Video above: Tax changes amid COVID-19 pandemic that could impact you Next Monday, May 17, is the official deadline for individuals to file their 2020 federal tax return, and in most instances, their state tax return, too.It’s a month later than usual, thanks to the pandemic. But the filing deadline’s not the only thing that’s changed. Many of the upheavals over the past year have caused other changes to your taxes. Due to the COVID crisis, there are plenty of new and revised provisions and important dates you will need to know about before filing your return this year.Here are some of the most important ones.Why May 17?While the original filing and payment due date was April 15, the IRS has pushed the deadline to May 17 to give individual filers, tax preparers and the IRS itself more time to sort through the many changes affecting one’s 2020 taxes from the latest pandemic relief package. As it is, the filing season started a few weeks late this year since the IRS had its hands full administering provisions, like stimulus checks, from prior pandemic relief packages.Unless you choose to file for an extension (see question below) you must file and pay any remaining federal income taxes you owe for 2020 by May 17.That way, you will avoid being hit with any potential late filing or late payment penalties.But if you do miss your filing or payment deadlines, you may be eligible for first-time penalty relief.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 was still due on April 15.The second applies to anyone living in Texas, Oklahoma and Louisiana, who were hit hard by the February storms. The IRS extended the federal tax deadline for residents in those states to June 15.Do I also get more time to file my state taxes then?In most instances.Even though the IRS extended the federal filing deadline, it was up to individual states to set their own tax deadlines.And most have extended their filing deadlines to May 17 to align with the federal schedule. They include Alabama, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Mississippi, 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.Some states’ filing dates differ. They are Hawaii, April 20; Iowa, June 1; Maryland, July 15; and Oklahoma June 15, although technically that only applies to tax payments, whereas returns still had to be filed by April 15.In Louisiana, the deadline is May 17, although residents living in federally declared disaster areas due to the February winter storm have until June 15.Do I get 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 Account (Archer MSA), and Coverdell Education Savings Account (Coverdell ESA).Can I file for an extension to file my 2020 return? Yes. You may get an automatic five-month extension to file your 2020 federal income taxes, meaning they won’t be due until Oct. 15. To do so, submit your request to the IRS by May 17.But note that an extension to file is not an extension to pay what you owe. You still must pay any remaining federal taxes owed on your 2020 income by May 17, if you want to avoid a potential late payment penalty.And if you’re owed a refund, taking longer to file your taxes means you will wait longer to get your refund.When can I expect my refund?Typically refunds are issued within 21 calendar days of the IRS receiving your return. The fastest way for you to receive yours is to file electronically and choose direct deposit, the IRS notes.But this year, there is an unusually large backlog of returns to be processed both from 2019 and 2020. As of April 22, there were more than 29 million returns being held for manual processing, according to National Taxpayer Advocate Erin Collins. So any refunds from that batch are likely to be delayed.The IRS also has said it is taking longer to process mailed documents, such as paper tax returns, and correspondence related to one’s tax return — for instance, if the IRS requested more information or found an error in a filer’s calculations.IRS Commissioner Rettig told lawmakers on April 13 that any returns going through the agency’s error resolution service are taking 10 to 14 days to process, up from the typical three to five days in a normal filing season.To find out if your refund is being processed, you can check the IRS tool “Where’s My Refund?” either within 24 hours of when the agency indicates it has received your e-filed return or four weeks after you mailed in your paper return. But note the tool will not tell you if the IRS needs more information from you or when it plans to release your refund, Collins noted in a blog post.Are my stimulus payments taxable? No. The money is tax-free.But some people who are eligible for the money didn’t receive the first two rounds of payments — primarily those whose 2019 income was higher than their 2020 income or people who did not file tax returns for 2019 or 2018. They will be able to receive the money owed them via their federal tax return so long as they claim the refundable Recovery Rebate Credit.That credit will reduce your income tax liability dollar-for-dollar. And to the extent the credit exceeds your tax liability, you’ll get the remainder as a refund.For more, see here and here.Are my unemployment benefits taxable? Yes, but for households with modified adjusted gross income below $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 in the latest COVID relief package signed into law by President Joe Biden.Also, when figuring out whether you are eligible for the $10,200 exclusion, you do not have to count any income from your unemployment benefits as part of your calculations of modified AGI, according to Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting.For anyone who filed their tax return