We are less than two weeks from loans.. In 2021, the IRS has its work cut out for it to continue to catch up on sending the missing and communicate the many tax rule changes regarding charitable deductions, IRA and 401 (k) plans, and student
“This year’s tax season will be exceptionally busy for taxpayers and the IRS as many aspects of the coronavirus relief measures adopted in 2020 will affect our tax returns,” said Garrett Watson, senior policy analyst at the Tax Foundation.
As always, the sooner you file your taxes, the sooner you can get a new stimulus check and speed up the delivery of any missing money owed to you. “The IRS encourages taxpayers to file electronically to avoid delays in processing paper returns, as the agency is still driving a large backlog of paper correspondence from last year,” Watson said.
With that in mind, here’s everything you need to know about the major changes for 2020 tax returns. And if you need help navigating the process and filing electronically, be sure to check out our choices for..
Does the IRS owe you money from previous years?
. After three years, by law, the money then becomes the property of the US Treasury Department, and you will no longer be able to get it. After May 17, 2021, unclaimed 2017 refunds will become the property of the US Treasury. The IRS estimates $ 1.3 billion in unclaimed tax refunds in 2017 for about 1.3 million taxpayers. .
First of all, good news. If you have received aMarch CARES Act or December Stimulus Bill, which does not count as taxable income and will not impact your return. These payments will also not be considered income in determining whether you qualify for federal government assistance or benefit programs. ( .)
Missing dunning payment requests
If you had the right to collect all or part of theper person or the per person, but it never happened (or did not exactly reflect your ), you can claim your missing money on your 2020 tax return as . This credit will increase the amount of your total tax refund or decrease the amount of tax you owe.
You will deposit for theon Form 2020 1040 or Form 1040-SR to request a catch-up stimulus payment. The IRS Recovery Refund Credit Spreadsheet can help you determine if you’re missing a payment, and if so, for how much. We have full instructions on .
If you don’t usually file a tax return, you may be, at or do not meet the required income threshold – but think you owe stimulus money, you will have to file a 2020 return. Our step by step guide explains exactly . Note that non-filers are often eligible for the IRS’s free file program and should not have to pay to file a federal return.
For the 2020 tax year, the standard deduction is $ 12,400 for single filers (an increase of $ 200) and $ 24,800 for married couples filing jointly (an increase of $ 400). For heads of households, the standard deduction is $ 18,650 (an increase of $ 300). These increases are adjustments to inflation. (Learn more.)
Charitable donation deductions
This year,to qualifying charities – even if you don’t detail. Temporary provision of the CARES law aimed at encouraging donation, this deduction cannot be carried over to subsequent years. You can search for eligible organizations with the Tax Exempt Organizations Finder at IRS.gov. (Learn more.)
Employers can now contribute up to $ 5,250 per year to an employee’s student debt – and it’s tax free for both employer and employee, as long as it’s payments made from March 27, 2002 to December 31, 2020. (Find out more Continued.)
IRAs and retirement plans
thefor IRAs and retirement plans for 2020. Since these RMDs count as taxable income, if you haven’t taken the distribution, it’s like getting tax relief. (Learn more.)
Income tax credit
Designed to benefit low-income people, this tax credit can reduce your taxable income and your salary. Under the Taxpayer Certainty and Disaster Tax Relief Act of 2020, part of the, you can use the amount of your income earned in 2019 or 2020 to calculate your tax credit for 2020, a potentially important provision for people who lost their jobs during the pandemic. (The higher the income, the larger the tax credit.)
One thing to note: if you claim this credit, the IRS may ask for additional information, which could cause your repayment to be delayed.
Child tax credit
Like the EITC, theis designed to benefit working families by generally allowing them to claim up to $ 2,000 per eligible child through a refundable credit. But the increases the amount families can claim to $ 3,600 per child under 6 and to $ 3,000 for children over 6. The credit money will be split: half will be paid through the tax refund and the other half will be paid monthly from July to December.
You can use this IRS tool to determine if your child or dependent will be eligible for the credit. As with the EITC, requesting this credit may trigger a request for additional information, which could delay your repayment.
Flexible spending on health
If you have a flexible healthcare spending plan, the good news is that the tax-exempt contribution limit has increased to $ 2,750, $ 50 more than last year. (Learn more.)
Some medical expenses are tax deductible – and Congress passed a more generous allowance for what you can deduct as part of the December stimulus bill. Instead of putting a cap on spending that exceeds 10% of your, as originally planned, you can now deduct medical expenses that exceed 7.5% of your AGI. Awesome! (Learn more.)
Can I deduct expenses related to working from home?
Nope —. The Tax Cuts and Jobs Act suspended tax deductions for home office tax deductions until 2025. Note that this could change next year if Congress chooses to grant more. tax breaks in the future relief legislation.
You can find more details on all of these tax changes on the IRS website and on CNET.the team prepared , including a series of articles covering the 2020 tax season from all angles.