10 Dec Getting Ready for Filing in 2021
Can you believe the 2021 tax filing season begins in 2 months?! It feels like we just got done with 2020! But, everything in 2020 feels like its never ending, doesn’t it?! By the way, the IRS created a special page, which outlines steps to take now to make tax filing easier in 2021.
Recovery Rebate Credit/Economic Impact Payment
If you received an Economic Impact Payment, keep Notice 1444, Your Economic Impact Payment, with you 2020 tax records. You may be eligible to claim the Recovery Rebate Credit on your tax year 2020 federal income tax return if you(r):
- didn’t receive an Economic Impact Payment, or
- Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018), plus $500 for each qualifying child they had in 2020.
If you didn’t receive the full amount of the Economic Impact Payment for which you were eligible, you may be able to claim the Recovery Rebate Credit when you file in 2021. Don’t worry about completing information about the Recovery Rebate Credit on tax year 2020 Form 1040 or 1040-SR, unless eligible to claim an additional credit amount.
Interest on refunds taxable
Did you get a federal tax refund in 2020 and with interest? Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.
Charitable deduction changes
New this year, those who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, read Publication 526, Charitable Contributions.
The IRS always cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and processing may take longer (such as additional reviews to help protect against identity theft). Just like last year, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, cannot be issued before mid-February.
Our calendars fill up FAST, so call NOW and schedule an appointment to start your tax return! We can also talk about tax strategies for your small business.