I hate taxes Taxes are a briefian, my father, my shoulder Don't you know I feel a lot more than my shoulder I hate taxes I'm ringing at home with Sarah and Tenelle I don't know if you can hear that in the background, Sarah But Robert Cray He is singing the 1040 blues He's dead, he hates taxes Plain and simple I think a lot of people would identify with him Well, it's January 31st And so whether we hate taxes or not It's just about time to deal with them In one way or another That's right And we have Rowling an expert today That we have had on our show before Yes, normally we have him Jeff, as the season is starting to wrap up, he's usually really tired and blustered, but we've got him at the beginning of the season because we've got a lot to unpack this year. That's right. So, we want to thank Joey Jeter for joining us today. Joey Jeter works for Cowart Reason Sergeant as a managing shareholder in Brownsville, Tennessee.
So, Joey, thanks for joining us. Well, thanks for having me. Joey's really smart. And you know what?
We need somebody smart, Joey. And we're glad you're here today because there's lots to talk about with this tax talk here. And I just want to start with stimulus money because that's been a hot topic and we've talked about stimulus funds more in the past few months than we have ever. So, there's still some people out there that didn't get stimulus or they got to take at this point.
If they did not get their stimulus money, that's tax-related. What needs to be done now? Really, there's a couple ways of handling getting your stimulus payments if you haven't received them yet. The easiest thing to do is your 2020 tax return and you can claim that credit that wasn't received on that tax return.
The 2020 tax return, you can get the first and second stimulus. And on this 2021 tax return, if you haven't gotten the third stimulus, you can get the credit on that tax return. Oh, so we're going to have to deal with two different returns. If one of the first two I didn't get, I've got to go back and do the 2020 return.
I can't do that on the 2021 return. Correct. Okay. That's good information.
Very good information. There's been a lot of issues with these stimulus payments on, like you said, the partial payments have been the biggest concern because the 2019 and 2018 tax return will stop. Okay. Oh, that's a lot.
Yeah, yeah. Well, definitely. So you've given people a good place to start with that. Another question comes along with unemployment issues.
A lot of people filed for unemployment for the first time in 2021. Is that money taxed the same as a paycheck? Yes, in 2020 with everything being shut down and people not going to work, the federal government gave what they call an exemption for your first $10,200 of your unemployment income. But in 2021, that bill is not a exemption and it will be taxed just as it was the regulation.
Okay. A lot of people may not realize that. I'm hoping that they do, but I'm worried that they probably don't. Okay.
So just to clarify, if I got unemployment, then I may be looking at a tax liability for that income unexpectedly. You could. Now, unemployment does allow you to withhold federal withholding from that money. So hopefully some tax support will help and you've got some paid in.
Did I have to take steps in order for that to happen? I'm sorry, taking steps? Did I have to take steps for that to happen or did they do it automatically? I know.
Usually you would have to check a box or something like that to tell them to withhold. Okay. Okay. So let's talk a little bit about the advanced child tax credit because that was a hot-button topic this year as well.
So many families were getting that for their children, I don't know, $250 or $300 depending on the child's age or something like that. First of all, is that something that's going to cause a reduction in tax refunds this spring for some of those families? Unfortunately, it looks like it probably will. As you said, the tax rate was increased from $2,000 to $3,000 for a child that's six years and older and from $2,000 to $3,600 for a child that's under six years and older.
So what they really know is they take a half of that credit and pay it to the families over half a year. So you're losing half of that credit. So when you find a tax return for 2021, instead of having a $2,000 credit for two children, you're going to have either $1,500 or $8,800. Right.
So that is $500 less per child over six and then $200 less per child over six. So it could be, depending on the number of children on the tax return, it could be a possible reduction. Okay. So my refund may not be as large as what I've seen in the past because I got some of that child tax credit in advance.
Correct. Correct. And the child tax credit was paid out hoping to get the economy going and so we're trying to get more money out into the economy. Yeah, I still got the money.
Yeah, you just got sooner than... I got it sooner and smaller amounts than the one large lump. Right, you got it. You just got it in a different time frame than you typically do, right?
Okay, okay. Yeah, so that's good to realize. We talk about earned income tax credit every year and typically direct that towards people that have children. Have there been any changes to the earned income tax credit that make, you know, childless people eligible for that credit?
You know, usually I typically don't deal a lot with earned income tax credit, but there were some changes this year that are going to broaden the scope of who can qualify for. If you're 19, well, there's temporary changes to the permanent changes to earned income credit. The two temporary changes are if you're 19 years old and you're not a student, you can't qualify for earned income credit. If you're a student, you must be going forward to qualify for it.
