COVID-19 has changed a lot, even the deadline to file your federal income tax return. The IRS announced returns are now due May 17, 2021, a one-month extension on the traditional date.
This year, filing might be more complex. So, we turned to a few people who actually read the federal tax code.
“Oh yeah, I’m constantly reading the tax code and breaking down tax laws for people,” said TurboTax CPA Lisa Greene-Lewis.
NEW 1099 RECIPIENTS
Greene-Lewis said many people moved into the “gig” economy for the first time. They’re seeing a 1099 for the first time. Do. Not. Ignore. these forms.
“When you get that 1099, the IRS also gets the same 1099 for matching,” she said. “So they know how much income you made.”
The same goes for people who dabbled in the stock market – which many people did for the very first time. Expect a 1099-B form from your broker. If you do not understand it, H&R Block’s Nathan Rigney suggests buying tax software or hiring a tax professional.
“You really don’t want to be in a situation where you’re trying to figure this out for the first time when you have a really complicated 1099-B sitting in front of you,” Rigney said. “You don’t want to do that without help.”
If you got a stimulus payment, Greene-Lewis shared some good news.
“It is not taxable,” she said. And, “if you received too much, you don’t have to pay it back.”
If you did not get a stimulus payment, but believe you should have, you might be able to claim the Recovery Rebate Credit. It could mean thousands of dollars for families. Here’s a video showing how to do that.
Many families who faced layoffs or lost work in 2020 are getting a shock while preparing their federal tax returns. Unbeknownst to many workers, the federal government taxes unemployment income. Recipients should receive a 1099-R form.
Sarah Bauer in Rohnert Park was astonished when she figured her 2020 return.
“Things went bad real quick, my tax [refund] dropped by $4,000,” she said. Bauer called on Congress to make unemployment benefits tax free. “I think it’s awful. And I think it’s wrong. I think that the lawmakers need to know how much people are going to be suffering as a result of this.”
- Find Your Members of Congress: Search on GovTrack
EXTRA CREDITS & DEDUCTIONS
Record layoffs have squeezed family finances. But, if your income is lower than it was a year ago, that might actually boost your refund. You might now qualify for deductions or credits that you couldn’t get in years past because you made too much money.
The Earned Income Credit is a perfect example. IRS spokesman Raphael Tulino says the EITC increases families' refunds an average of $2,500.
But it’s not automatic. You must add the Earned Income Credit to your return.
“The thing is: about one in five of returns miss out on this credit,” Tulino said. He said it’s possible that even more people will miss out this year, “because people don’t know about it, because their income changed, and they never took [the credit] before.”
HOME OFFICE DEDUCTION
We’re about to let down the work-from-home crowd. Yes, lots of people paid out-of-pocket for desks, chairs, and other stuff that the boss didn’t cover. But no, you cannot deduct those work expenses, Greene-Lewis said.
“Starting with tax year 2018, employees can no longer deduct their home expenses on their federal taxes,” she explained.
IF YOU CAN’T PAY
Money is short for many families. Lots of businesses are still closed. And, we’re still in a pandemic. So, what if you do your taxes, find out you owe Uncle Sam, and can’t pay up? Don’t panic. Tulino said you should file your return on time; pay what you can; then, apply for a payment plan on the IRS website.
“The agency realizes that a lot of folks are in that position and we have a lot of flexibility to do that,” he said.
GET YOUR TAXES DONE FOR FREE
Every year, millions of families qualify to have their federal taxes figured and filed for free under a program called FreeFile.
"'Free File’ is a partnership between the IRS and private software companies," Tulino said. "It’s been around for quite some time. It allows people, generally, with income of $72,000 or less for this year, to file federal income tax for free.”