2021 tax season: What to prepare for

2021 tax season: What to prepare for

The U.S. government has delayed the onset of this year’s tax filing season, which could be an early indication that the pandemic may once again muddle the process for many U.S. taxpayers.

Instead of opening at the end of January, the IRS will begin accepting returns on Feb. 12 – a decision that was made, in part, to allow the agency time to send out another round of economic impact payments.

As previously reported by FOX Business, National Taxpayer Advocate Erin M. Collins warned that some of the challenges created by the pandemic in 2020 will carry on through 2021 filing season, and “possibly for months longer.”

Here are some things to know about the upcoming filing season:

You don’t have extra time to file

Even though filing season starts a bit later than normal, tax returns will keep their original due date of April 15.

Last year marked the first time ever that the IRS delayed the filing deadline – taxpayers had until July to file their returns.

Unemployment taxes

Many people lost their jobs in 2020 and became eligible for expanded unemployment benefits, but some people did not know those benefits counted as taxable income.

The IRS requires people to report income received in the form of unemployment.

Failure to do so could result in taxes owed to the IRS, and failure to pay could result in potential penalties and interest as well.

Others were unaware that taxes are not automatically withheld.

A flat federal tax rate of 10%  can be withheld from beneficiaries’ paychecks.

If you do not have taxes withheld from your checks, you may have to make quarterly estimated payments to the IRS. These payments are typically required of individuals who expect to owe tax of $1,000 or more when their return is filed.

Unemployment income and withheld taxes will appear on a 1099-G statement that is typically mailed at the end of the year.

Stimulus check taxes

Stimulus payments do not count as income and you do not owe taxes on the direct payments.

Didn’t receive your stimulus money?

If you are one of the Americans who has not received stimulus cash – any or all of the checks that you are eligible for – you should claim them through the Recovery Rebate Credit on your 2020 Form 1040 or 1040-SR.

You can also claim this credit if you did not receive the full amount you were owed.

The IRS is asking people in this situation to file and claim the credit even if you don’t normally have to file taxes.

The backlog

The 2021 tax season is just around the corner, but the IRS still has unopened tax returns from last year.

As of Dec. 25, 2020, it had 6.9 million individual tax returns “in the processing pipeline.”

In some cases, those returns were dated April 15.

Unless there is an issue with your return, the agency says there is no action the individual can take.

“We’re working hard to get through the backlog. Please don’t file a second tax return or contact the IRS about the status of your return,”’ the IRS website states.

Source:-foxbusiness

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