before the latest Covid relief package went into effect in mid-March, the IRS said there is no need to file an amended return unless the exclusion would make you newly eligible for more tax credits and deductions that were not claimed on your original return. Otherwise, the agency said it will re-figure your taxes by incorporating the $10,200 exclusion and either refund you any resulting overpayment or apply it to other taxes you owe.Of course, if you live in a state with an income tax that also taxed unemployment compensation, you also should check your state revenue department’s web site to see if your state has decided to follow the IRS and exclude the first $10,200 from state income tax as well.Whether or not you qualify for the $10,200 exclusion, note that most unemployment compensation is 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 didn’t opt to have any income tax withheld from your unemployment payments during the year, the full tax bite will be assessed when you file your return.But if your 2020 income was very low because you didn’t work for a big chunk of last year, it’s unlikely you will have to cut a check to the tax man. Instead, you will see your federal and state refunds reduced by whatever income taxes you owe on your jobless benefits.What other new pandemic-related tax changes should I know about? Congress made a number of changes to tax benefits, such as tweaking the rules to make the Earned Income Tax Credit more generous, or creating new ones for individuals and small business owners to provide pandemic relief.Small business owners who received a tax-free, forgiven loan from the Paycheck Protection Program may still deduct the businesses expenses they paid for with their loan money.Eligible self-employed people may claim a new sick leave and family leave tax credit that was created by the Families First Coronavirus Response Act.And lastly, individuals who take the standard deduction may now take a new charitable deduction even though they are not itemizing. Keep in mind, the deduction can only be taken for contributions made to an IRS-designated charitable organization known as a 501(c)(3), which would rule out many of the online fundraisers for individuals or businesses struggling during the COVID crisis.Are there any new tax breaks for students?Yes. The IRS has advised that if you received any pandemic-related emergency financial aid grants in 2020 you do not have to include that money in your gross income calculation.Also, even if you used any part of those grants for qualified tuition and related expenses in 2020, you still may be eligible to claim a tuition and fees deduction, the American Opportunity Credit or the Lifetime Learning Credit on your return.
Video above: Tax changes amid COVID-19 pandemic that could impact you
Next Monday, May 17, is the official deadline for individuals to file their 2020 federal tax return, and in most instances, their state tax return, too.
It’s a month later than usual, thanks to the pandemic. But the filing deadline’s not the only thing that’s changed. Many of the upheavals over the past year have caused other changes to your taxes. Due to the COVID crisis, there are plenty of new and revised provisions and important dates you will need to know about before filing your return this year.
Here are some of the most important ones.
Contents
Why May 17?
While the original filing and payment due date was April 15, the IRS has pushed the deadline to May 17 to give individual filers, tax preparers and the IRS itself more time to sort through the many changes affecting one’s 2020 taxes from the latest pandemic relief package. As it is, the filing season started a few weeks late this year since the IRS had its hands full administering provisions, like stimulus checks, from prior pandemic relief packages.
Unless you choose to file for an extension (see question below) you must file and pay any remaining federal income taxes you owe for 2020 by May 17. To see also : U.S. has administered 187 million doses of COVID-19 vaccines, CDC says.
That way, you will avoid being hit with any potential late filing or late payment penalties.
But if you do miss your filing or payment deadlines, you may be eligible for first-time penalty relief.
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 was still due on April 15.
The second applies to anyone living in Texas, Oklahoma and Louisiana, who were hit hard by the February storms. The IRS extended the federal tax deadline for residents in those states to June 15.
Do I also get more time to file my state taxes then?
In most instances.
Even though the IRS extended the federal filing deadline, it was up to individual states to set their own tax deadlines. Read also : Navigating taxes in retirement | Business.
And most have extended their filing deadlines to May 17 to align with the federal schedule. They include Alabama, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Maine, Massachusetts, Michigan, Minnesota, Mississippi, 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.
Some states’ filing dates differ. They are Hawaii, April 20; Iowa, June 1; Maryland, July 15; and Oklahoma June 15, although technically that only applies to tax payments, whereas returns still had to be filed by April 15.
In Louisiana, the deadline is May 17, although residents living in federally declared disaster areas due to the February winter storm have until June 15.
Do I get 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 Account (Archer MSA), and Coverdell Education Savings Account (Coverdell ESA). See the article : Saving for retirement with a Roth IRA – WSB-TV Channel 2.
Can I file for an extension to file my 2020 return?
