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Archive | Tax Time

Here’s how people can pay their federal taxes

The May 17 deadline for individuals to file and pay their federal income tax is fast approaching. While paying taxes is not optional, people do have options when it comes to how they pay taxes. The IRS offers a variety of ways to pay taxes.

Some taxpayers must make quarterly estimated tax payments throughout the year. This includes sole proprietors, partners, and S corporation shareholders who expect to owe $1,000 or more when they file. Individuals who participate in the gig economy might also have to make estimated payments. The deadline to pay estimated taxes remains April 15, 2021.

Here are five ways for people who need to pay their taxes. They can:

  • Pay when they e-file using their bank account, at no charge, using electronic funds withdrawal.
  • Use IRS Direct Pay which allows taxpayers to pay electronically directly from their checking or savings account for free. They can choose to receive email notifications about their payments when they pay this way. Taxpayers should watch out for email schemes. IRS Direct Pay sends emails only to users who request the service.
  • Pay using a payment processor by credit card, debit card or digital wallet options. Taxpayers can make these payments online, by phone or through the IRS2Go app.
  • Make a cash payment at more than 60,000 participating retail locations nationwide. To pay with cash, visit IRS.gov and follow the instructions.
  • Pay over time by applying for an online payment agreement. Once the IRS accepts an agreement, the taxpayers can make their payment in monthly installments.

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Working families and individuals eligible for homestead property tax credit

Average tax credit was $669 for the 2019 tax year

LANSING, Mich.—Working families and individuals with household resources of $60,000 or less a year may be eligible for a Homestead Property Tax Credit, according to the Michigan Department of Treasury.

Michigan’s Homestead Property Tax Credit can help taxpayers if they are a qualified homeowner or renter and meet certain requirements. For most people, the tax credit is based on a comparison between property taxes and total household income, with homeowners paying property taxes directly and renters paying them indirectly with their rent.

“Homestead Property Tax Credits provide tax relief for Michigan’ working families and individuals,” said Deputy State Treasurer Glenn White, head of Treasury’s Revenue Services programs. “These tax credits can reduce tax owed and may provide a refund.”

For the 2019 tax year, more than 1.1 million (or 1,172,000) taxpayers claimed the Homestead Property Tax Credit, totaling more than $784.8 million with an average credit at $669.

Taxpayers may claim a Homestead Property Tax Credit if ALL the following apply:

* Your homestead is in Michigan.

* You were a resident of Michigan for at least six months during the year.

* You own or are contracted to pay rent and occupy a Michigan homestead on which property taxes were levied.

* If you own your home, your taxable value is $135,000 or less (unless unoccupied farmland).

* Your Total Household Resources are $60,000 or less

Taxpayers who are required to file a state income tax return should claim the Homestead Property Tax Credit with their return. Taxpayers may file a Homestead Property Tax Credit claim by itself.

Unemployment compensation—including the federal exclusion—is still included in a taxpayer’s Total Household Resources. While the federal American Rescue Plan Act reduced Adjusted Gross Income and state tax liabilities, it doesn’t reduce Total Household Resources.

To learn more about the Homestead Property Tax Credit and state income taxes, go to www.michigan.gov/incometax and click on “Credits and Exemptions” at the bottom of the page.

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IRS has refunds totaling $1.3 billion for people did not file in 2017

WASHINGTON—Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 Form 1040 federal income tax return, according to the Internal Revenue Service.

“The IRS wants to help taxpayers who are due refunds but haven’t filed their 2017 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return.”

The IRS estimates the midpoint for the potential refunds for 2017 to be $865—that is, half of the refunds are more than $865 and half are less. In Michigan, they estimate 43,100 did not file, and are owed refunds totaling $43,189,300.

In cases where a federal income tax return was not filed, the law provides most taxpayers with a three-year window of opportunity to claim a tax refund. If they do not file a tax return within three years, the money becomes the property of the U.S. Treasury. For 2017 tax returns, the window closes May 17, 2021, for most taxpayers. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by that date.

