schedule 3, which as you can see on the slide is additional credits and payments. For 2021, we provided a separate line for credit items that were grouped together in 2020. And we've also added line items to implement certain provisions of the legislation that Philip and I have discussed today. So Line 6 of the 2021 Schedule 3, that is entitled other refundable credits. And now this list many of the non-refundable credits on new Line 6A and 6L with a catch-all line on 6Z. And then looking at Line 13 of the Schedule 3, that's entitled other payments or refundable credits. Last year, it was Line 12 of Schedule 3, this year it's now Line, as I said Line 13. We've also added some new items here. So for refundable qualified sick and family leave credits, they can be calculated on that schedule on that Form 7202 or the Schedule H for household employers, there are two separate line items on the 2021 Schedule 3, Line 13B is for the credits taken before April 1 of 2021. And then Line 13H is for the credits taken after March 31 of 2021. And these new line items 13B and 13H, they correspond to the legislative changes we discussed earlier. And finally, I want to mention that Schedule 3 has two line changes to reflect that certain non-refundable and refundable portions of the Child and Dependent Care Credit which Philip discussed earlier. So we revised Line 2 of the Schedule 3 for the non-refundable Child and Dependent Care Credit. And that provides clarity by referencing the specific line item on the Form 2441, that's Line 11 that contains the non-refundable credit. And finally, for the new refundable Child and Dependent Care Credit for 2021, we added a new line item which is Line 13G to the Schedule 3. So all of these Schedules 1, 2 and 3 that Phil and I have discussed, I highly recommended that you review those before tax season gets underway. And with that, Phil, let me turn it back over to you to discuss some of our new products for this year. Philip Yamalis: Sure, thanks Richard. So on this slide, we've listed some of our new products for tax year 2021 that we want to call to your attention today. First up is the Form 9000, which is the alternative media preference form. This form enables taxpayers with print disabilities, the opportunity to elect to receive written communications from the IRS in an accessible format such as large print, Braille, audio, plain text file, as well as Braille ready file. The form is just one line with six checkboxes in the six available formats or for the six available formats. The IRS will also provide a standard print copy of the written communication in the same envelope with the selected alternative media format. Taxpayers can file the Form 9000 with their tax return, or they could send it in by itself. Written communications include those formal letters and notices sent to taxpayers about their income tax account, as well as other notices and correspondence between the IRS and taxpayers. Form 9000 will work in conjunction with the Schedule LEP, which is the Limited English Proficiency form that the IRS introduced last year.

Now next we have the New Schedule K2 as well as the Schedule K3, these schedules will be used with Forms 1065, 1120S, as well as Form 8865. The new Schedules K2 and K3 were developed for 2021 to assist partnerships and their partners to comply with the International provisions of the Internal Revenue Code, including those enacted by the Tax Cuts and Job Acts of 2017. The Schedule K2 will only be filed by certain partnerships that need to report international transactions. The information that partnerships provide on the Schedule K2 will be provided to their partners on the new Schedule K3. Next we have a pair of new schedules for the 2021 Form 1116, the new Schedule B Foreign Tax Carryover Reconciliation Schedule is similar to the Schedule K of the Form 1118.

Schedule B will improve the tracking of foreign tax credit carryovers. The new Schedule C foreign tax return redeterminations corresponds with the new Schedule L of the form 1118. Schedule C will allow followers to identify current year foreign tax redeterminations for the years to which they relate, and other information related to prior years. Rich any other new products you'd like to share with us? Richard Furlong: Yes, just quickly, before we get to our fourth and final polling question we have. As I think you can see on this slide, two new products, they're associated with tax exempt entities for electronic filing. Now, these forms were developed pursuant to the Taxpayer First Act, which was passed in 2020, also referred to as TFA. Because this that legislation requires certain tax exempt entity forms to be available for electronic filing for tax year 2021. So to accommodate the TFA mandate, we created these two new forms that you see on your slide. Form 8453, this function this form replaces the old form now retired the Form 8453-EO, because now we're referring to these exempt organizations as tax exempt entities as required under the Taxpayer First Act. Also, the Form 8453-TE expanded the list of returns that will accompany this form when filed electronically. And the second bullet on the slide refers to the Form 8879-TE, which is the e-file signature authorization for tax exempt entity. So this form replaces the old Form 8879-EO. And we've made some terminology changes to in both of these new forms from the old forms. So with that count, I think we're ready for our fourth and final polling question.

Karen Russell: You're correct, sir. So, audience here we are. The advanced excess advance payments of the 2021 Child Tax Credit are calculated on what form or schedule? Is it A, Form 8962.

B, Schedule EIC. C, Schedule 8812 or D, Schedule 2? Again, excess advanced payments of the 2021 Child Tax Credit are calculated on what form or schedule? Is it the A, 8962. B, Schedule EIC. C, Schedule 8812, or D, Schedule 2. And in the interest of time, we're going to I need you guys to make your selections, click the radio button next to the correct response. I'm going to give you a few more seconds. And now I am going to close the polling. So we can share the correct response and get to our Q&A session. Okay, and the correct response is C, Schedule 8812. I believe it was well, both presenters went into detail about the 8812. So Phil, I believe it was still actually.

