At the Mid-Year Mark

calculator with taxes text lying on wooden desk with place for text

{6 minutes to read} We had another wet holiday weekend on July 4th this year. Wet days like these bring back some good vibes from my homeland — the Caribbean. On the zinc top roofing — the raindrops dance to a different and sweeter rhythm.

In spite of the wet days across the Tri-states, I hope you made the best of the holiday — Independence Day. Webster’s dictionary defines this holiday as “a holiday celebrating the anniversary of a country’s independence from another country that ruled it in the past-” As for the United States of America, this holiday was born on July 4, 1776, as a day that represents the Declaration of Independence and our independent nation.

While we are on the matter of independence — for a limited time, the IRS gives us more independence — to deduct food and drinks purchased from a restaurant. Let’s be strategic in taking advantage of this expansion to reduce our tax liability. After all, we create and develop most of our business relationships over meals.

We are officially at the mid-year mark – 

This gives us the opportunity to assess the past six months of actions and plan more intently for the next six months. 

The intent of this article is to share a few of the changes that will impact the 2021 tax year. One of these changes is related to families (with dependent – children or adults) and another is the larger deduction for certain meal expenses. However, before we begin, let’s note two of the areas for which I get the most inquiries from individuals. These happened in the 2020 tax year but will impact 2021 tax-year filers as well.

•2020 Retirement distribution – if you withdrew money from your retirement funds in 2020 and selected to allocate the withdrawal evenly over 3 years – you are required to add/include the portion that belongs to 2021 as part of your income.

•Unused flexible spending for health and dependent care – there can be carry-over from 2020 to 2021 – so please manage your 2021 contributions.

So, what’s new for 2021?

Business meals are now 100% deductible (limited time). Under the lock-down of the pandemic, most among us were not able to break bread with our work colleagues and business acquaintances, resulting in huge losses for the restaurant industry. In an effort to assist that industry, the lawmakers temporarily increased the deductible amount for business meals. This is a win-win for restaurant owners and their patrons.

Under the Consolidated Appropriations Act, 2021, a temporary exception was enacted to the previous 50% limitation. Per the IRS, “beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Below are new credits only available in 2021

1. Child Tax Credit – Earlier this year, Congress passed the American Rescue Plan Act (ARPA) which increases the credit for dependent children and allows partial payment of the credit this year — before you file your 2021 tax returns.

Here is how the credit works: 

a. Income and Age Limitations: 

On the last day of the year, ARPA allows individual tax returns to qualify to take a child credit of $3,000 for children under the age of 18.  To qualify, the child must have a social security number and be claimed as a dependent on the 2021 return. The full amount is refundable, if income is $150,000 or less for joint filers (i.e., MFJ), and for HOH and +Single, the amount is $112,500 and $75,000 respectively. If or when the income exceeds $400,000 for MFJ, If income exceeds the above, the amount of the credit decreases until it is fully phased out.

Read here to see if you qualify for this credit.

2. Child & Dependent Care Credit – Under ARPA, the child & dependent care increases/expands for 2021 only. These are expenses we pay to take care of a child or a qualified dependent while we work. Individual taxpayers qualify for a refundable credit at a rate of up to 50% for the first $8,000 of expenses for one (1) dependent and up to $16,000 in expenses for more than one dependent. There is no advance for this credit. Prior to 2021, the maximum credit was 20% of $3,000 for one dependent/child and up to $6,000 for two or more. 

3. So, how has the credit expanded or changed in 2021? 

a. The maximum credit amount refundable is $4,000 for a child or dependent.

b. Income limitations – The credit amount starts to reduce when income is $125,000, and phases out fully at $438,000.

c. Residency limitations – you must live in the United States for at least ½ of the year.

During a time of crisis (e.g. the current pandemic), more developed countries like the USA extend financial help to the people. In 2020, such help showed up in the form of stimulus checks, unemployment income, etc. At the same time, scammers, referred to by the IRS as “the Dirty Dozen,” began to crop up. In a notice (alert) dated June 28, 2021, the IRS posted a notice with the subject lineAmericans urged to watch out for tax scams during the pandemic. For your protection, please read the details from the IRS website.

In closing, in spite of the necessary boundaries that are still required due to the current pandemic, my hope is that we freely celebrate our independence. Scripture reminds us that we have free will. Let us resolve to use our free will to express light and love – as a way of being. 

One last thought before you go, if you have not filed your 2019 or 2020 tax returns you may not be able to receive some of these credits. As always, you can freely contact us if you need assistance to file your returns. 

With gratitude, 


Nadine Riley, CPA
Founder, Masterpiece Accounting Group
Phone: (212) 966-9301

The Masterpiece Accounting Group web, blogs, and articles are not rendering legal, accounting, or other professional advice. Tax strategies and techniques depend on your specific facts and circumstances. You should implement the information in this newsletter only with the advice of your tax and legal advisors