Due to the pandemic and the 2021 American Rescue Plan Act, tax filing has seen many changes. One of them is reporting stimulus payments received in 2021. Reporting of stimulus payments for the tax year 2021 will look a little different for the 2021 tax season. To help taxpayers report the correct amount, the IRS will begin to send out a new type of document in late January, it will be IRS Letter 6475.
Just like every year, you are eager to file your taxes and get your refund but you should wait to file your taxes till you receive Letter 6475 from the IRS. Using the figures in this letter will not only help you report your 2021 stimulus payment correctly—but it will also help you avoid delays in getting back your refund.
IRS Letter 6475 only applies to the third round of Economic Impact Payments, which were issued in March through December of 2021. The third round of Economic Impact Payments, including “plus-up” payments, were advance payments of the 2021 recovery rebate credit that would be claimed on a 2021 tax return. Plus-up payments were additional payments the IRS sent to people who received a third Economic Impact Payment based on a 2019 tax return or information received from the Social Security Administration, Railroad Retirement Board, or Veterans Affairs. Plus-up payments were also sent to people who were eligible for a larger amount based on their 2020 tax return.
Anyone who received a 2021 stimulus payment will be sent letter 6475.
What Personal Information Does IRS Letter 6475 Include?
IRS Letter 6475 provides several key pieces of personal information for your reference:
Your Full Name and Address: This ensures the letter is correctly associated with you and confirms your contact details.
Economic Impact Payment Details: The document outlines the total amount of the Economic Impact Payments (EIPs) issued to you for the 2021 tax year.
This letter acts as an official record from the IRS, detailing what stimulus payments you’ve received, thereby helping you accurately report them on your tax return.
As such it is not required for you to have the 6475 letters but we would like to encourage you to wait for your 6475 letters before filing taxes for 2021 vs. using other sources to figure out the amount. If the amount you gathered from alternate sources is different from what is reported by the IRS then it could trigger a manual review of your return, which could delay your return – and refund for weeks.
While you may have received a Letter 1444-C after receiving your stimulus payment, that’s not the document the IRS recommends you use to prepare your tax return.
If you’re ready to file your taxes, but you have still not received your 6475 letters, there is an alternative. You can create an ID.me account with the IRS to verify the details from the 6475 letters.
Here’s how to check your Economic Impact Payment:
• Create a new ID.me account (if you don’t have one) by going to: https://www.irs.gov/payments/your-online-account
• Click Sign in to your Online Account
• Click ID.me to Create a New Account
• Follow the on-screen instructions to provide information to set up the secure ID.me account.
Note that users may be asked to create a live video of themselves (using a phone or webcam) and/or upload photo identification. For help, visit the ID.me help page.
Once you’ve created an ID.me account, you can access your online account at the link directly above. In your online account, you should be able to see all transactions including the Economic Impact Payment.
What should you do with IRS Letter 6475?
Once you get your letter, you need to use the amount shown on your Recovery Rebate Worksheet to determine if any credit applies.
“I’m not required to file taxes. Is there a benefit to reporting this money?”
Yes, even if you are not required to file taxes, you should file taxes to be eligible for more money later on.
For example:
• If you believe you didn’t receive the full stimulus payment amount that you were due, you can file a 2021 federal income tax return to claim the additional money. This is known as a Recovery Rebate Credit.
• You may be entitled to a refundable credit, such as a Child Tax Credit or Earned Income Credit. That means, when you file, you’ll get your money back. But the catch is, you have to first file your tax return to claim that money.
Need help filing your IRS letter 6475, NexGen Taxes team of fully vetted accounting and tax professionals can help you report the advance payments you received in 2021 and help you claim any other credits or deductions you’re entitled to. We are here for you 24/7, reach out to us today.
The IRS Section 179 deduction helps businesses save on taxes when purchasing qualifying assets like heavy vehicles, machinery, and eligible software.
Internal Revenue Service (IRS) Section 179 allows businesses to deduct qualifying equipment costs. This includes vehicles over 6000 pounds of gross vehicle weight rating (GVWR). This weight includes the vehicle itself, its passengers, and their cargo. These vehicles must be used more than 50% for business purposes.
Alternative allowable deductions may apply if the vehicle is below this weight limit. Check with a qualified tax professional and see what business expenses you may claim as deductions to reduce your tax burden. Check the GVWR requirements for vehicles to ensure eligibility.
Section 179 vehicle list includes SUVs, trucks, and vans with a gross vehicle weight rating (GVWR)of over 6,000 pounds. This provision allows businesses to deduct the full purchase price of qualifying vehicles used for business purposes in the year they were placed in service.