The IRS reminds taxpayers seeking a 2017 tax refund that their checks may be held if they have not filed tax returns for 2018 and 2019. In addition, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2017. Many low- and moderate-income workers may be eligible for the Earned Income Tax Credit (EITC). For 2017, the credit was worth as much as $6,318. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2017 were:

  • $48,340 ($53,930 if married filing jointly) for those with three or more qualifying children;
  • $45,007 ($50,597 if married filing jointly) for people with two qualifying children;
  • $39,617 ($45,207 if married filing jointly) for those with one qualifying child, and;
  • $15,010 ($20,600 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the tax year 2017 Form 1040, 1040A and 1040EZ) and instructions are available on the IRS.gov Forms and Publications page or by calling toll-free 800-TAX-FORM (800-829-3676).

Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2017, 2018 or 2019 should request copies from their employer, bank or other payer. Taxpayers who are unable to get missing forms from their employer or other payer can order a free wage and income transcript at IRS.gov using the Get Transcript online tool at https://www.irs.gov/individuals/get-transcript. Alternatively, they can file Form 4506-T to request a wage and income transcript. A wage and income transcript shows data from information returns received by the IRS, such as Forms W-2, 1099, 1098, Form 5498 and IRA contribution information. Taxpayers can use the information from the transcript to file their tax return.

First-time filers and EIP eligible

The IRS reminds first-time filers and those who usually don’t have a federal filing requirement that they must file a 2020 tax return to claim the Recovery Rebate Credit (RRC), if they were eligible but did not receive the first or second Economic Impact Payment (EIP), or received less than the full amounts. The IRS offers free options to prepare and file a return at How to File on IRS.gov. Taxpayers who received the full amounts of both EIPs cannot claim the RRC and should not include any information about the payments on their 2020 tax return.

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Guidance available on treatment of unemployment compensation for tax year 2020

LANSING, Mich. The Michigan Department of Treasury has posted a notice related to the treatment of unemployment compensation for tax year 2020 at https://www.michigan.gov/treasury/0,4679,7-121–556084–,00.html.

The federal American Rescue Plan Act excludes unemployment benefits up to $10,200 from income for tax year 2020 for those within certain income brackets, providing tax relief on both federal and state income taxes. Taxpayers who may have anticipated owing taxes may now be entitled to a refund.

“If you have already filed your tax return, please wait to file an amended return to receive the American Rescue Plan Act benefits,” State Treasurer Rachael Eubanks said. “The IRS will be adjusting received returns and begin processing them in May without the need for taxpayers to file an amended federal return. States are awaiting guidance from the IRS as to whether they can provide us with the information we would need to do a similar calculation at the state level. This would alleviate the need to file an amended state return. We appreciate taxpayers’ patience as we work through this.”

There is no need for taxpayers to file an amended federal return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

The notice also includes information related to total household resources and household income for the purposes of various tax credits.

Additional information will be posted as it becomes available.

How to File a State Tax Return

Choosing electronic filing and direct deposit is convenient, safe and secure. Last year, more than 4.4 million Michigan taxpayers e-filed, which is 86 percent of state income tax filers.

For more information about e-filing, go to www.mifastfile.org.

Printed tax forms were distributed and are available in limited quantities at public libraries, some northern Michigan post offices, Michigan Department of Health and Human Services county offices and Treasury Field Offices.

All individual income tax returns must be received by 11:59 p.m. on May 17, 2021.

For the benefit and convenience of taxpayers, both the beginning and end of the individual income tax filing season are the same as the Internal Revenue Service.

Questions?

Taxpayers with questions about their state income taxes are encouraged to use Treasury eServices. The online platform enables taxpayers to ask state income tax-related questions when convenient and avoids waiting for a state Treasury Department customer service representative to answer your call.

To get started with Treasury eServices, go to www.michigan.gov/incometax and click on “eServices Individual Income Tax.”

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Federal tax day for individuals extended to May 17

Treasury, IRS extend filing and payment deadline

WASHINGTON—The  Treasury Department and Internal Revenue Service announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

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State tax return deadline extended

Taxpayers can now file tax returns and make payments by May 17, 2021

LANSING, Mich.–State of Michigan individual income tax annual returns are now due on May 17, 2021, according to the Michigan Department of Treasury.

The new filing deadline comes after the Internal Revenue Service extended its deadline to the same date. For the benefit and convenience of taxpayers, both the beginning and end of income tax filing season are the same as the IRS.

