The tax season officially kicked off on February 12 after a delay of more than two weeks from the normal start date.
And aside from a slightly shorter archive window, things will look different for millions of Americans this year. From reporting unemployment benefits to claiming a missing incentive payment, you can expect many changes for this tax return season.
Here are six changes and rules that could affect your taxes for 2021.
1. You may end up with a surprise bill (or reduced refund) for your unemployment
Unemployment soared during the start of the Covid-19 pandemic; at worst, more than 6 million Americans per week initially applied for unemployment. And if you’re one of the millions who received unemployment benefits in 2020, you could end up with a surprising tax bill. That’s because unemployment benefits are considered taxable income by the IRS.
This isn’t new, but with millions of Americans filing for unemployment for the first time in 2020 due to pandemic-related job losses, many will learn when you sit down to file your taxes.
YOU must declare your unemployment benefits on your tax return. And yes: this is also the case if you have chosen to have tax withheld from your benefits. Depending on your tax situation, you may still owe tax as your deductions were not enough
If you received unemployment benefits in 2020, you must receive Form 1099-G from your state. You can see how much you have received in box 1. You must declare this amount on line 7, schedule 1 of your Form 1040 (federal income tax return).
It is also essential to list any taxes withheld from your benefits, which you can see in Box 4 of your 1099-G. You enter this on line 25b of your tax return.
There are some instances where you don’t need to report your unemployment benefits. If your income is lower than the IRS filing income requirementsyou don’t have to worry about filing a tax return. But if you expect a tax refund or qualify for it claim the recovery credit, it may be in your best interest to submit a dossier.
2. Claim a missing incentive payment or an additional incentive payment on your tax return
The IRS announced this on February 16 all first and second stimulus checks have been sentSo if you have not received your incentive payments or have received a partial payment, you should declare it on your 2020 tax return.
You may be eligible for additional incentive money if you have experienced some life changes, including:
- Your income decreased in 2020 compared to 2018 or 2019
- You gave birth or adopted a child under 17 on 31 December 2020
- You were no longer considered a dependent person for the 2020 tax year
However, there are a few cases where you cannot claim the discount on your tax return:
- You have received a full incentive payment for the first and second rounds
- Someone can claim you for the 2020 tax year
- You are not a US citizen or a resident alien
If you need to claim all or part of the recovery rebate credit, you can do so by first adding the Worksheet for recovery credit, which will ask you a series of questions to ensure you qualify. The worksheet shows the amount you can claim on your tax return.
The credit increases your tax refund or decreases the amount of taxes you owe. Unlike the economic impact payments that are paid out in the first and second rounds, if you owe taxes or other government debt, any refund can be applied to them
3. You can now claim charities without specifying
Before the CARES Act was passed in March 2020, you could only deduct charitable contributions if you itemized your tax deductions. Itemized deductions allow you to deduct certain expenses from your tax return if the amount exceeds what the standard deduction allows.
However, the CARES law included a provision that allows you to deduct charity deductions of up to $ 300 in cash for 2020 with no specification.
But before you claim this deduction on your tax return, make sure your donation is eligible. So you must have donated cash investments and any kitchen appliances you have donated Goodwill does not qualify. Also, the organization to which you have donated must be tax-free. You can check if your charity is considered a tax-exempt organization by the IRS Tool for Searching Exempt Organizations
The IRS encourages taxpayers to keep track of the charitable donations, including a receipt, letter of confirmation, canceled check, or credit card receipt.
4. New Income Tax Review Rule (EITC)
As a result of the Covid-19 pandemic, millions of Americans lost their jobs or worked fewer hours than in 2019. According to the US Bureau of Labor Statistics, unemployment rates have risen in almost all metropolitan areas in 2020 of the previous year.
And since the Earned Tax Credit (EITC) is based on your percentage of earned income, including wages and compensation (excluding unemployment income). If you earn less, you may only qualify for lower credit – or none at all.
To compensate for this, Congress passed it Taxpayers’ Security and Tax Relief Act of 2020The law includes a lookback provision, which allows you to choose income that would generate the highest EITC credit either the 2019 or 2020 tax year.
5. Special transfer provisions for flexible spending accounts
If you have an unused balance in your Flexible spending account 2020 (FSA), you might be lucky. The Consolidated Appropriations Act 2021 passed in December included a provision to carry over unused balances for both plan years 2020 and 2021 to the following year (normally, they are “use it or lose itThese changes apply to both health and dependent flexible spending accounts.
Contact your employer’s FSA administrator to determine the next steps to transfer unused funds.
6. Teachers can claim personal protective equipment on their tax return
If you are a teacher or K-12 educator, you can deduct up to $ 250 for non-reimbursed expenses for PPE purchased for your classroom on your tax return in 2020. You charge this amount Line 10, Schedule 1 of Form 1040These items include face masks, hand soap, sanitizing wipes, gloves, and other personal protective equipment.
Key filing dates for the 2021 tax season
Some significant changes have been made to tax season dates. Here’s What You Should Know.
12th of FebruaryThe IRS has officially begun the 2021 tax filing season to accept and process tax returns.
15 of April: The last day for most Americans to file their Federal Tax Return 2020 Form 1040, unless you have request a tax extensionThe IRS announced on Feb. 22 that the state of Texas has until June 15 to file their taxes due to the recent winter storms.
While the IRS has not announced an intention to extend the tax filing season for the rest of the country, some Democrats in Congress are pressuring them to do so, saying that the challenges Americans faced last season for tax returns, which was extended to July 2020, also apply to this year.
October 15: If you’ve filed a tax extension, this is the last date to file your Federal Tax Return 2020 Form 1040.
The IRS encourages taxpayers to file their tax returns electronically and use direct deposit to receive their tax refund sooner. If you choose to file your tax return using a paper return, you can expect it to take longer to process.
More Tags We LoveBest Car Insurance Rates For High Risk Drivers Best Undergraduate Degree For Medical School In Canada Biggest Debt Management Company Uk Calc Credit Card Payment Content Management Software Definition Debt validation letter template Guaranteed Cash Advance Loans Bad Credit How To Know My Credit Score Free Which Credit Report Is Best Equifax Experian Or Transunion Who Will Give Me A Home Equity Loan With Bad Credit