This year tax filing season was delayed till February 12 but that wasn’t the only change there was. As 2020 was such a particular year, there have been changes that you must consider when you file your return. What new things must you bear in mind?
Tax season, each year, is a difficult time, but this year it is even more challenging. Things can be even more complicated this time around as there are new changes brought by the pandemic. What must you consider this year when you file your return?
According to the IRS website, this year, special attention must be paid when filing your return for there are changes and other key items to consider.
Recovery Rebate Credit
Taxpayers who received Economic Impact Payments (stimulus checks), should keep Notice 1444, Your Economic Impact Payment, with their 2020 tax records, for they may be eligible to claim the Recovery Rebate Credit if:
• They didn't receive the first or second Economic Impact Payment they were entitled to
• They didn't receive the full amount of the Economic Impact Payment for which they were eligible.
• They didn’t receive the money they were entitled to for dependents.
Charitable deduction changes
Taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. This provision is new, made this year by the CARES Act.
Interest on refunds are taxable
Taxpayers who received a federal tax refund in 2020 may have been paid interest that are taxable and must be reported on federal income tax returns. In January 2021, the IRS should have sent Form 1099-INT to anyone who received interest totaling $10 or more.
Unemployment tax break
The American Rescue Plan Act has waived federal tax on up to $10,200 of unemployment benefits an individual received in 2020. This means workers can exclude up to $10,200 in jobless benefits from their 2020 taxable income. For married couples, each spouse can exclude up to $10,200 of their benefits.
The IRS always warns taxpayers not to rely on receiving a refund by a certain date, for some returns may require additional review. Just like last year, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, take more time.
This year refunds can take even longer for the IRS is taking more time to process mailed documents including paper tax returns, and all tax return related correspondence. Due to the pandemic, there has been less staff at the agency and paper documents have piled up.
The IRS has reminded taxpayers once more that the fastest and safest way to receive a refund is to combine direct deposit with electronic filing. Many taxpayers qualify to use the IRS Free File program.
This combination has also been the way to be among the first to receive the stimulus checks, so you may want to e-file and update your banking account information.