Everything You Need To Know About Filing 2020 Taxes
The unexpected crisis of COVID-19 that ran rampant throughout 2020 and into this year has caused many changes and upheavals to tax returns this year. Due to all of that, there are many new and revised dates you will need to know about before filing your taxes this year.
The original filing and payment deadline for taxes is normally April 15th, the IRS has now pushed that to May 17th. June 15th to anyone living in Texas, Oklahoma, and Louisiana, who were hit hard by the winter storms in February.
If you file for extension, they won't be due until October 15th, but always remember that an extension to file is not an extension to pay! You still must pay any remaining federal taxes owed on your 2020 income by the tax due date if you want to avoid any potential late payment penalties. If you are owed a refund, you will have to wait longer to get your refund.
So when can you expect your refund? Normally refunds are issued within 21 days of the IRS receiving your tax return. If you file electronically and choose direct deposit, you will receive it faster. The IRS mentioned that it is taking longer to process mailed documents, especially with the constant tax code changes and the demand of issuing stimulus checks. According to the IRS, there are 7.6 million returns that haven't been processed, 3 times more compared to last year.
Are your stimulus payments taxable?
No, the money is tax-free! However, many still haven't received the first two rounds. If you haven't received the stimulus payments, you will be able to receive them via your federal tax return as long as you claim the refundable Recovery Rebate Credit.
What About Unemployment Benefits?
Unemployment benefits are taxable; however, with the latest Covid relief package that was signed into law by President Biden, households with income below $150,000 last year, the first $10,200 in unemployment benefits will be exempt from the federal income tax. Unemployment compensation is treated as taxable income, both by the IRS and by most states. (States that are exceptions: Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington, Wisconsin and Wyoming)
So what are the other tax changes you need to know about?
Small business owners who received the Paycheck Protection Program can deduct the business expenses they paid for with their loan money. There are changes to charitable donations for those who did not itemize them may take a deduction up to $300 for cash contributions made in 2020 to qualifying organizations. And eligible self-employed people may claim a new sick leave and family leave tax credit that was created by the Families First Coronavirus Response Act.
If you have questions or need help, please feel free to reach out to us at (832) 295-3353, or you can also set up an appointment with us at https://xqcpa-bookme.acuityscheduling.com/schedule.php.