Update on the Federal Child Tax Credit (CTC)

We thought we would give everyone a brief description and update on the federal Child Tax Credit (CTC).  This has been one of the ‘levers’ that the federal government has pulled in order to get more money into the pockets of taxpayers that have children and fall within certain income limits.

What is the Child Tax Credit?

The CTC is a tax benefit to help families who are raising children.

What’s new for the tax year 2021 tax return?

  • Increase from $2,000 to $3,000 per child for children over the age of six
  • Increase from $2,000 to $3,600 for children under the age of six
  • Raised the age limit from 16 to 17
  • Full credit for families making up to $150,000 for married filing jointly or $112,500 for head of household
  • The full credit is now refundable (previously only up to $1,400 could be refunded)
  • Advance Child Tax Credit – starting in July of 2021
    • For every child 6-17 years old, families will get $250 each month
    • For every child under 6 years old, families will get $300 each month
    • Receive the remainder of the credit when you file your taxes

Please see the link below to see if you are eligible to receive these payments, check on your payments, or stop the advance payments from being received.


Your tax professionals will need to know if you received Advance Child Tax Credit payments during the year and if so, how much you received.  This will be reconciled on your 2021 tax return, with the balance of the credit being given to you.

Is the IRS Calling You?

The Internal Revenue Service (IRS) will never call you looking for personal information or payment information.  They almost always initiate these conversations by sending notices through the mail.

In some specific instances an IRS agent might attempt to call or show up at your home or business, but this is AFTER several notices have been sent to the taxpayer by mail.  If an agent comes in-person, they will have multiple forms of identification and credentials to verify their legitimacy.  One of those documents is a what they call a HSPD-12 card.  This is an official federal government ID card.

A more detailed image can be viewed here.

If you DO get a written notice in the mail, you ALWAYS have the opportunity to question or even appeal their findings.  Knowing your rights as a taxpayer is important in these situations.  For a quick reference, this link can be used to view the IRS Taxpayer Bill of Rights.

Of course, if you are in need of professional tax representation, our team at Buffalo Tax Strategies is available to help you Get Educated and Get Ahead!


The IRS Still Has Not Processed My Return – What Should I Do?

It is October 7th, 2021, and since this has been such a recurring theme in our office this year (regarding tax year 2020 personal returns), I thought it would be appropriate to put out a blog post with some guidance.  This was actually an email (reply) made to an actual client and it highlights some of the current frustrations that people are facing at this time.


Good Afternoon Amber,

I apologize for the delay, but if you’re still looking for assistance, I’ll try to address all your concerns:

I got your e-mail from A**** D******. I am at work right now but could set up a time to chat if you think you can help me.
We can absolutely setup a call if you’d like. I also have an online appointment scheduler: calendly.com/buffalotaxstrategies

So long story short, my family has not received our tax returns this year. I did have an office prepare them and they are being no help . They just say we have to wait. I have also received 2 letters basically stating the same thing from the IRS.
This is INCREDIBLY common this year. Unfortunately I have several clients still in ‘processing’ status. I’m sure you’re already aware of this, but here’s the link to the IRS ‘where’s my refund’ tool. https://www.irs.gov/refunds
If you use this tool, at least you can verify that the return is still ‘processing’ with the IRS.  If you have not received your refund, but the status on the IRS site shows ‘completed’ or ‘refund processed,’ that’s an issue.  

I have tried to call the IRS but it seems to be a lost cause. I have also heard, that this is really common this year. I was looking to see if you had any experience with any of your clients this year similar to this. Or if you had any idea of what we can do?
Again, it is very common this year. I haven’t heard of literally anyone that has been able to get through to the IRS in the past couple months. The best I have done / heard is to send a letter and wait up to 8 weeks for them to process it. It’s the only way I have gotten / heard of people getting any kind of response.  This can be incredibly confusing because you might still be getting letters from the IRS while they are still processing the letter with your reply.  

