February 1, 2021, Monday

Here is a look at some of the latest news in the tax world:

• The IRS has announced that tax season will open February 12, which means that is when they will begin accepting and processing paper and electronic tax returns. You can still go ahead and file your tax return, and are urged to do so by tax authorities. Taxpayers receiving the Earned Income Tax Credit and Additional Child Tax Credit will not have their refunds issued before the first week of March, as part of the Protecting Americans from Tax Hikes (PATH) Act.
• The last day to pay any taxes you owe on time this year is April 15, 2021. If you file a request for an extension on filing your taxes, the final day to filed your extended tax return is October 15, 2020. Refunds are expected to be issued along the normal timeframe of 1-3 weeks for direct deposit and 3-6 weeks for mailed checks.
• If you did not receive your stimulus, you may still receive your stimulus through your tax refund. The two stimulus payments are advances on credits that can be claimed on the 2020 tax return. They are not supposed to be able to be seized for anything except perhaps back child support. If you need to check on the status of your stimulus payment, you can use the IRS's Get My Payment portal to see when and if you will receive it.
• Due to many people having reduced hours, changing jobs, or losing jobs due to the pandemic, the Earned Income Tax Credit (EITC) may be calculated using 2019's income instead of 2020's. The EITC is a refundable credit that reduces your tax liability dollar for dollar, and any excess is given to you as part of your income tax refund. The EITC is calculated based on earned income such as wages, salary, tips, net earnings from self-employment, union strike benefits, and long-term disability benefits received before the minimum retirement age. Passive income is not used to calculate the EITC, such as interest, dividends, Social Security, unemploymnet, alimony, or pay received while incarcerated. (Child support is tax neutral and not included.) There are further requirements based on filing status, dependents, income limits, investment income limits, and residency status.
• Unemployment is taxable income. Many people received unemployment last year and will receive a Form 1099-G in the mail soon if they have not gotten one already. You will need this form to file your taxes correctly, and you may have a reduced refund or even owe back money to the IRS. Taxpayers could have filed Form W-V4 to voluntarily have a flat 10% withheld from their benefits to cover their tax liability. Alternatively, as this is considered a type of earned income, it may help with credits such as the Earned Income Tax Credit and Child Tax Credit.

Tags - A. Sanford - Tax News - Stimulus - Unemployment - EITC -

A. Sanford, CTP

I have been working in tax offices since 2006, preparing tax returns since 2010, and earned my Chartered Tax Professional certification in 2020.

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