The unprecedented events of 2020 changed so much about life as we knew it.
And many of the changes and upheavals from last year have caused changes to your tax returns this year. Due to the Covid crisis, there are plenty of new and revised provisions and important dates you will need to know about before filing your 2020 taxes this year. Here are some of the most important ones.
When can I file my 2020 taxes?
The IRS will begin accepting federal tax returns on Friday, February 12. Yes, that’s later than normal. Read MoreTypically tax filing season opens in the second half of January. But the IRS needed more time to program and test its systems to insure they were ready for this year’s tax season since the agency was very busy at the end of 2020 getting out the second round of economic relief payments to Americans.
When are taxes due?
Despite the later than usual start date for filing season, you must file and pay any remaining federal income taxes you owe for 2020 by the traditional due date of April 15, unless you file for an extension (see next question). That way you will avoid being hit with any potential late filing or late payment penalties.But if you do miss your filing or payment deadlines, you may be eligible for first-time penalty relief.
Can I file for an extension?
Yes. You may get an automatic six-month extension to file your 2020 federal income taxes — meaning they won’t be due until October 15. To do so, submit your request to the IRS by April 15.But note that an extension to file is not an extension to pay what you owe. You still must pay any remaining federal taxes owed on your 2020 income by April 15, if you want to avoid a potential late payment penalty. And if you’re owed a refund, taking longer to file your taxes means you will wait longer to get your refund.
When can I expect my refund?
Typically refunds are issued within 21 days of the IRS receiving your return. But the agency notes the fastest way for you to receive yours is to file electronically and choose direct deposit.To better assess when yours might arrive, you can check the IRS tool “Where’s My Refund?” either within 24 hours of when the agency indicates it has received your e-filed return or four weeks after you mailed in your paper return.
Are my stimulus payments taxable?
No. The money is tax-free. But some people who are eligible for the money didn’t receive it — primarily those whose 2019 income was higher than their 2020 income or people who did not file tax returns for 2019 or 2018. They will be able to receive the money owed them via their federal tax return so long as they claim the refundable Recovery Rebate Credit. That credit will reduce your income tax liability dollar-for-dollar. And to the extent the credit exceeds your tax liability, you’ll get the remainder as a refund.For more, see here and here.
Are my unemployment benefits taxable?
Yes. Unemployment compensation is treated as taxable income, both by the IRS and by most states. (The exceptions are Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington and Wyoming.)If you didn’t opt to have any income tax withheld from your unemployment payments during the year, the full tax bite will be assessed when you file your return. But if your 2020 income was very low because you didn’t work for a big chunk of last year, it’s unlikely you will have to cut a check to the tax man. Instead you will see your refund reduced by the amount of income taxes you owe on your jobless benefits.
What other new pandemic-related tax changes should I know about?
Congress made a number of changes to tax benefits, such as the Earned Income Tax Credit, or created new ones for individuals and small business owners to provide pandemic relief.Small business owners who received a tax-free, forgiven loan from the Paycheck Protection Program may still deduct the businesses expenses they paid for with their loan money.
Individuals who take the standard deduction may now take a new charitable deduction even though they are not itemizing.And eligible self-employed people may claim a new sick leave and family leave tax credit that was created by the Families First Coronavirus Response Act.
Source: edition.cnn.com
