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IRS Starts Accepting Tax Returns for 2020: Timing, Deductions and Details to Know

The unprecedented events of 2020 have changed life as much as we knew it. And many of the changes and shocks of the past year have brought about changes in your tax returns. Due to the COVID-19 crisis, there are many new and revised regulations and important dates that you need to be aware of before filing your 2020 tax return this year. Edition CNN has collected some of the most important.

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When to File Your 2020 Tax Return

The IRS begins accepting federal tax returns on Friday, February 12th.

Yes, it's later than usual.

Typically, tax filing season begins in the second half of January. But the IRS took longer to program and test their systems, to make sure they were ready for tax season, as the agency was very busy at the end of 2020.

When to pay taxes

Despite the later than usual start date of the filing period, you should file and pay any remaining federal income taxes you owe for 2020 before the traditional payment date of April 15th, unless you apply for an extension.

By doing this, you will avoid potential late submission or late payment penalties.

In the event that you miss the deadline for filing or paying, you may be eligible for a penalty waiver.

Can I apply for an extension

Yes. You can get an automatic six-month extension for your 2020 federal income tax filing - which means you have to file your tax return by October 15th. To do this, submit your request to the IRS by April 15th.

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But please note that the renewal is not an extension to pay off your debt. If you want to avoid a possible late payment penalty, you must still pay the remaining federal taxes on your 2020 income by April 15th.

And if you are entitled to a refund, the delay in filing means you have to wait longer for a refund.

When to wait for a return

Refunds are usually made within 21 days of receiving your tax return. But the agency notes that the fastest way to get a refund is to file a return electronically and choose direct transfer.

For a better estimate of when you will receive your refund check the IRS tool "Where is my return?" either within 24 hours after the agency says it has received your electronic declaration, or four weeks after you mailed it.

Is quarantine financial aid taxed?

Not. Money is not taxed.

But some people who have the right to financial assistance did not receive it. First of all, those whose income in 2019 was higher than their income in 2020, or people who did not file tax returns for 2019 or 2018. They will be able to collect their money on federal tax returns if they claim a refundable repayable recovery loan.

This loan will reduce your income tax liability on a dollar to dollar basis. And if the loan amount exceeds your tax liability, you will be refunded the balance.

Are unemployment benefits taxable

Yes. Unemployment compensation is treated as taxable income both by the IRS and most states (except Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington and Wyoming).

If you did not withhold income tax from your unemployment benefits during the year, then the full amount of tax will be calculated when you file your tax return.

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What are the tax rates for 2020-2021

Even accountants are a bit confused after the changes over the past few years, so it might be a good idea to see if your rate has changed. However, this will depend in part on how you file your return. Fortune.

For individual payers:

  • 10%: taxable income up to $ 9
  • 12%: taxable income between $ 9 and $ 876
  • 22%: taxable income between $ 40 and $ 126
  • 24%: taxable income between $ 85 and $ 526
  • 32%: taxable income between $ 163 and $ 301
  • 35%: taxable income between $ 207 and $ 351
  • 37%: taxable income over $ 518

For married persons filing a joint declaration:

  • 10%: taxable income up to $ 19
  • 12%: taxable income between $ 19 and $ 751
  • 22%: taxable income between $ 80 and $ 251
  • 24%: taxable income between $ 171 and $ 051
  • 32%: taxable income between $ 326 and $ 601
  • 35%: taxable income between $ 414 and $ 701
  • 37%: taxable income over $ 622

For married persons filing separately:

  • 10%: taxable income up to $ 9
  • 12%: taxable income between $ 9 and $ 876
  • 22%: taxable income between $ 40 and $ 126
  • 24%: taxable income between $ 85 and $ 526
  • 32%: taxable income between $ 163 and $ 301
  • 35%: taxable income between $ 207 and $ 351
  • 37%: taxable income over $ 311

For heads of households:

  • 10%: taxable income up to $ 14
  • 12%: taxable income between $ 14 and $ 101
  • 22%: taxable income between $ 53 and $ 701
  • 24%: taxable income between $ 85 and $ 501
  • 32%: taxable income between $ 163 and $ 301
  • 35%: taxable income between $ 207 and $ 351
  • 37%: taxable income over $ 518
What's the standard deduction this year

The standard deduction for most taxpayers actually increased in 2020 due to inflation.

  • Individual payer - $ 12 (was $ 400)
  • Married persons filing a joint declaration - $ 24 (was $ 800)
  • Married persons filing separately - $ 12 (was $ 400)
  • Heads of Household - $ 18 (was $ 650)
For most of 2020, I worked from home. Can I charge home office fees?