“I’m happy to announce that we are giving Michiganders extra time on their taxes this year,” said Governor Whitmer. “This has been a difficult year for everyone, and by moving the income tax payment date, I hope families have the buffer they need to get their finances in order. I am grateful for the money going out to Michiganders under the American Rescue Plan and proud of the state-level pandemic relief we’ve delivered to families and small businesses. Together, we’ll build our economy back better.”

“Taxpayers are trying to understand how the federal stimulus and the COVID-19 pandemic is impacting their taxes,” State Treasurer Rachael Eubanks said. “We are continuously evaluating how we can assist taxpayers. Changing the state’s filing and payment deadlines can help individuals figure out their next steps as we navigate these extraordinary times.”

“Our members have been adamant to find relief everywhere we can for the people of the State of Michigan,” said *Matt Hall, chairman of the House Tax Policy committee. “We have been prepared with legislation to extend the April 15 filing deadline this year and we’re grateful that Treasury and the administration are working to waive penalties and interest in the meantime.”

Under a Taxpayer Notice issued by the state Treasury Department, state individual income tax annual returns and payments are now due before 11:59 p.m. on May 17, 2021.

Individual taxpayers who need additional time to file beyond the May 17 deadline can request an extension to Oct. 15, 2021. Taxpayers requesting additional time to file should estimate their tax liability and pay any taxes owed by May 17, 2021, to avoid additional interest and penalties.

Because the extension is limited to the 2020 taxes, first quarter estimates for tax year 2021 remain due on April 15, 2021.

Taxpayers who are owed a refund are encouraged to file their state income tax returns so they can receive their refunds. More information about e-filing is available at www.michigan.gov/mifastfile.

Changes to city income tax deadlines require state legislation.

To learn more about Michigan’s taxes, go to www.michigan.gov/taxes or follow the state Treasury Department on Twitter at @MITreasury [ https://www.twitter.com/mitreasury ].

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Tax Time Guide: Get credit for IRA contributions made by April 15

WASHINGTON—The Internal Revenue Service notes that taxpayers of all ages may be able to claim a deduction on their 2020 tax return for contributions to their Individual Retirement Arrangement made through April 15, 2021. There is no longer a maximum age for making IRA contributions.

An IRA is designed to enable employees and the self-employed to save for retirement. Most taxpayers who work are eligible to start a traditional or Roth IRA or add money to an existing account.

Contributions to a traditional IRA are usually tax deductible, and distributions are generally taxable. There is still time to make contributions that count for a 2020 tax return, if they are made by April 15, 2021. Taxpayers can file their return claiming a traditional IRA contribution before the contribution is actually made. The contribution must then be made by the April due date of the return. While contributions to a Roth IRA are not tax deductible, qualified distributions are tax-free. In addition, low- and moderate-income taxpayers making these contributions may also qualify for the Saver’s Credit.

Generally, eligible taxpayers can contribute up to $6,000 to an IRA for 2020. For someone who was 50 years of age or older at the end of 2020, the limit is increased to $7,000. The restrictions on taxpayers age 70 1/2 or older to make contributions to their IRA were removed in 2020.

Qualified contributions to one or more traditional IRAs are deductible up to the contribution limit or 100% of the taxpayer’s compensation, whichever is less.

For 2020, if a taxpayer is covered by a workplace retirement plan, the deduction for contributions to a traditional IRA is generally reduced depending on the taxpayer’s modified adjusted gross income:

Single or head of household filers with income of $65,000 or less can take a full deduction up to the amount of their contribution limit. For incomes more than $65,000 but less than $75,000, there is a partial deduction and if $75,000 or more there is no deduction.

Filers that are married filing jointly or a qualifying widow(er) with $104,000 or less of income, a full deduction up to the amount of the contribution limit is permitted. Filers with more than $104,000 but less than $124,000 can claim a partial deduction and if their income is at least $124,000, no deduction is available.

For joint filers, where the spouse making the IRA contribution is not covered by a workplace plan, but their spouse is covered, a full deduction is available if their modified AGI is $196,000 or less. There’s a partial deduction if their income is between $196,000 and $206,000 and no deduction if their income is $206,000 or more.

Filers who are married filing separately and have an income of less than $10,000 can claim a partial deduction. If their income is at least $10,000, there is no deduction.

