The pandemic has slowed down the economy, but it hasn’t delayed the April 15, 2021, tax filing deadline.
The IRS, however, didn’t start processing tax returns until February 12th. As we’ve noted in a few previous articles, your tax filing isn’t going to look the same as it did last year for multiple reasons — policy changes among them. But there are still a few more things to keep in mind.
Here are some new challenges for both the IRS and the average taxpayer this year:
IRS Has a Later Start This Year
The processing postponement was to give the IRS time to prepare for their second of economic impact payments last December. There will likely be a third stimulus payment, and President Biden intends to include $1,400 checks as part of another $1.9 trillion stimulus package, with or without Republican support.
Heads Up to Remote Workers
With the onset of quarantine and the bulking up of the remote workforce, online earners could face the extra complication of filing income tax returns to multiple states. A remote worker living in Colorado who earns pay from California sources, for example, needs to report that income on a federal, Colorado, and California state tax return.
The good news is that Colorado permanent residents can claim income tax payments made to other states on their state income tax form. Each state, however, has different rules, and only few — Texas and Florida, for example — have no state-level income tax. Other states like Maryland, Pennsylvania, Virginia, West Virginia, and Washington, DC have agreements in place to mitigate the effects of double taxation.
You Must File a Return to Get the Stimulus Payment
Then there are those who because of low income fall below the threshold for filing an income tax return. In 2020 for example, single citizens under age 65, who are not self-employed, and earn less than the 2020 standard deduction of $12,400, are exempt from filing federal income tax returns.
What’s different this year for the latter group of non-taxpayers is that in order to receive their stimulus rebate money via the Recovery Rebate Credit, they can only do that by filing a tax return. The IRS has published special instructions and asks taxpayers to refer to its extensive information linked to its Economic Impact Payment Information Center Page.
Charitable Deductions Can be Claimed with the Standard Deduction
Last year’s CARES act included a temporary $300 above-the-line charitable donation. Taxpayers taking that deduction did not have to itemize their deductions to claim charitable donations, but could instead take the standard deduction.
For 2021, that provision has been extended and enhanced. It has been doubled to $600 for joint filers.
IRS Foresees Delays
Taxpayers who anticipate a rebate this year need to file quickly and opt for electronic returns. Also, paper refund checks could take even longer, so the best advice is to let the IRS send refunds to private financial accounts.
Taxpayers can ask the IRS to send their refunds to up to three accounts. Said IRS Chief Taxpayer Experience Officer Ken Corbin, “I can’t stress enough the importance of filing electronically and choosing direct deposit. This is the safest and easiest way to file an accurate tax return and get a refund.”
Finally, be on the lookout for tax scams. Check out IRS listing of its “Dirty Dozen” tax fraud schemes.