Posted by Fred Lake

2021 Tax Season: What You Need To Know Before Filing

2021 Tax Season: What You Need To Know Before Filing

It is the last day of 2020, and the IRS encourages taxpayers to take the necessary steps in the final days of the year to file federal tax returns in a timely and correct manner before 2021.

The pub 5348 is the third in a series of reminders designed to help taxpayers prepare for tax season. A special updated page available on IRS.gov outlines steps taxpayers can take now to facilitate tax filing in 2021.

The IRS says there are a few important things to consider, including loans, deductions, and repayments this year, which includes:


Economic Impact Payment / Recovery Rebate Credit 

Taxpayers who have received an Economic Impact Payment must keep Notification 1444, their Economic Impact Payment, with the tax record for 2020. They may be eligible for the recovery credit refund on the tax return federal income fiscal year 2020 if they have not received payment for the economic impact, and the benefit payment was less than $ 1,200 ($ 2,400 if you are married and filing jointly for 2019 or 2018), plus $ 500 for each eligible child you had in 2020.

Suppose taxpayers have not received the full amount of the economic impact payment to which they were eligible. In that case, they will request recovery rebate credit when filing in 2021.

Individuals are not required to complete recovery rebate credit information on Form 1040 or 1040-SR for the fiscal year 2020 when filing in 2021 unless they are eligible for an additional credit amount.


Interest in taxable refunds 

Taxpayers who got a federal tax refund this year may have received interest. Interest refunds are taxable and must be reported on federal income tax returns. In January, the IRS will send out Form 1099-INT to anyone who received interest totaling $10 or more.


Changes to charitable deductions

Taxpayers who usually don't itemize their deductions can make a charitable deduction of up to $ 300 for cash contributions made in 2020 to qualifying organizations. 


Refunds 

The IRS always warns taxpayers and tax professionals not to count on getting a refund by a certain date, especially when making large purchases or paying utility bills. Some returns may require further investigation, and therefore processing may take longer.

For example, the IRS and its tax industry partners continue to strengthen the security review process to protect against identity theft and refund fraud.

Like last year, refunds that require an earned income tax credit or additional child tax credit cannot be issued until mid-February. This applies to the full repayment, including the part not associated with these loans.

The IRS reminds taxpayers that the fastest and safest way to receive a refund is to combine direct deposit and electronic filing, including the IRS FreeFile program. Taxpayers can track their refund using the Where-is-my-refund tool. 


Other refund reminders

  • Refunds for taxpayers who require an earned income tax credit or additional child tax credit cannot be issued until mid-February. This applies to the full repayment, not just the portion of the loan.

  • The most secure way to receive a refund is to combine direct deposit and electronic filing, including the IRS Free File program.

  • The taxpayer should not be dependent on receiving a refund by a certain date, especially when making large purchases or paying utility bills. Some tax returns may need additional review and may take longer to process.


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Fred Lake
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