Worksheets are available in the Form 1040 Instructions or in Publication 590-A, Contributions to Individual Retirement Arrangements. The deduction is claimed on Form 1040, Schedule 1. Nondeductible contributions to a traditional IRA are reported on Form 8606.

Even though contributions to Roth IRAs are not tax deductible, the maximum permitted amount of these contributions begins to phase out for taxpayers whose modified adjusted gross income is above a certain level:

For filers who are married filing jointly or qualifying widow(er), that level is $196,000.

For those who file as single, head of household, or married filing separately and did not live with their spouse at any time during the year, that level is $124,000.

For filers who are married filing separately and lived with their spouse at any time during the year, any amount of modified AGI reduces their contribution limit.

The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is often available to IRA contributors whose adjusted gross income falls below certain levels. In addition, beginning in 2018, designated beneficiaries may be eligible for a credit for contributions to their Achieving a Better Life Experience (ABLE) account. For 2018, the income limits are:

$32,500; single and married filing separate

$48,750; head of household

$65,000; married filing jointly

Taxpayers should use Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the Saver’s Credit, and its instructions for details on figuring the credit correctly.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax For Individuals.

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IRS begins delivering third round of Economic Impact Payments to Americans

WASHINGTON—The Internal Revenue Service announced today that the third round of Economic Impact Payments will begin reaching Americans over the next week.

Following approval of the American Rescue Plan Act, the first batch of payments will be sent by direct deposit, which some recipients started receiving as early as last weekend, and with more receiving coming this week.

Additional batches of payments will be sent in the coming weeks by direct deposit and through the mail as a check or debit card. The vast majority of these payments will be by direct deposit.

No action is needed by most taxpayers; the payments will be automatic and, in many cases, similar to how people received the first and second round of Economic Impact Payments in 2020. People can check the Get My Payment tool on IRS.gov to see the payment status of the third stimulus payment.

“Even though the tax season is in full swing, IRS employees again worked around the clock to quickly deliver help to millions of Americans struggling to cope with this historic pandemic,” said IRS Commissioner Chuck Rettig. “The payments will be delivered automatically to taxpayers even as the IRS continues delivering regular tax refunds. We urge people to visit IRS.gov for the latest details on the stimulus payments, other new tax law provisions and tax season updates.”

Highlights of the third round of Economic Impact Payments; IRS will automatically calculate amounts

In general, most people will get $1,400 for themselves and $1,400 for each of their qualifying dependents claimed on their tax return. As with the first two Economic Impact Payments in 2020, most Americans will receive their money without having to take any action. Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.

Because these payments are automatic for most eligible people, contacting either financial institutions or the IRS on payment timing will not speed up their arrival. Social Security and other federal beneficiaries will generally receive this third payment the same way as their regular benefits. A payment date for this group will be announced shortly.

The third round of Economic Impact Payments (EIP3) will be based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered online at IRS.gov using the agency’s Non-Filers tool last year, or alternatively, submitted a special simplified tax return to the IRS. If the IRS has received and processed a taxpayer’s 2020 return, the agency will instead make the calculation based on that return.

In addition, the IRS will automatically send EIP3 to people who didn’t file a return but receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) or Veterans Affairs benefits. This is similar to the first and second rounds of Economic Impact Payments, often referred to as EIP1 and EIP2.

For those who received EIP1 or EIP2 but don’t receive a payment via direct deposit, they will generally receive a check or, in some instances, a prepaid debit card (referred to as an EIP Card). A payment will not be added to an existing EIP card mailed for the first or second round of stimulus payments.

Under the new law, an EIP3 cannot be offset to pay various past-due federal debts or back taxes.

The IRS reminds taxpayers that the income levels in this new round of stimulus payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly.) The reduced payments end at $80,000 for individuals ($160,000); people above these levels are ineligible for a payment. More information is available on IRS.gov.

New payments differ from earlier Economic Impact Payments

The third round of stimulus payments, those authorized by the 2021 American Rescue Plan Act, differs from the earlier payments in several respects:

  • The third stimulus payment will be larger for most people. Most families will get $1,400 per person, including all dependents claimed on their tax return. Typically, this means a single person with no dependents will get $1,400, while a family of four (married couple with two dependents) will get $5,600.
  • Unlike the first two payments, the third stimulus payment is not restricted to children under 17. Eligible families will get a payment based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents and grandparents.

