Updated: Nov 24, 2020
The Internal Revenue Service today encouraged taxpayers to take necessary actions this fall to help file their federal tax returns timely and accurately in 2021, including special steps related to Economic Impact Payments (EIP). This is just the first of a series of reminders to help taxpayers get ready for the upcoming filing season.
Taxpayers will need their Notice 1444, Your Economic Impact Payment, to calculate any Recovery Rebate Credit they may be eligible for on their 2020 Federal income tax return.
Taxpayers with an Individual Taxpayer Identification Number (ITIN) should ensure it hasn't expired before they file their 2020 federal tax return. If it has, IRS recommends they submit a Form W-7, Application for IRS Individual Taxpayer Identification Number, now to renew their ITIN. Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits.
Taxpayers can use the Tax Withholding Estimator on IRS.gov to help determine the right amount of tax to have withheld from their paychecks. If they need to adjust their withholding for the rest of the year time is running out, they should submit a new Form W-4, Employee's Withholding Certificate, to their employer as soon as possible.
Taxpayers who received non-wage income like self-employment income, investment income, taxable Social Security benefits may have to make estimated tax payments. Payment options can be found at IRS.gov/payments.
Taxpayers may be able to claim the Recovery Rebate Credit if they met the eligibility criteria in 2020 and:
They didn't receive an Economic Impact Payment this year, or
Their Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018) plus $500 for each qualifying child.
For additional information about the Economic Impact Payment, taxpayers can visit the Economic Impact Payment Information Center.
Taxpayers who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest totaling at least $10.
Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a 2020 federal tax refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer.
By law, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund − even the portion not associated with EITC or ACTC. The IRS expects most EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they chose direct deposit and there are no other issues with their tax return. Taxpayers should use Where's My Refund? for their personalized refund date.
With social distancing continuing, taxpayers can stay home safely and file electronically via the IRS Free File program if they are comfortable completing their own returns. Taxpayers also have the option to find a tax preparer.
Serenity Financials, LLC is fully equipped to service taxpayers in all states this season.