I can not even get the tax preparer we use to review the tax returns and make sure they were done correctly. It is very sad because if is a family owned agency and the father passed away in the middle of tax season. He was my connection there.
That’s incredibly unfortunate. If you’d like me to take a look at the return I’d be happy to give you some insight.

So we WILL be using you for next years taxes. Also, not that it matters, but I do have multiple accounts with A***. Just so you don’t think I am some rando. Any advise would be appreciated. Thank you so much for your time.
Much, much appreciated! Thank you for reaching out Amber, I hope this helps. Again, give me a call if you have any other questions or concerns.


Michael V. Knapp, CMA, IRS-EA
Buffalo Tax LLC
3411 Delaware Ave
Buffalo, NY 14217

Retirement Plan Options for Business Owners

I’ve had several business owners ask me about the various retirement plans that are available, and how they might impact their taxes.  In response, I’ve created this (very basic) listing of the Retirement Plan Options available to Business Owners.  For more information, please don’t hesitate to call our office 716.320.1829.



$6,000 annual contribution limit (per person)

$7,000 (age 50+)


  • Pretax contributions, tax-deferred until distributions in retirement
  • Funds grow tax-deferred


  • The tax rate might be higher in subsequent (retirement) years
  • Difficult to access the money until age 59 ½ (exceptions apply)
  • Contribution limits are cumulative total for BOTH Traditional and ROTH accounts

Interaction w/ Business:

  • Contributions are NOT deductible to the business but lower your taxable income on your personal tax return (1040)




$6,000 annual contribution limit (per person)

$7,000 (age 50+)


  • After-tax contributions, tax-deferred until distributions in retirement
  • Taxes already paid, so the entire balance of funds available for distribution


  • Contributions do NOT lower taxable income
  • Contribution limits are cumulative total for BOTH Traditional and ROTH accounts

Interaction w/ Business:

  • Contributions are NOT deductible to the business and do not lower your taxable income on your personal tax return (1040)




For self-employed people and small business owners with few / no employees

2021 Contribution Limits cannot exceed the lesser of:

  • 25% Compensation (self-employment income)
  • $58,000


  • Pretax contributions, tax-deferred until distributions in retirement
  • Funds grow tax-deferred


  • No ROTH conversion option
  • Require proportional contributions for each eligible employee if you contribute for yourself
  • Difficult to access the money until age 59 ½ (exceptions apply)
  • Contribution amounts reduce the amounts you can contribute to other IRAs, including ROTH.

Interaction w/ Business:

  • Contributions are deductible to the business, including contributions made to employee accounts
  • Flexibility – you don’t have to commit to contributing every year




Small company version of a 401(k) plan.

Allows for employee AND employer contributions

2021 Contribution Limit:


$16,500 (age 50+)

Employer contributions are mandatory and can be made using one of two methods:

  • Provide matching contributions up to 3% of the employees pay, not limited by the annual compensation limit
  • Make non-elective contributions equal to 2% of the employee’s compensation based on max. salary of $290,000.

Low eligibility requirements.  Can participate if they’ve received at least $5,000 in compensation during any two preceding calendar years.


  • Pretax contributions, tax-deferred until distributions in retirement
  • Funds grow tax-deferred
  • SIMPLE contributions are NOT cumulative with traditional and ROTH IRA limits and will not reduce the amount you can contribute to them. However,   they ARE cumulative with the contribution limits for other employer-sponsored plans, such as 401(k) plans and 403(b) plans.


  • Employer contributions mandatory
  • No ROTH conversion option
  • Difficult to access the money until age 59 ½ (exceptions apply)

Interaction w/ Business:

  • Contributions are deductible to the business, including contributions made to employee accounts


If you are looking for a certified public accountant in the Buffalo area to assist you with taxes and more, do not hesitate to reach out to our team.

