2021 Revenue Tax Season: What To Know Earlier than Submitting In New Jersey

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NEW JERSEY – New Jersey’s 2021 tax season is in full swing as applicants collect their W-2 and other documents for their 2020 tax return.

In the first tax year since the coronavirus hit living and working in the United States, millions of Americans file returns that look very different from previous years.

Here are seven things you should know about this New Jersey tax season:

Do the stimulus payments count? No, the two federal economic aid payments sent to all Americans in 2020 shouldn’t be included in your gross income, according to the Internal Revenue Service. Don’t include it in your taxable income. According to the IRS, this will not reduce your reimbursement or affect your eligibility for government benefit or benefit programs.

How about unemployment benefits? Yes, these count. When the pandemic forced the US unemployment rate to rise to an unprecedented 14.7 percent by April, more people than ever will have to report unemployment income during that tax season.

While unemployment benefits are taxable, they are not considered “earned” income and are not used against you to determine whether you are eligible for the earned income tax credit, Jackson-Hewitt points out. In general, states do not withhold taxes on unemployment benefits.

According to Jackson-Hewitt, job search costs are no longer deductible.

Specific changes in New Jersey:

  • Marijuana Law: In November 2020, New Jersey voters approved Public Question 1, a statutory constitutional amendment that legalizes recreational marijuana from January 1. The electoral measure states that general sales tax will apply to marijuana sales and local option sales taxes of up to 2 percent may also be collected. The measure prohibits excise taxes on retail marijuana purchases, but does not prohibit the imposition of additional taxes at the wholesale or manufacturer level. The House and Senate both passed laws that would provide for an additional “excise tax” and a “local gross income tax (BRT) transfer tax” on cannabis products. As of this writing, Governor Phil Murphy (D) has not responded to this bill.
  • Company income: On September 29, 2020, Governor Murphy signed law retrospectively increasing and extending the New Jersey surcharge on corporate taxable income in excess of $ 1 million. The surcharge was passed at a rate of 2.5 percent in 2018, but it was on the right track to drop to 1.5 percent for 2020 and 2021 and to sunset by 2022. Instead, A. 4721, which came into force immediately after it came into force, retroactively set the rate back to 2.5 percent for the tax years 2020 to 2023. As a result, the highest corporate tax rate in New Jersey, which would have been 10.5 percent for 2020 and 2021, is now 11.5 percent for 2020 to 2023.

Do I qualify for an Earned Income Tax Credit? The Earned Income Tax Credit is designed to help middle-to-low income individuals and families lower the taxes they pay and help them get more refunds, according to the IRS.

The IRS has an online tool that can be used to determine if you qualify for the credit.

Standard deduction changes: The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies based on your enrollment status.

The standard deduction for each filing status for the 2020 tax year has changed slightly compared to 2019, according to the IRS:

  • Separate single or married registration: $ 12,400, down from $ 12,200 for 2019.
  • Married Joint Registration or Qualified Widow: $ 24,800, down from $ 24,400 for 2019.
  • Head of household: $ 18,650, down from $ 18,350 in 2019.

Congress passed important tax laws in 2017. The bill signed by President Donald Trump that year kept the seven tax brackets but lowered the number of tax rates. In addition, the income thresholds above which the rates apply have been changed.

New tax rates

These new rates came into force for the 2018 tax year and have remained in place ever since. Here is a reminder for the 2020 tax year:

Tax brackets and thresholds for individual applicants in the 2020 tax year

Tax Rate – Taxable income bracket

10 percent – $ 0 to $ 9,525
12 percent – $ 9,526 to $ 38,700
22 percent – $ 38,701 to $ 82,500
24 percent – $ 82,501 to $ 157,500
32 percent – $ 157,501 to $ 200,000
35 percent – $ 416,701 to $ 418,400
37 percent – More than $ 500,000

Tax brackets and thresholds for married couples filing together in the 2020 tax year

Tax Rate – Taxable income bracket

10 percent – $ 0 to $ 19,050
12 percent – $ 19,051 to $ 77,400
22 percent – $ 77,401 to $ 165,000
24 percent – $ 165,001 to $ 315,000
32 percent – $ 315,001 to $ 400,000
35 percent – $ 400,001 to $ 600,000
37 percent – More than $ 600,001

When is tax day this year?

Tax day is again the traditional April 15th. The deadline was extended by three months a year ago due to the then new coronavirus pandemic. April 15 falls on a Thursday in 2021. Before the pandemic, tax day would only be delayed if April 15 falls on a weekend or local holiday in Washington, DC

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