Additional information is available on IRS.gov.

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Things taxpayers should know when choosing between standard and itemized deductions

Deductions reduce the amount of taxable income when filing a federal income tax return. In other words, they can reduce the amount of tax someone owes.

Most taxpayers have a choice of either taking the standard deduction or itemizing their deductions. The standard deduction may be quicker and easier, but, itemizing deductions may lower taxes more, in some situations. It’s important for all taxpayers to look into which deduction method best fits them.

New this year

Following tax law changes, cash donations of up to $300 made by December 31, 2020 are deductible without having to itemize when people file a 2020 tax return.

Here are some details about the two methods to help people decide deduction to take:

Standard deduction

The standard deduction is an amount that reduces taxable income. The amount adjusts every year and can vary by filing status. The standard deduction amount depends on the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to a higher standard deduction.

Taxpayers benefit from the standard deduction if their standard deduction is more than the total of their allowable itemized deductions. They can use the Interactive Tax Assistant, How Much Is My Standard Deduction? to determine the amount their standard deduction and if they should itemize their deductions. www.irs.gov/help/ita/how-much-is-my-standard-deduction.

Itemized deductions

Taxpayers may itemize deductions because that amount is higher than their standard deduction, which will result in less tax owed or a larger refund. In some cases, they not allowed to use the standard deduction.

Tax software can guide taxpayers through the process of itemizing their deductions. Taxpayers who itemize file Schedule A, Form 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.

A taxpayer may benefit by itemizing deductions if any of following apply to their tax situation, they:

  • Had large uninsured medical and dental expenses
  • Paid interest and taxes on their home
  • Had large uninsured casualty or theft losses
  • Made large contributions to qualified charities

Individual itemized deductions may be limited. Schedule A, Form 1040, Itemized Deductions can help determine what limitations may apply. www.irs.gov/forms-pubs/about-schedule-a-form-1040

More information:

Publication 501, Dependents, Standard Deduction, and Filing Information www.irs.gov/forms-pubs/about-publication-501
Topic No. 551, Standard Deduction www.irs.gov/taxtopics/tc551

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Avoid pandemic paper delays

Use e-file with direct deposit for faster refunds

WASHINGTON—Tax filing season opened on Feb. 12, and the Internal Revenue Service is urging taxpayers to take some simple steps to help ensure they file accurate tax returns and speed their tax refunds to avoid a variety of pandemic-related issues.

Although every year the IRS encourages taxpayers to e-file their returns and use direct deposit to receive refunds, to those taxpayers who have previously not used e-file, the IRS emphasizes using it this year to avoid paper-related processing delays. Taxpayers can file electronically by using a tax professional, IRS Free File [ https://www.irs.gov/freefile ] or other commercial tax preparation software. The IRS cautioned paper-filed tax returns and paper checks will take even longer this year due to a variety of reasons.

Taxpayers have until Thursday, April 15, 2021, to file their 2020 tax return and pay any tax owed. The IRS expects to receive more than 160 million individual tax returns this year with nine out of 10 returns filed electronically [ https://www.irs.gov/filing/e-file-options ]. At least eight out of 10 taxpayers get their refunds by using direct deposit [ https://www.irs.gov/refunds/get-your-refund-faster-tell-irs-to-direct-deposit-your-refund-to-one-two-or-three-accounts ].

“The pandemic has created a variety of tax law changes and has created some unique circumstances for this filing season,” said IRS Commissioner Chuck Rettig. “To avoid issues, the IRS urges taxpayers to take some simple steps to help ensure they get their refund as quickly as possible, starting with filing electronically and using direct deposit.

“Following months of hard work, we are ready to start this year’s tax season,” Rettig added. “Getting to this point is always a year-round effort for the IRS and the nation’s tax community. Doing it in a continuing COVID-19 environment while simultaneously delivering stimulus payments for the nation is an unprecedented accomplishment by IRS employees. I also want to thank all our tax partners and tax professionals for their hard work that makes tax time smoother for the nation. All of us stand ready to serve America’s taxpayers during this important filing season.”

Wage and Investment Commissioner and Chief Taxpayer Experience Officer Ken Corbin provides an in-depth perspective on how the IRS is preparing for a successful filing season in his A Closer Look [ www.irs.gov/about-irs/preparing-for-and-delivering-the-2021-filing-season ] column.