Yes. You may get an automatic five-month extension to file your 2020 federal income taxes, meaning they won’t be due until Oct. 15. To do so, submit your request to the IRS by May 17.
But note that an extension to file is not an extension to pay what you owe. You still must pay any remaining federal taxes owed on your 2020 income by May 17, if you want to avoid a potential late payment penalty.
And if you’re owed a refund, taking longer to file your taxes means you will wait longer to get your refund.
When can I expect my refund?
Typically refunds are issued within 21 calendar days of the IRS receiving your return. The fastest way for you to receive yours is to file electronically and choose direct deposit, the IRS notes.
But this year, there is an unusually large backlog of returns to be processed both from 2019 and 2020. As of April 22, there were more than 29 million returns being held for manual processing, according to National Taxpayer Advocate Erin Collins. So any refunds from that batch are likely to be delayed.
The IRS also has said it is taking longer to process mailed documents, such as paper tax returns, and correspondence related to one’s tax return — for instance, if the IRS requested more information or found an error in a filer’s calculations.
IRS Commissioner Rettig told lawmakers on April 13 that any returns going through the agency’s error resolution service are taking 10 to 14 days to process, up from the typical three to five days in a normal filing season.
To find out if your refund is being processed, you can check the IRS tool “Where’s My Refund?” either within 24 hours of when the agency indicates it has received your e-filed return or four weeks after you mailed in your paper return. But note the tool will not tell you if the IRS needs more information from you or when it plans to release your refund, Collins noted in a blog post.
Are my stimulus payments taxable?
No. The money is tax-free.
But some people who are eligible for the money didn’t receive the first two rounds of payments — primarily those whose 2019 income was higher than their 2020 income or people who did not file tax returns for 2019 or 2018. They will be able to receive the money owed them via their federal tax return so long as they claim the refundable Recovery Rebate Credit.
That credit will reduce your income tax liability dollar-for-dollar. And to the extent the credit exceeds your tax liability, you’ll get the remainder as a refund.
Are my unemployment benefits taxable?
Yes, but for households with modified adjusted gross income below $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 in the latest COVID relief package signed into law by President Joe Biden.
Also, when figuring out whether you are eligible for the $10,200 exclusion, you do not have to count any income from your unemployment benefits as part of your calculations of modified AGI, according to Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting.
For anyone who filed their tax return before the latest Covid relief package went into effect in mid-March, the IRS said there is no need to file an amended return unless the exclusion would make you newly eligible for more tax credits and deductions that were not claimed on your original return. Otherwise, the agency said it will re-figure your taxes by incorporating the $10,200 exclusion and either refund you any resulting overpayment or apply it to other taxes you owe.
Of course, if you live in a state with an income tax that also taxed unemployment compensation, you also should check your state revenue department’s web site to see if your state has decided to follow the IRS and exclude the first $10,200 from state income tax as well.
Whether or not you qualify for the $10,200 exclusion, note that most unemployment compensation is 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 didn’t opt to have any income tax withheld from your unemployment payments during the year, the full tax bite will be assessed when you file your return.
But if your 2020 income was very low because you didn’t work for a big chunk of last year, it’s unlikely you will have to cut a check to the tax man. Instead, you will see your federal and state refunds reduced by whatever income taxes you owe on your jobless benefits.
Congress made a number of changes to tax benefits, such as tweaking the rules to make the Earned Income Tax Credit more generous, or creating new ones for individuals and small business owners to provide pandemic relief.
Small business owners who received a tax-free, forgiven loan from the Paycheck Protection Program may still deduct the businesses expenses they paid for with their loan money.
Eligible self-employed people may claim a new sick leave and family leave tax credit that was created by the Families First Coronavirus Response Act.
And lastly, individuals who take the standard deduction may now take a new charitable deduction even though they are not itemizing. Keep in mind, the deduction can only be taken for contributions made to an IRS-designated charitable organization known as a 501(c)(3), which would rule out many of the online fundraisers for individuals or businesses struggling during the COVID crisis.
Are there any new tax breaks for students?
Yes. The IRS has advised that if you received any pandemic-related emergency financial aid grants in 2020 you do not have to include that money in your gross income calculation.
Also, even if you used any part of those grants for qualified tuition and related expenses in 2020, you still may be eligible to claim a tuition and fees deduction, the American Opportunity Credit or the Lifetime Learning Credit on your return.
