Hello friends! It’s that time of year again that we all look forward to with such happiness, tax time! I’m kidding, of course. If you don’t dread tax time, you must be either a tax professional OR employee of the decade at the IRS. While I don’t mind paying reasonable taxes, I can’t tell you how much I loathe getting ready for our return to be done and filed. For me, it’s days and days of getting numbers together and collecting information. Fun times, for sure.
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If you are getting ready to file your taxes, there are a couple of things you need to know about the 2021 tax season. First of all, the filing deadline has been extended to May 17th. Thanks to the crazy year we had in 2020, the IRS has been turned upside down starting with the extended filing deadline last year of 7/15/20 and sending out multiple rounds of stimulus checks with a reduced workforce, to boot. I personally know someone whose 2020 tax return was received in a timely manner but has STILL not been processed. Don’t forget that last year was only the second year of filing taxes under the new 2018 tax legislation so, things were still a little shaky at the IRS before the pandemic hit last year.
Second, the American Rescue Plan (or ARP), was passed just last month. Why is that important for your 2020 taxes? Well, if you received unemployment payments last year, the ARP says the first $10,200 of unemployment insurance payments are excluded from your taxable income as long as your AGI is less than $150,000. Now that is big news for a lot of people who got walloped in the wallet last year because of the twindemic. For them, this tax break could mean the difference between having to pay or getting a refund. Sadly, the legislation wasn’t passed until well into March, after some people had already filed their returns. Now, is there anything you can do about that? Well, read on, MacDuff
Third, if you have already filed your taxes and claimed all of your unemployment payments on your tax return, you can amend your return to take advantage of the ARP tax break. Many millions of people file their taxes in January or February to get their refunds as soon as possible. If you are one of those early filers who could have taken advantage of the $10,200 tax break on unemployment payments but filed before the ARP was passed, all you need to do is amend your return with the IRS.
How do I amend my return? Well, that’s a good question. Your best bet is to contact either your tax professional OR the IRS and ask them how to go about amending your return. They will be able to point you in the right direction, using the correct forms to amend. Remember, the ARP was just passed a few weeks ago and it takes a bit of time for the forms to catch up with the legislation. Once those forms catch up, you’ll want to get them filed as quick as you can to make sure you are squared away with the IRS. You should also check with your state’s Department of Revenue to make sure those forms are amended, too.
Those are a just a few tips to remember as we progress through the 2021 tax season. The world is still pretty topsy-turvy so anything I can do to help folks navigate it. Finally, since I always want to end on a high note, remember that your stimulus funds are not counted as taxable income. Yay!
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