When you speak about tax planning for 2022, it is as much about what expired during 2021 as it is about new 2022 provisions. For some time, there have not been many permanent tax law changes. Most law changes have a built-in expiration date also known as a sunset provision. The intent is generally to allow future legislators to decide whether there is still a need for a provision.
This is especially true recently when so many COVID-related provisions sailed through. Many of these measures needed to be done quickly. The disease spread throughout the country and decimated businesses and caused unemployment on a scale many commentators have said has not been seen since the Great Depression. As a CPA whose firm had to assist so many of our clients in weaving their way through all of these new rules, it was apparent that the law writers didn’t have much time to think the provisions all the way through. This led to constant updates on guidance of how to actually interpret these new laws and the tax benefits they created.
In addition, for better or worse, the current gridlock in Congress has probably made the matter worse since the provisions which did the most to benefit taxpayers and businesses are expiring, along with the ones which didn’t. Without getting any more tangled up in how this happened, here is a list and brief discussion of individual and business provisions which expired in 2021:
- Employee Retention Credit which gave a tax credit to employers who kept their employees on board during the pandemic, and met other criteria, was set to expire on December 31, 2021. However, it was retroactively ended early on September 30, 2021. The credit could be as much as $7,000 per employee per quarter. This is a big hit to small employers who qualified.
- The child tax credit was reduced from a maximum of $3,600 per child and was fully refundable. Additionally in 2021, half of the credit could be paid in monthly advance payments. For 2022, the credit reverts to pre-pandemic levels of $2,000 per child and only $1,400 of it is refundable. The ability to get half of your expected credit paid in advance monthly also expired at the end of 2021.
- Paid sick and family leave credit expired as of September 30, 2021. It had allowed a credit of up to $511 per day for employees who were unable to work due to COVID. The credit covered wages paid up to 80 hours (10 days). Clearly getting a credit equal to wages paid under this provision (up to the $511 per day limit for 10 days) was a tremendous benefit to employers who were hit with employees being affected by COVID.
- Enhanced earned income tax credit for childless individuals expired December 31, 2021.
- Enhanced employer-provided dependent care assistance exclusion expired after 2021.
- Individuals who did not itemize charitable donations and gave cash amounts to qualified charities could deduct up to $300 for single taxpayers and $600 if married and filing joint. That provision expired in 2021.
These are some of the broader reaching rules and benefits which expired at the end of 2021. Many of these may come back if any of the stalled legislation is enacted. Be sure to check with your tax professional to see if any of these or other provisions will affect your individual return or your business.