Be tax ready: Review pandemic-related changes

Last year’s sweeping set of tax changes not only affected individuals and their families but may also affect the tax return they’re filing this year. A new IRS Fact Sheet [ https://www.irs.gov/newsroom/be-tax-ready-understand-how-life-changes-may-affect-the-2020-tax-return-filed-this-year ] explains what taxpayers need to know to file a complete and accurate tax return. The IRS recognizes that filing this year may be challenging for some taxpayers and it’s important to understand how to claim credits and deductions, get a refund timely and meet all tax responsibilities.

Recovery Rebate Credit helps people still eligible for Economic Impact Payments

For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn’t receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit [ https://www.irs.gov/newsroom/recovery-rebate-credit ] when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.

New language preferences to help taxpayers

Additionally, this year for the first time, Forms 1040 and 1040-SR [ https://www.irs.gov/forms-pubs/about-form-1040 ] are available in Spanish, and the IRS has a new form [https://www.irs.gov/forms-pubs/about-schedule-lep] allowing taxpayers to request that they receive information from the IRS in their preferred language. The Schedule LEP, Request for Change in Language Preference, will allow taxpayers to request information in some 20 different languages besides English.

The IRS also wants to remind taxpayers of other important changes that could impact their tax return this year.

Remember to factor in retirement plan distributions

Some taxpayers found it necessary to take coronavirus-related early distributions from 401(k) plans and traditional IRAs in 2020. Under the CARES Act, those distributions up to $100,000  are not subject to the 10% additional tax that otherwise generally applies to distributions made before an individual reaches age 59. In addition, a coronavirus-related distribution [ https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers ] can be included in income in equal installments over a three-year period, and an individual has three years to repay a coronavirus-related distribution to a plan or IRA and undo the tax consequences of the distribution.

Taxpayers should also remember that they can make contributions to traditional IRAs until April 15, 2021, and still deduct that amount on their 2020 tax return, if eligible.

New for 2020: non-itemizers can deduct $300 for charitable cash contributions

Previously, charitable contributions could only be deducted if taxpayers itemized their deductions. 

However, with the CARES act, taxpayers who don’t itemize deductions may take a charitable deduction [ https://www.irs.gov/newsroom/most-taxpayers-can-deduct-up-to-300-in-charitable-contributions-without-itemizing-deductions ] of up to $300 for cash contributions made in 2020 to qualifying organizations. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose.

Now more than ever, e-file is best

Now more than ever, the safest and best way to file a complete and accurate tax return and get a refund is to file electronically and use direct deposit [ https://www.irs.gov/filing/e-file-options ]. Taxpayers can visit IRS.gov/filing [ https://www.irs.gov/filing ] for more details about IRS Free File [ https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free ], Free File Fillable Forms [https://www.irs.gov/e-file-providers/free-file-fillable-forms] and Free tax preparation sites [https://www.irs.gov/individuals/irs-free-tax-return-preparation-programs]. E-filing is also available through a trusted tax professional. Free File is a great option for people who are only filing a tax return to claim the Recovery Rebate Credit [ https://www.irs.gov/newsroom/recovery-rebate-credit ], either because they didn’t receive an Economic Impact Payment or did not receive the full amount.

The fastest way to get a refund is to file electronically and use direct deposit [https://www.irs.gov/filing/e-file-options]. Most refunds are issued in less than 21 days, but some refunds may take longer for a variety of reasons. Taxpayers can track their refund using “Where’s My Refund? [ https://www.irs.gov/refunds ]” on IRS.gov or by downloading the IRS2Go mobile app where theyll get a personalized refund date as soon as 24 hours after the tax return is electronically submitted.

Most early Earned Income Tax Credit/Additional Child Tax Credit filers should see an update to Where’s My Refund? by Feb. 22. The IRS cannot answer refund status inquiries unless it has been 21 days since the return was electronically filed.

IRS tax help is available 24 hours a day on IRS.gov, where people can find answers to tax questions and resolve tax issues online from the safety of their home. The Let Us Help You [https://www.irs.gov/help/telephone-assistance] page helps answer most tax questions, and the IRS Services Guide PDF [ https://www.irs.gov/pub/irs-pdf/p5136.pdf ] links to other important IRS services.

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