In COVID Tax Tip 2021-09, which was issued January 15, 2021, the IRS announced that it will begin accepting and processing 2020 tax year returns on Friday, February 12, 2021. Tax Tip 2021-12 and COVID Tax Tip 2021-13 were issued in the first week of February 2021. In each update, the IRS encourages federal tax returns to be filed electronically and combined with direct deposit. Pandemic related delays associated with paper filing and a backlog are the main reasons given in all three statements.
Direct deposit is fast, secure, easy, and provides options, such as splitting refunds into more than one financial account. Checking, savings, health, education, and some retirement accounts are allowed. U.S. Savings Bonds can also be purchased with refunds, up to $5,000.00, using IRS Form 8888.
COVID Tax Tip 2021-13 covers a number of COVID-19 pandemic tax topics, including who should file a federal tax return, the Recovery Rebate Credit, the Unearned Income Credit, Unemployment Benefits, and two education credits.
The majority of people with gross income of $12,400 or more are required to file federal tax returns. Some with lower incomes aren’t required to file but should consider filing for a refund if they had federal income tax withheld because they may be eligible for tax credits.
Millions of Americans are now receiving or have received taxable unemployment compensation during the pandemic. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in spring, 2020. Federal law allows recipients to choose to have a flat 10% withheld to help them avoid owing taxes on this income when they file. Form 1099-G should have been received in January 2021.
Most eligible people have already received full Economic Impact payment amounts for the recovery rebate credit. For those who are eligible and have not received the full amounts of the credits may be eligible to file a claim. In order to file the claim, people must file a tax return, even if they are not normally required to file.
The maximum Economic Impact Payments for qualifying individuals were:
$1,200 per person and $500 per qualifying child for the first payment
$600 per person and $600 per qualifying child for the second payment
Taxpayers with children, who are eligible for Earned Income Tax Credit, may be given temporary relief if their income was higher in 2019 than in 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 can be used to figure your EITC for 2020. See Publication 596, EIC.
People, who don’t owe taxes, but pay certain higher education expenses may qualify for one of two education credits: The American Opportunity Credit, and the Lifelong Learning Credit, which would both use Form 8863.
SPS/GZ is a full-service tax reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file Affordable Care Act tax forms, Forms 1099, and Forms 3921 and 3922. Reach out today at email@example.com or call at (888)375-3049. Our solution allows companies to simply upload their data file to our secure portal in a few easy steps and we handle everything else.