So, you don't have to pay for children for this temporary change in law. And then also, if your 2021 income is less than you made in 2019, you can use your 2019 income to calculate your earned income credit. So, I'm thinking that's going to open up some more people to claims credit. Definitely.
I didn't know that. Well, okay, wait a minute. Let me review that and make sure I understand. If your income was less in 2021, that was in 2020.
2019. 19. Then you can use your 2019 return. Wow.
Mm-hmm. Okay. I haven't done this in practice yet, so I have no real idea how it works. Well, that's okay.
We're glad to know that, you know, these are some of the changes. We're getting updated on some things there. Yeah. Okay.
Okay. Well, I want to talk about federal student loan payments. And there are a lot of people that want to talk about federal student loan payments. But they've been on pause, along with the interest that comes along with them.
So, for many people, they claim the interest that they pay every year on their student loans, on the taxes. How is this change going to affect filing our taxes? So, with this rate period, I guess they're calling it, for lack of a better word, they haven't done much change other than they still cashed $2,500 that you can deduct. But if you haven't paid anything in there, you're not going to get a deduction.
So, it could, you know, increase your tax liability not having that deduction. Yeah. Okay. I think that's important for a lot of our listeners to know those that do have federal student loans and repayment that have been on pause and they have not made payments, which they haven't been required to make payments.
That's a deduction that you won't be able to have this time if you haven't paid any interest in. Okay. So, continuing the student loan conversation, there is ongoing discussion about student loan forgiveness, most notably, recently being that public service loan forgiveness program is kind of changing and being promoted more. So, if people find themselves forgiven for their student loan balances, is this considered taxable income?
We're talking about the public service loan forgiveness, correct? Yes. So, the federal government said if you qualify for this and you do get your student loans deducted to the program, it's not considered taxable. Okay.
Okay. You just got like a fist bump in this room. Well, I mean, you know, this is something that I know people have been really, you know, pondering. You know, student loan forgiveness can help a lot of people going forward, but there's a concern about a large tax bill if that's considered income.
So, that's something that I'm glad we were able to clear up for a lot of our listeners today. It is, but there's a bunch of things you've got to, you know, have to check the box to qualify for. Right, yeah, yeah. It's not automatic.
No. No, no. I mean, I think you've got to make 120 payments, which if you, I did say that if you even use this pause period, even though you didn't make those payments, that would count to that. Yes.
Okay. Okay. Well, another thing that was going on a lot in 2021 were homes being sold. I think we did a complete flip in my subdivision of, you know, we're 90% new people now.
Not 90, but a lot. Yes, a whole lot. And a lot of people sold their homes at a price that was higher than the home was even worth, an asking price, which is good for them. What effect, if any, does this have on our taxes?
If we were one of those lucky families that sold a home for way above what it was worth, does that affect our taxes at all? Well, it's possible that it could. If it's a personal residence and you've lived in there for two years, at least three of the past five years as your personal residence, and if you're single and you've had a gain of $250,000 less or you're married and signed jointly and if it's $500,000 less then there will be no tax consequence a day. Okay, okay.
Now, if you bought a house that fixed up in six months and yet there's going to be some tax liabilities. But a personal residence should be fine. Well, that's good news for a lot of home buyers. For sure.
Yeah, I'm expecting to see a number of those this year. I think that'll be interesting to see what, you know, rolls out with people. Yeah. Okay, so we talked about a lot of changes or potential changes for people this tax filing season and, you know, a lot of people just choose to do their own taxes at home.
I think it's real simple. They don't have a lot of deductions or those kinds of things. So they do it online and do it themselves. Can you think of some specific situations over the last year or so that you may encourage people to seek out a professional to help them with their taxes?
I mean, just off the top of my head there's a few things that we talked about already but kind of give me pause to make sure I'm at least getting the money that I'm, you know, unentitled to. That's right. It certainly is one of the biggest tax fractures, I guess. But the child tax credit this year is going to be complicated, say the least.
The IRS has sent letters and I think being circulated out there. There should be some but it's just a lot going on. Yeah, there's a lot of changes and if you're not sure, you're right, seek some professional help. You don't want to miss money that is yours.
Certainly. I mean, you're probably not talking about a huge increase in the difference that you're paying for the service but you could be leaving a lot of money out of the table. And we do not like to leave money on the table. That's not what we do.
I learned a lot today just during these few minutes we've been talking. Yeah, it's given me a couple of things to look into and think about. So, Joey, thank you for always joining us at tax season and kind of letting us know