What to consider when filing in 2021
Posted on January 5, 2021
Teipen CPA Group encourages all taxpayers to make sure they take advantage of every new regulation and tax credit available to them in the weeks ahead of tax filing.
Towards that end, there were several important tax regulations passed in 2020 involving credits, deductions and refunds, including:
- Recovery Rebate Credit/Economic Impact Payments – Taxpayers who received an Economic Impact Payment should keep Notice 1444, their Economic Impact Payment receipt, with their 2020 tax records. If you received this payment, you may be eligible to claim the Recovery Rebate Credit on your tax year 2020 federal income tax return.
- If you didn’t receive the full amount of the Economic Impact Payment (and were eligible), you may be able to claim the Recovery Rebate Credit. Taxpayers do not need to complete information about the Recovery Rebate Credit on tax year 2020 on Form 1040 or 1040-SR when filing, unless they are eligible to claim an additional credit amount.
- Interest on refunds taxable – Taxpayers who received a federal tax refund in 2020 may have been paid 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 in 2020, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. (Ask your CPA for a list of qualifying organizations, or read Publication 526, Charitable Contributions on IRS.gov.
Teipen CPA Group reminds taxpayers that the fastest and safest way to receive a refund is to combine direct deposit with electronic filing. If you are expecting a refund after filing, you can track your refund using the Where’s My Refund? tool on IRS.gov.
However, we caution our clients not to rely on receiving a refund by a certain date – particularly if you are depending upon the refund to make a major purchase or pay bills.
Some types of returns require additional review and processing, which can take longer. The IRS also continues to strengthen security reviews to help protect against identity theft and refund fraud.
Additionally, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit cannot be issued before mid-February. This applies to the entire refund, even the portion not associated with these credits.
If you want help making sure your 2020 taxes are in order, give us a call. Teipen CPA Group will be happy to help make sure you get all the credits, refunds and deductions for which you are legally entitled.