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How to Do Your Taxes if You’ve Received a Child Tax Deduction

The kid tax benefit and how to prepare your taxes
19 Feb 2022,

In this interview, Taxfyle CEO Richard Lavina discusses the tax file service, claiming a child tax credit, accounting for cryptocurrency, and IRS backlogs in previous years’ filings.

ALEXIS CHRISTOFOROUS This tax season may go down in history, and not in a good way. Due to IRS personnel constraints, taxpayers are now faced with new hurdles. Richard Lavina, CEO and founder of Taxfyle, is here to guide us through it all.

Richard, welcome to the show. We’ll get to Taxfyle and what you do there later. But first, I’d want to discuss some of the problems we have as taxpayers this year, including how to report pandemic-related stimulus monies and child tax credits. So, what? Which may impact our returns.

LAVINA, RICHARD Yes, thank you. The child tax credit is the one that most Americans are affected by. So, in 2021, the credit went from $2,000 to $3,600? And I, as a parent, chose to receive some payments accelerated in 2021, right?

So when it comes time to file your taxes this season, and you have until April 15 to do so, make sure that you track all the payments that you received in 2021 if you had some of that check— that credit advanced to you. If not, fine. You could deduct the full $3,600.

And as for small firms, you mentioned stimulus payments and such. The biggest is PPP. The newest word on PPP is that if you got PPP financing due of the pandemic, it appears to be totally forgiving, meaning you don’t have to pay it back.

MITCHELL: Tax filing day is two months away, on April 18. Crypto is one of the major issues that many people are facing this year because they must disclose any winnings. And I’m curious how others deal with it.

LAVINA, RICHARD Crypto is difficult because unlike stocks, many traders trade crypto without first exchanging it for cash. Unlike the stock market, you’re usually converting funds into the equity of the firm you’re seeking to acquire stock in, right? But with crypto, you’re swapping coins, whether you use Coinbase or another exchange.

The IRS treats it differently than conventional trading because they compute or want you to calculate your gains and losses as you trade from one position to another. So it seems to me that many individuals that do crypto assume it’s just when you convert it back into money, like the euro or USD. That’s when you record it on your tax return’s schedule D.

But it isn’t. It’s a bit more complicated. Many software programmes exist to help you keep track of all those position changes. And we recommend it.

ALEXIS CHRISTOFOROUS Because of the IRS’s backlog, many taxpayers are also trying to figure out how to file their 2021 returns. So, what?

LAVINA, RICHARD Wait. You could phone for an update. Sure, it helps. But receiving an update isn’t hard. They currently have almost 6 million returns pending. Aren’t many of them paper? As you know, you can file electronically or on paper. Sometimes they require you to file on paper rather than electronically if you’ve had to amend your work.

If you still haven’t received a refund or a settlement with the IRS in 2021, you’re probably going to be further back in the queue than if it was done electronically.

MITCHELL: Now, Richard, I’d want to ask about Taxfyle. It’s been dubbed the Uber of taxes because you can do it from your couch. Tell me what sets you apart from other firms.

LAVINA, RICHARD There are a lot of wonderful do-it-yourself tax apps out there. And if you need help, TurboTax Live is wonderful if that’s your thing. If you’re a small business owner who trades crypto, we offer a network of 4,500 on-demand CPAs and IRS enrolled agents who specialise in somewhat more sophisticated circumstances.

So the target market is those that spend 10+ hours on TurboTax, become angry, and want to [INAUDIBLE]. Our company was founded six years ago to help tackle that challenge.

ALEXIS CHRISTOFOROUS Okay, we’ll leave it there. Taxfyle was founded by Richard Lavina. Because of COVID, many people do not want to see their accountant to file, thus this is a perfect alternative. Thank you for coming. Karina.