10 Ways For Professional Athletes to Reduce Tax Liability

Professional athletes can reduce their tax liability in several ways, including:

1. Utilizing retirement accounts: Contributing to a 401(k) or IRA can reduce taxable income and lower tax liability.

2. Deducting expenses: Athletes can deduct expenses related to training, equipment, travel, and other business-related expenses.

3. Taking advantage of tax credits: Tax credits can help reduce tax liability. For example, income taxes paid to other states may be used as a credit against your home state income taxes.

4. Utilizing charitable deductions: Donating to charitable organizations can provide a tax deduction while also supporting a good cause.

5. Timing income: Athletes can defer signing bonuses or other income until a later year when tax rates may be lower.

6. Establishing residency in a low-tax state: Athletes can save on state income taxes by establishing residency in a state with little or no income tax.

7. Utilizing income averaging: Athletes can use income averaging to reduce their tax liability by spreading income over several years.

8. Setting up a business: Athletes can set up a business to take advantage of business tax deductions.

9. Utilizing a tax professional: A tax professional can help athletes identify tax-saving opportunities and ensure compliance with tax laws.

10. Investing in tax-efficient strategies: Athletes can invest in tax-efficient strategies such as municipal bonds or exchange-traded funds (ETFs) to reduce tax liability.

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What You Need to Know About Child Tax Credit Payments

Most qualifying families will automatically receive the expanded payments, but those who don't have to file taxes or haven't done so will need to update their information with the IRS.

The payments, which were included in the American Rescue Plan, change an existing tax credit by expanding the eligibility pool and increasing the money families get. Under the expanded credit, the IRS, also for the first time, is offering the option to receive the payments monthly, rather than in a lump sum as a tax refund.

The expanded payments are expected to significantly decrease the number of children living in poverty; the White House estimates that child poverty could be reduced by as much as 50 percent.

Most of the roughly 39 million families who are eligible have filed taxes recently or received stimulus checks and do not need to take any additional steps to receive the monthly benefit. But an estimated 4 million to 8 million eligible children are at risk of missing out because their families are not required to file taxes or they have not done so.

Non-filing households tend to be more vulnerable and the most in need of assistance. And although the Biden administration has rolled out a number of online portals where families can update their information, cumbersome government websites, language and technology barriers, and a general lack of public awareness threaten the impact of the program.

Who qualifies?

People who claim children 17 or younger as deductions on their taxes are eligible.

The full enhanced credit will be given to single filers who earn as much as $112,500 and joint filers making up to $150,000 a year. The payments begin to decrease for those making more, with the credit completely phasing out for single payers earning more than $200,000 or for married couples with incomes above $400,000.

The IRS determines the age of a child by how old the child is at the end of the 2021 calendar year. So children turning 18 this year will not be eligible.

There are no work requirements, and you do not need a permanent home to claim the credits.

How much money do you get?

That depends on how old the children are (and how much money you make).

How will the money be distributed?

If you filed taxes in 2019 or 2020 or received a stimulus check, you should get a direct deposit. If the IRS does not have your current banking information, then keep an eye out for a check in the mail.

If you do not see a direct deposit payment Thursday, you can visit the Child Tax Credit Update Portal to see whether your information is up to date.

When will you get the payments?

The IRS plans to send direct deposits on the 15th of each month, so: July 15, Aug. 13 (this payment is early because the 15th falls on a Sunday), Sept. 15, Oct. 15, Nov. 15 and Dec. 15.

If you do not want to get payments on a monthly basis and would prefer to get the cash in a lump sum during tax season, you can update that preference on the IRS website. A White House official said about 1 million people have chosen to do that so far.

What if you don't file taxes?

If you were not required to file taxes in 2019 or 2020 or did not do so, you must update your information with the IRS to receive the benefit.

The IRS released an online tool where parents can register their information electronically. The tool does not work well on mobile devices, so it is best to use it on a laptop or a desktop computer. The tool is available only in English, but an administration official said Spanish and other languages are in the works. If you did not receive the pandemic stimulus checks, the IRS will also use information uploaded to the non-filer tool to make sure you get those payments. Lost your job? Got married? Had another kid? If you had any significant life change that could affect how much money you are eligible for, you will need to update the information in a different IRS online tool (separate from the non-filer tool).

Changes in dependents, marital status and income, however, cannot be made until later in the summer. As long as the information is updated this year, the IRS will give you back pay for any missed monthly credits.

When will the monthly expanded credit end?

The expanded credit ends in December. Biden has called for a four-year extension, which would need congressional approval. Other Democrats have called for making the expansion permanent.

How can the money be used?

However you'd like. Unlike other benefits, such as food stamps or housing vouchers, the child tax credit is unrestricted

Summarized from Data Source Lauren Egan, NBC News

Treasury watchdog warns of tax refund delays as IRS works through backlog

Taxpayers may face delays in getting their refunds this season, a Treasury watchdog warned, because the Internal Revenue Service is still dealing with last year's backlog and faces difficulties hiring enough workers to process old and incoming returns.

"Of particular concern is the continued challenges in hiring sufficient staff needed to both continue to work backlog inventory and process Tax Year 2020 tax returns at the same time," the Treasury Inspector General for Tax Administration wrote in a report released on Wednesday. "This could further affect taxpayers awaiting refunds and additional Recovery Rebate Credits associated with these Tax Year 2020 returns."

At the end of 2020, the IRS had a backlog of more than 11.7 million paper returns, both individual and business, that needed to be processed. Some taxpayers with unprocessed returns may have trouble contacting the understaffed IRS, further delaying those returns. Additionally, the IRS may need to divert resources for the backlog to the ongoing distribution of the third round of stimulus checks.

"The backlog of returns, correspondence, and other types of work resulting from the pandemic has and will continue to have a significant impact on the associated taxpayers," the report said.

While the IRS increased their hiring goals for the 2021 fiscal year, they "have been unable to hire as many new employees as they expected," the report found. Too few applicants and problems processing applications delayed hiring.

The IRS is slower processing individual tax returns versus last year. As of March 12, the IRS had processed 88.5% of the total tax returns it received, while last year at this time the agency had processed 96.5% of total received returns, according to agency data. Overall, the IRS has processed 15 million fewer returns this year compared with the same time last year.

This year, the filing season opened on February 12, a delayed start compared with previous years, leaving Americans with less time to prepare their returns. The initial April 15 deadline for personal tax returns also has been pushed to May 17.

Taxpayers can claim the first and second round of stimulus checks on their 2020 taxes as a Recovery Rebate Credit if they didn't receive a stimulus payment or received the wrong amount.

Additionally, the IRS recently announced that jobless workers who already filed their taxes and are eligible for the newly-implemented tax break on the first $10,200 of unemployment benefits do not need to amend their return if they filed already. Instead, the agency will send a second refund automatically for the difference.

Data Source Denitsa Tsekova