The good news is you’ll have one more month to file your 2020 return.
But the filing deadline isn’t the only thing that has changed. Many of the upheavals of the past year have resulted in changes to your taxes. Due to the Covid crisis, there are many new and revised provisions and important dates that you will need to know before you file your 2020 return this year.
Here are some of the most important.
So when are taxes due?
While the original filing and payment date was April 15, the IRS extended the deadline to May 17 to give individual filers, tax preparers and the IRS itself more time to Sort through the many changes affecting 2020 taxes from the latest Covid relief program. . As it stands, the filing season began a few weeks later this year as the IRS had its hands full administering the provisions of previous Covid relief packages.
Unless you choose to file an extension request (see question below), you must file and pay any remaining federal income tax due for 2020 by May 17.
This way, you will avoid being hit by possible late or late payment penalties.
But if you miss your production or payment deadline, you may be eligible for first penalty remission.
There are two exceptions to the new extended federal deadline.
The first applies to anyone who pays estimated taxes, including many small businesses. Your usual April 15 payment is still due on April 15, and despite pressure from lawmakers and the tax preparer community, IRS Commissioner Charles Rettig reiterated to lawmakers on April 13 that this deadline would not be. not extended.
The second applies to anyone living in Texas, Oklahoma, and Louisiana, who was hit hard by the February storms. The IRS has extended the federal tax deadline for residents of these states to June 15.
Do I also have more time to file my state taxes?
In most instances.
Even though the IRS has extended the federal filing deadline, each state sets its own tax deadlines.
Filers from states that don’t extend their deadline to May 17 or beyond may have to file their federal return – or at least calculate what they’ll put on their federal return – by April 15 anyway.
This is because states often use adjusted federal gross income or federal taxable income as the starting point for determining a filer’s income subject to state tax.
But most states have extended their filing deadlines until May 17 to align with the federal deadline. They include Alabama, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Illinois, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Virginia, West Virginia and Wisconsin.
Oklahoma has extended its deadline to June 15. And Maryland previously extended its filing deadline to July 15.
The remaining states still have their original filing date, which is April 15 in most cases, according to the Federation of Tax Administrators.
The current filing dates for some states and the District of Columbia differ. They are in Hawaii on April 20; Iowa, April 30; and DC, July 15.
In Louisiana, the deadline is May 17, although affected residents living in areas affected by the federal government due to the winter storm in February have until June 15.
Do I have more time to make contributions to my IRA and health savings account?
Yes. You now have until May 17 to make 2020 contributions to your IRA, Roth IRA, Health Savings Account, Archer Medical Savings Accounts (Archer MSA), and Coverdell Education Savings Accounts (ESA Coverdell).
Can I request an extension to file my 2020 return?
Yes. You can get an automatic five-month extension to file your 2020 federal income taxes, which means they won’t be due until October 15. To do this, submit your request to the IRS by May 17.
But note that a file extension is not an extension to pay for what you owe. You still have to pay any remaining federal taxes owed on your 2020 income by May 17, if you want to avoid a possible late payment penalty.
And if you’re eligible for a refund, taking longer to file your taxes means you wait longer for your refund.
When can I expect my refund?
Typically, refunds are issued within 21 calendar days of receipt of your return by the IRS. The fastest way for you to receive yours is to file electronically and choose direct deposit, notes the IRS.
The agency also said that it takes longer to process documents sent by mail, such as paper tax returns and correspondence related to the tax return – for example, if the IRS has requested more ‘information or found an error in a registrant’s calculations. It also started this year with a backlog of millions of 2019 returns that needed processing.
On April 13, IRS Commissioner Rettig told lawmakers that the agency still had 1.7 million returns to process from 2019 and that any returns going through the agency’s error resolution service takes 10-14 days, compared to three to five days in a normal deposit. season.
To better assess the date on which your refund could arrive, you can consult the IRS tool “Where’s my refund?” either within 24 hours of when the agency indicates it received your electronic return or four weeks after you mailed your paper return.
Are my stimulus payments taxable?
No. Money is tax free.
But some people who are eligible for the money did not receive the first two rounds of payments – mainly those whose income in 2019 was more than their income in 2020 or people who did not file a tax return for 2019 or 2018. They can do it. receive the money owed to them through their federal tax return as long as they claim the refundable repayment credit.
This credit will reduce your income tax dollar for dollar. And to the extent that the credit exceeds your tax liability, you will get the rest as a refund.
Are my unemployment benefits taxable?
Yes, but for households with modified adjusted gross income less than $ 150,000 last year, the first $ 10,200 in unemployment benefits for each taxpayer in a household will be exempt from federal income tax, thanks to a provision of the latest Covid relief program signed by the president. Joe Biden.
Also, to determine if you qualify for the $ 10,200 exclusion, you don’t have to count your unemployment benefit earnings as part of your modified AGI calculations, according to Mark Luscombe, senior federal tax analyst. at Wolters Kluwer Tax & Accounting. .
For anyone who filed their tax return before the latest Covid relief program went into effect in mid-March, the IRS has said there is no need to file an amended return unless the exclusion will only make you eligible for more tax credits and deductions that are not claimed on your original return. Otherwise, the agency said it will reorganize your taxes by incorporating the $ 10,200 exclusion and will refund any resulting overpayments to you or apply it to other taxes you owe.
Of course, if you live in a state with an income tax that also imposed unemployment compensation, you should also check your state revenue department’s website to see if your state has decided to follow the path. ‘IRS and exclude the first $ 10,200 from state income tax.
Whether or not you qualify for the $ 10,200 exclusion, note that most unemployment benefits are treated as taxable income, both by the IRS and by most states. (The exceptions are Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington , Wisconsin and Wyoming.)
If you did not elect to withhold income tax from your unemployment benefits during the year, the total amount of tax will be assessed when you file your return.
But if your 2020 income was very low because you didn’t work for much of the last year, you’re unlikely to have to cut a tax check. Instead, you’ll see your federal and state refunds reduced for any income tax you owe on your unemployment benefits.
What other tax changes related to a pandemic should I know about?
Congress has made a number of changes to tax benefits, such as the earned income tax credit, or created new ones for individuals and small business owners to provide pandemic relief.
Small business owners who received a tax-exempt loan under the Paycheck Protection Program can still deduct the business expenses they paid with their loan.
People who take the standard deduction can now take a new charitable deduction even if they don’t itemize.
And eligible self-employed workers can claim a new sick leave and family leave tax credit created by the Families First Coronavirus Response Act.
Are there any new tax breaks for students?
Yes. The IRS has advised that if you received emergency financial assistance grants related to a pandemic in 2020, you do not have to include that money in your gross income calculation.
Additionally, even if you used a portion of these grants for eligible tuition and related expenses in 2020, you may still be eligible for a tuition and fee deduction, US opportunity credit, or credit. lifelong learning when you return.
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