Perhaps not. Home office deductions are for self-employed individuals. That is, if your company sent you home for most of the past year, you won't be able to write off any utilities.

However, if you are self-employed and your income is on a 1099 statement instead of a W-2, you can write off the percentage of home expenses that you devote exclusively to work.

I had a chance to withdraw money from a 401 (k) or an IRA. Will you have to pay taxes on this?

CARES allows people under 59,5 years old to withdraw up to $ 100 from their retirement plans without penalty. If you were one of them, then yes, you will have to pay taxes on the money received. But if you return the funds to your account within three years, you can get a refund of the taxes paid.

Is it worth listing charitable contributions this year

For a while, charitable giving seemed like a major headache when it came to cutting tax liabilities after sweeping tax changes in 2018. However, the CARES Act makes them think again. Legislation allows deductions of up to 100% of the adjusted gross income, although the deductions will need to be detailed.

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If you are making a standard deduction, you can write off up to $ 300 in cash.

Do I need to submit a declaration

If you made less money in 2020 than in 2019, it's a good idea to file a tax return whether you owe taxes or not. Filing a return for a lower amount can help you get quarantine payments, whether it's past payments that are still due to you or future payments that have not yet been approved.

How much do you need to earn to file a tax return

It really depends on your filing status and age.

Single people under the age of 65 who earn $ 12 a year or more will have to file a tax return. If you are 400 or older, the minimum amount increases to $ 65.

For married people under 65 who file together, the threshold is $ 24. If both of you are over 800, the amount will go up to $ 65. If one of the spouses is under 27 and the other is older, it is $ 400.

Married and filing separately? The threshold is a paltry $ 5 for all ages.

Heads of households who have not yet celebrated their 65th birthday and have earned more than $ 18 will have to file returns. If they are over 650, this amount rises to $ 65.

Finally, widows and widowers under the age of 65 with dependent children who earn more than $ 24 will be required to file a tax return. For widows and widowers over 800 years old - $ 65.

Is there a free tax filing system

IRS Free File Is a program that works with renowned internet tax service providers including TurboTax and H&R Block. You will need to earn $ 72 or less to use the system, which is now open through 000 tax filing season.

What are the common tax mistakes to look out for?

Small mistakes can have serious consequences. And the little things can do everything from delayed returns to higher audit risk. According to tax authorities, here are the most common mistakes:

  • Missing or inaccurate social security numbers
  • Misspelled names
  • Submission status errors
  • Mathematical errors
  • Errors in calculating tax credits or deductions
  • Invalid bank account numbers
  • Unsigned forms
  • Submitting an application with an expired Individual Taxpayer Identification Number (ITIN)
What happens if you file your tax return later

If you miss the April 15 deadline, you may incur two types of fees and penalties on top of any taxes you owe: one for late filing and one for late payment. If you file your return more than 60 days late, you will probably face a minimum fine of $ 210 (unless you owe less, then the penalty is 100% unpaid tax). Otherwise, the penalty can be up to 5% of unpaid tax each month until you pay, but no more than 25%.

Late payment penalties are typically 0,5% of the unpaid tax per month, although they can rise to 25%. This amount can be significantly reduced if you develop a payment agreement with the IRS.

Of course, if you apply for an extension, these penalties do not apply. If you can provide reasonable reasons for refusing to apply, then you will also avoid them. And if you've historically filed documents on time, you may be eligible for the First Delay Penalty Reduction Program.

What are the chances of getting an IRS audit

It depends if you are a higher income person or running a small business?

Taxpayers with income of $ 10 million or more had significantly higher audit rates than any other category between 2010 and 2015. The IRS is expected to increase its audit of small businesses by 50% this year.

How can you get a bigger return next year

The IRS Withholding Tax Calculator will help you select a specific refund amount and best prepare for it through adjustments. This is a great tool for people who do not expect significant fluctuations in their income over the course of the year.

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Please note that your income tax is no longer dependent on your marital status and withholding benefits. Instead, it is now based on your expected registration status and standard deduction.

What other new tax changes related to the pandemic you should be aware of

Congress has made a number of changes to tax breaks, such as the Earned Income Tax Credit, or created new incentives for individuals and small business owners to ease the pandemic.

Small business owners who received a tax-free forgiven loan under the Payroll Protection Program may still deduct the business expenses they paid with the loan.

Standard Deductions can now make a new charitable deduction even if they don't list it.

And eligible self-employed people can claim a new Sick Leave and Family Leave Tax Credit that was created by the Coronavirus Response Act for Families.

Read also on ForumDaily:

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