So let's see what the response rate is. And our response rate is 73% accuracy rate. But the we will probably in the Q&A session go a little bit over the Form 8812. And I'm not going to request so make an explanation of why 8812 is correct, because we can cover that or you can also do that in your free time find out why the 8812 is the form that used to compute the advanced excess advanced payments. Okay, Rich, it looks like you're going to discuss products available for the limited LEP taxpayers. Can you go over that? Richard Furlong: Before we get into our Q&A, Karen, we do want to mention some of the tax products for Limited English Proficiency or LEP taxpayers.

We at the IRS, we take great pride in that we've made significant strides in our efforts to increase the availability of information to taxpayers, and ultimately, to improve the taxpayer experience for underserved populations across the United States. And those would include those with Limited English Proficiency. So last year in for the 2020 returns we published for the first time Form 1040, along with associated schedules 1, 2, and 3 and their instructions in Spanish. This year, we have translated publication 17, which is our omnibus text guide into multiple languages in to Chinese both simplified and traditional, Korean, Vietnamese and Russian along with Spanish. And we've added the Spanish version of pub 17 for over a decade. And we will continue to translate products into other languages as resources allow. And finally, Karen, before we get into our Q&A, because we have quite a number of great questions coming in, here's just a listing of the pages on irs.gov that you can all bookmark for additional resources. And I know we provided you with the resource document before today's webinar. So with that, let me turn it back over to you, Karen. Karen Russell: Thank you, Rich. And thank you, Phil. So you guys, it's Karen Russell, I will be moderating this Q&A session. And we do have a lot of questions. I mentioned that we want to know what your questions are. If you haven't submitted them yet. Here's your opportunity. Phil and Rich are staying on to answer the questions. And we will get to as many as we can. But we may not be able to answer all of the questions. So one of the big one that we got was please clarify above the line versus below the line deduction. Phil, Rich, whoever wants to take that one. Please go ahead. Richard Furlong: I can jump on that one. Above the line and below the line. It's sort of inside tax world jargons for above the adjusted gross income line, and below the adjusted gross income line. So if you were to put the 2021 1040, which is of course out in final version, side by side with the 2020 1040, you would see that the positioning of this line item for 2021. Karen is line 12-B for those who do not itemize them Schedule A but have qualified cash contributions. To qualify tax exempt entities, charitable organizations, it's below the adjusted gross income line. Whereas on the 2021 return, it was above the 2020 adjusted gross income line. So again, that was a result of the legislation this year. We just want to point out because I know many of the attendees have eagle eyed clients who look at these items, and they might ask you that question. Thanks, Karen. Karen Russell: Thank you very much, Rich. And then we did get some comments in about the polling question number two about the $1,000 of the audience had a question about that $1,000. And so, Phil, would you clarify that a little bit please?

Richard Furlong: Phil you may be on mute. Philip Yamalis: Can you hear me now? Richard Furlong: Yes, we can. Karen Russell: Yes, we can. Richard Furlong: I think you're back on mute so. Karen Russell: I might be able to help out a little bit because I thought okay. Richard Furlong: I can jump in. I'm the one responsible for that polling question. And I think many of the attendees know that the for 2021 only under the American Rescue Plan, there was an increase. First, the changes included making the credit fully refundable, irrespective of income. But it also raised the maximum credit for 2,000 to 3,000. Hence, the 1,000 increase. But I think many of the attendees know Karen, that there's that additional $600 for eligible taxpayers for qualifying children under the age of six. So that's why that question. You can blame me for that, that question if you got it wrong, but it is $1,000 for qualifying children between the ages of six and 17. And then under age six, that additional $600 bringing it up to $3,600, Karen. Karen Russell: Right, right. And that's basically because there are two age groups we're dealing with. So one is $1,000, one is $1,600. Thank you for that Rich. Okay, so let's see if Phil can answer this. So, Phil, you mentioned that the child and dependent care credit is refundable for 2021. If the taxpayer meets a residency requirement. Can you review this requirement? Philip Yamalis: I sure can. If you can hear me. Karen Russell: I can and yes, I sure can. Philip Yamalis: Oh, right.