Payroll Protection Program (PPP) Loan Documentation

With all the questions surrounding the PPP loan, I recently had an opportunity to email a client and go in-depth on the documentation required for the application. I think this information can be useful to any business owner trying to gain a better understanding:

I hope all is well and you are staying safe during this COVID-19 pandemic. Thank you for allowing us the opportunity to discuss some matters regarding loan documentation for small business owners applying for Paycheck Protection Program (PPP) loans.

I think the loan program was a great example of creative approaches to help small businesses have access to affordable funding as a form of economic stimulus by keeping their employees on the payroll. I have assisted and consulted several clients that are small business owners along with some not-for-profits in and around the Buffalo Niagara Region all of which have obtained PPP loans.

The application process is pretty straight forward provided all required loan documentation was available. I would start by collecting all 4 quarterly Federal Forms 941 for the calendar year 2019 along with the 1st quarter Form 941 for the calendar year 2020. These forms report wages paid by quarter. I would also consider including Federal Form W-3 for 2019, which details and should agree with the total wages reported on the previous quarterly Federal Forms 941. The purpose for this is to substantiate wages paid to employees and are a factor in the legible amount of the loan.

If a business or not-for-profit has independent contractors in place rather than employees and documents payments through a Federal Form 1099 MISC, they should collect all such federal 1099 forms paid in 2019 along with their Federal Form 1096 filing for 2019 to include as the basis to calculate the aggregate payroll costs for the past 12 months for employees whose principal place of business is within the United States. If a sole proprietor were to apply for a PPP loan, the best source of income data would be their Federal Schedule C filing pertaining to the Federal Form 1040 filing.

Once that financial ‘payroll’ data has been collected you must aggregate any compensation paid to an employee or independent contractor/sole proprietor in excess of $100,000 paid over the last 12 months as these are a subtraction from the payroll calculation for eligibility amounts. After compiling the total eligible payroll factor, you would need to divide this amount by 12 for a monthly average and multiple this average by 2.5 to determine the eligible PPP loan amount that could be requested.

Also, it is especially important to substantiate the business applying for the PPP loan. This would include a proper taxpayer identification number, address of the business, type of business industry, employee headcount, and ownership of the business. Ownership could be a single owner or multiple partners and a drivers’ license is needed to confirm and validate identity. As a side note, multiple partners (those with greater than 20% ownership) are of particular consideration.

Lastly, make sure a bank account is included on the application so money can be directly deposited into an account. We hope this helps in answering some PPP calculations and loan documentation topics. Please advise any questions that you may have and thanks again for the opportunity to share our views and thoughts on this subject matter.

In a subsequent email, I explained my interpretation of the $100,000 cap components:

My interpretation of the definition of the $100,000 cap or excluded from the payroll costs aggregator is strictly compensation, health care and retirement benefits. I would define compensation to be these components: salary, wages, overtime wages, commissions, tips, paid time off and bonus pay. Stock options could also be an ingredient in the definition of compensation but I would not think this would be applicable as the PPP was initiated for small businesses.

The payment and not the accrual of health care benefits including insurance premiums along with the payment/funding of retirement benefits would also be applicable within this calculation of the $100,000 cap excluded. I have applied my interpretation for compensation for the eligible total amount and the cap excluded to a combination of my clients, as well as some not-for-profits that reached out to me. Fourteen of these organizations have received PPP funding prior to the fund being exhausted.

I believe and have heard that some banks might be taking an alternate approach and defining payroll costs to include not only the above items listed but also FICA taxes, however, this is a tax and not what I would define as compensation paid to an employee. The best bet is to check with your bank to make sure what their interpretation of payroll costs is under their lending calculations.

Furthermore, I cannot stress enough the importance of small businesses having up-to-date bookkeeping and accounting records. It is critical for not only timely financial reporting, income tax matters, and banking processes but when opportunities for assistance arise a small business owner should not have to stress and scramble to complete such vital financial processes.

If you have any questions regarding the points mentioned above, or assistance preparing the PPP loan documentation, please don’t hesitate to reach out! Our small business accountants would be happy to help with any of your needs. We serve Buffalo, NY, and the surrounding areas. Contact us today.

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