Tax season begins on 2/12/2021 when the IRS (and most states) begin to accept efiled tax returns.
However, not all forms and schedules will be immediately available. Patience is your friend right now.
Should You Extend Your 2020 Tax Return?
I usually recommend extensions for your return for 3 big reasons:
1.You have less chance of being audited if you extend,
2.You know better what tax laws are going to change & can better strategize, and
3.If there is a retroactive change (like those we’ve had for the last few years), you don’t have to pay someone to amend your tax return.
Now, we have another big reason and, in this case, you may want to extend right away. Don’t wait.
My whole family got COVID in December. I was the only one who didn’t. The one thing that was really clear is that COVID means exhaustion. My husband who is one of the hardest working people I know could barely get out of bed for 12 days.
If your tax preparer, their family, you or your family get COVID, there is a good chance you won’t be able to get your tax return finished up on time even if you have all the information needed.
You just won’t have the energy.
As soon as efiling opens up, unless you can file right away, extend.
Extending the return doesn’t mean you don’t have to ever file and you still need to make an estimate of the taxes due and pay the tax. Otherwise, you may face penalties and interest on the taxes due.
Sign Up For Direct Deposit When You File
When you file your return, use direct deposit or direct pay. Otherwise, it may take a long time (months at least) to process your return and you’re likely to trigger IRS inquiries. That’s despite the fact that you actually did pay them! They just are months and month behind on processing correspondence they received
What If You Didn’t Get Your Stimulus Payments?
If you didn’t receive one or both of the economic stimulus payments, you can claim the money due you as a Recovery Rebate Credit when you file.
Divorced Parents and Econ Stim Payments
It gets a little complicated if you’re divorced and share who “claims” the child. The IRS sent the econ payments to whomever claimed the child in 2019 (or 2018 if the 2019 returns had not been filed).
Are they due to keep it? That’s one for the parents to decide. The IRS said they aren’t going to handle those disputes. Hopefully it doesn’t take divorce lawyers to settle it, because you’ll end up spending more in legal fees than the econ stim payments will be.
“Nonfiler” Status and Econ Stimulus payments
The first econ stim payment was sent to nonfilers who registered at the irs.gov site. However, most were missed for the second econ stim payment. Even if you aren’t required to file due to your income level, you will need to file in order to get the econ stimulus payment.
What If Your Econ Stim Payment was Reduced Due to 2019 Income
The econ stim payments were limited based on what your AGI was in 2019. However, it’s actually your 2020 income that will determine how much you receive. You can request the additional amount as part of your 2020 tax return.
What If Your 2020 Income Increases and You Received Too Much?
If your income in 2020 pushes you over the adjusted gross income (AGI) level ($99K single, double that for married, filing jointly), you do not have to send back any econ stim.
This year is going to be an especially interesting tax season. Stay in good contact with your tax preparer and above all, be patient. We’re all going through a lot right now.
Got a tax question? Here’s how to get it answered: Tax Questions