How to Prepare for 2020 Tax Season
2020 is going to be over really soon, so the IRS advises taxpayers to get prepared for filing season 2021. If you are not sure what steps to take to make the tax filing stress-free, see the page that the IRS created. There’s a step-by-step guide that can come in handy.
What should I consider when filing in 2021?
There’s plenty of information that could go unnoticed. Check out the list and make sure you consider every point.
Recovery Rebate Credit/Economic Impact Payment
If you are a taxpayer who received a Recovery Rebate Credit, you should have also received a Notice 1444 from the IRS. Make sure you keep it with your 2020 tax records. You might need it if you think that the payment amount was wrong.
Taxpayers might be eligible to claim for Recovery Rebate Credit, also known as an Economic Impact Payment, on their 2020 Form 1040 or Form 1040-SR. That is possible if they didn’t receive an Economic Impact Payment yet, or they didn’t receive the full amount of the Economic Impact Payment (the maximum credit is $1,200 for those filing on their own, or $2,400 for married couples filing jointly, plus $500 for each qualifying child).
The Economic Impact Payment is not taxable. If you did not receive the payment to which you qualified, you will get the Recovery Rebate Credit instead when filing the 2020 tax return.
Second stimulus
There is likely additional stimulus of $600 coming to taxpayers (bill currently passed in Congress, headed to the President) for $600 more in stimulus checks. It is unclear how this will reflect on 2020 tax returns at this time.
$300 charitable deduction
This year the CARES Act added a $300 deduction for cash donations made in 2020. Taxpayers who take a standard deduction still can deduct charitable donations. It will work if you donate to a qualifying organization. To find out more, read our article on a new $300 charitable contribution deduction for 2020.
Refunds
Due to security concerns, refunds for tax returns claiming the Earned Income Tax Credit or Additional Child Tax Credit, will not be sent before the middle of February. So, there is no certain date when a taxpayer can receive the refund.
To receive a refund fast and safely choose the direct deposit option for the payments. Use the Where's My Refund? Tool to track your refund.
Biden’s tax plan
With a new presidency, we may see changes in the tax code. We provided a preliminary analysis of what may transpire and how it affects american taxpayers globally: please see Biden potential tax plan analysis.
Tax due dates
Importantly — keep abreast of upcoming tax deadlines. Please refer to our article: Tax Filing Deadlines to see which may pertain to you. Please note, the upcoming deadlines are also in your client portal and you will be notified via email ahead of them if you are on our email list.