Heavy SUVs and crossover cars over 6000 lbs, such as the Jeep Grand Cherokee, offer spacious interiors for cargo and passengers, making them ideal for business operations.
Tax Benefit: Deduct significant percent of purchase price in the first year under Section 179.
Use Case: Great for businesses needing reliable, all-terrain vehicles with high cargo capacity.
Pickup trucks over 6000 lbs, like the Ford F-250, are invaluable for industries requiring towing and heavy-duty hauling.
Tax Benefit: Significant first-year deductions are available for these rugged modes of transport
Use Case: Perfect for construction, landscaping, and logistics businesses.
Luxury vehicles over 6,000 lbs, such as specific Range Rover or Cadillac Escalade models, can also qualify.
Tax Benefit: Depreciation limits may apply, with specific caps based on the IRS rules.
Consideration: Maintain detailed records of business use to avoid deduction errors. See our blog on what constitutes good record-keeping.
Deduction eligibility depends on how much the vehicle is used for business. You can easily calculate this by tracking business miles versus total miles driven. While several apps are available, the easiest way is to use a spreadsheet. Ensure that at least 50% of business use is qualified.
You must purchase and start using it within the tax year to claim the deduction. Proper timing can maximize your tax savings and improve your cash flow.
Keep documentation like purchase receipts, registration, and mileage logs. These records will support your claim and safeguard against potential audits.
“All vehicles qualify for Section 179.” – Only those over 6,000 lbs GVWR primarily used for business are eligible.
“You can only deduct the purchase price.” – However, the purchase price and related costs, such as sales tax and registration fees, may also be deductible.
Accurate business reporting is non-negotiable for your success. Misreporting puts you at risk of costly IRS penalties, so you must maintain detailed logs. Consult a tax professional to understand depreciation limits and maximize your financial benefits and reduce tax liability. Take decisive action now—don’t let potential savings slip away!
The IRS Section 179 deduction is invaluable for businesses investing in over 6,000 lbs vehicles. By understanding the eligibility criteria, maintaining accurate records, and strategically planning purchases, you can achieve significant tax savings while fulfilling your operational needs.
If you’re considering a purchase or have questions about the deduction, consult a tax advisor for tailored guidance.
One downside of Section 179 is limits on deductible equipment costs yearly. For example, in 2021, the max deduction is $1,050,000 for eligible purchases. Specific rules define qualifying properties. If equipment isn’t used for business before its lifespan ends, a part of the deduction might count as income later. Consider your business finances and seek advice to decide on using Section 179.
The way you use your vehicle for business impacts your tax savings. It tells you the percentage of your vehicle costs that you can deduct. If you use your vehicle mostly for business, you can receive larger deductions.
Yes, there are limits for Section 179. Depreciation caps apply to certain vehicles, including luxury vehicles over 6000 lbs. They change each tax year. This affects the amount you can deduct.
Vehicles over 6,000 pounds that qualify for Section 179 deductions typically include SUVs, pickup trucks, and vans. Some examples are the Ford F-250, Chevrolet Suburban, and Toyota Land Cruiser, as long as they are used for business purposes more than 50% of the time.
For vehicles over 6,000 pounds, you can deduct up to $28,900 in the year of purchase (for tax year 2023) under Section 179. If the vehicle qualifies, you can also take 100% bonus depreciation on the remaining value, allowing you to write off the entire purchase price, depending on the total cost and the business use percentage.
The Section 179 Deduction allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the year. Depreciation, on the other hand, spreads the cost of the asset over its useful life, allowing for a portion of the cost to be deducted each year. This can provide immediate tax relief and help businesses reinvest in new equipment and technology.
No, you cannot write off 100% of an over 6000 lbs vehicle for tax purposes. The IRS allows for certain deductions based on the business use percentage of the vehicle, which includes factors such as how much the vehicle is used for business purposes versus personal use. It’s best to consult with a tax professional to determine the specific deductions you are eligible for based on your situation.
The Section 179 Deduction allows small businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. To take advantage of the Section 179 Deduction, a small business can follow these steps:
1. Purchase or finance qualifying equipment: Ensure that the equipment purchased is eligible for the Section 179 Deduction. This can include machinery, vehicles, computers, software, office furniture, etc.
2. Check the total cost: Confirm that the total cost of the equipment does not exceed the Section 179 spending cap (which is subject to change annually).
3. Place the equipment in service: The equipment must be placed in service during the tax year you are claiming the deduction for.
4. Keep records: Maintain detailed records of the equipment purchase and use for tax purposes.
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