Great. So to be is as you just mentioned in the question to be eligible for the refundable portion of the credit. For the child and dependent care credit, you or your spouse in the case of a joint return have to have your main home in one of the 50 states, or the District of Columbia for more than half the year. So your main home could be any location where you regularly live, your main home may be your house, an apartment, a mobile home, a shelter, temporary lodging, or another location, it doesn't need to be the same physical location throughout the taxable year. If you're temporarily away from your main home because of an illness at occasion business, school, military service, you're generally treated as living in your main home during the time. There are special exceptions for military personnel. But to meet the residency requirement, you have to live in the United States for over half the tax year. Karen Russell: Thank you so much. Philip Yamalis: You're welcome. Karen Russell: That's a wonderful response. I appreciate that. Okay, so Rich, this is for you, someone in the audience is confused about the reference to using 2019 income when calculating 2021 earned income tax credit. And why would they use income from two years ago? And how do they show this on the tax return? Richard Furlong: Thank you, Karen. That's a great question. I've heard that previously. And it comes back to the economic impact of COVID-19 over the past two years and Congress's intent through the legislation to allow those eligible to claim the earned income credit, who might have lost work and not been working or working minimally to look back to the pre-pandemic year, that would be 2019, and that their earned income was larger in that year when they run the calculation through their software, or through the worksheet that can give them an earned income credit, even if they had no earned income in 2021 Karen, but did have earned income in 2019, that would allow them to claim the earned income tax credit. So it was a policy change by Congress to assist taxpayers who would normally claim the EIC, but might be facing a lower amount as a result of losing work during the pandemic, Karen. Karen Russell: Thank you, Rich. I'm sorry, I was on mute and talking to myself. Okay, so Phil people were logging into the webinar, when they heard me mention that taxpayers who received any of the advanced monthly payments of child tax credit will get a letter. Can you talk more on that, please? Philip Yamalis: Sure. I'd be glad to Karen, just remember, they were advanced childcare payments, right? They're an advanced payment that are going to be reconciled on the 2021 tax return in January 2022. Now, the IRS is currently sending letter 6419 to provide total amounts of the advanced child tax credit payments that were dispersed to taxpayers during 2021. Now, it's important that you ask your clients to keep that letter right to share that letter with you so you can have it in their tax records, you'll need to refer to it, you'll want this letter so that you can generally have the payments that were paid out to them in 2021. The letters mailed to the address on file as of the letters mailing date. Generally, it's the address on the most recent tax return that they may have filed or the address that was updated when if they use the child tax credit update portal back during the time you can do so. So that's basically it if it's being sent out now as we speak, the Letter 6419 to provide a summary and total amount of the advanced child tax credit payments made. Karen Russell: Thank you for that terrific explanation. I appreciate that. Okay, so now we have time for one final question. I think that this is going to be pretty easy. So Rich, you've mentioned that Publication 17 is now available in other languages. Where can the audience find that? Richard Furlong: Great question. So the way I find it, is I go to irs.gov. I click on the tab at the top of the page forms and instructions. And then I go to the bar that says list all current forms and instructions. And I just type in Pub for Publication, Pub 17 and it brings up a drop down menu with the pub 17 Karen with those languages I mentioned earlier today. So that's the way I find it. Karen Russell: Terrific. All right, audience. Unfortunately, that's all the time we have for questions. And I do want to thank Rich and Phil for sharing their knowledge and expertise and staying on. Before we close out today, Rich, what key points do you want the attendees to remember? Richard Furlong: Well, just to remember, we've talked about those two key pieces of legislation impacting the 2021 tax year. As you see on the top bullet, we've gone into a little bit of depth on the significant changes to the child tax credit, the child and dependent care credit, the earned income credit and the premium tax credit. The forms and instructions can be a great help in diving deeper. And then finally, Phil and I discussed the changes to the Form 1040 itself, along with the associated enumerator schedules 1, 2, and 3 with modifications and additions to the line items, Karen. Karen Russell: Okay, thank you so much, Rich. And, Phil, can you go over your key points briefly? Philip Yamalis: Quickly, I'll tell you that the any changes to IRS forms and instructions that we make can be found on irs.gov/formchanges. We have many IRS products that are now available for Limited English Proficiency taxpayers. And we urge you to stamp the date on filing through the news by bookmarking irs.gov and checking regularly for updates that could come your way. With that Karen, let me turn it back over to you. Karen Russell: Thanks again. Thanks again, guys. Okay, audience, we are planning additional webinars throughout the year check irs.gov for that. We do have the National Taxpayer Advocate updates from them January 20, bankruptcy and the IRS January 25, and keys to mastering due diligence requirements, January 27. Just go to irs.gov. And just put webinars in the search bar, and you can register for our webinars there. And then of course, we will offer certificates of completion when appropriate.

We do invite you to visit the portal. There are many versions of our webinars that you can view our archived versions and then remember certificates of completion are not offered, if you view an archived version on the portal. Thank you. I want to thank those presenters for being on and answering your questions and providing a great presentation. So if you did attend today's webinar for at least 50 minutes after the official start time, you'll receive a certificate of completion that you can use with your credentialing associated organization or association for one possible CE credit and again, the time that I talked before the top of the hour does not count. If you're eligible for continuing education from the IRS and registered with your valid PTIN. Your credit will be posted in your PTIN account. If you qualify for certificates and have not received it or your credit by February 3, please send an email to cl.sl.web.conference.team@irs.gov. And the email is on the slide too. So if you're interested in finding out who your local stakeholder liaison is, you can send an email to that address as well. And we'll send that information to you.

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