A challenging tax season starts on Friday as the Internal Revenue Service finally starts processing its 2020 income tax return.
The tax season starts about two weeks later than last year. This reflects the additional time it took the IRS to program and test its systems following last-minute Washington tax law changes that included a second round of payments for economic impact and other pandemic relief benefits.
“We are ready,” said IRS Ken Corbin, the new IRS Chief Taxayer Experience Officer, a newly created position designed to help the agency better address tax issues. Corbin also acts as a commissioner for the IRS Payroll and Investment Department.
Some industry experts fear a flurry of returns could flood the IRS system on Friday, potentially causing hiccups and disruption. After all, tax professionals have been preparing tax returns for clients for a few weeks now, but they have had to wait to submit those tax returns electronically for the IRS system to accept them.
Corbin had no estimate of how many returns could be submitted on the first day. But he said the IRS has been working closely with the tax preparation industry to get updates, test their systems, and have IT professionals on hand to make sure everything is running smoothly.
When he called journalists on Thursday, he told journalists that the number of returns submitted by early filers can generally be between 20 and 40 million returns.
Look at last year’s stats. The IRS had already received 39.6 million individual income tax returns by February 14, 2020, and the majority of those returns – 38.3 million – had been processed. Around 18 million refunds were made during this period.
The IRS encourages people to avoid the potential headaches and delays that can arise when filing a paper return during the pandemic. Corbin said opting to file electronically is the safest way to submit a return and the fastest way to get a refund.
In relation to these stimulus payments, the IRS had some thought there, too.
The likelihood of a third stimulus payment of up to $ 1,400 for individuals is currently on the table. If everything goes smoothly with the necessary laws passed, some speculate that payments could be defaulted as early as mid-March.
Still, the excitement already builds on how one could play this system.
If you’ve lost a job and had a sizeable drop in income in 2020, some speculate that you might want to file your 2020 income tax return earlier this year so the IRS can base the next stimulus payment on your low income last year. It’s a possibility that some might get a bigger stimulus check.
But Corbin cautioned people aren’t rushing to file a return, just to file it asap. The best bet, he said, is to avoid mistakes and only submit when there is the right documentation and information available that you need.
For example, if you don’t have the correct W-2 forms or 1099 forms, there may be delays in processing the return.
“We always encourage taxpayers to file the most accurate tax return they can,” said Corbin.
The tax return ends on April 15th of this tax season. Corbin said the IRS didn’t expect the deadline to be extended like it did last year, given that the pandemic was widespread at the start of the pandemic. Last year the IRS extended the deadline to July 15th.
More: Stop! Don’t do your taxes until you find this number
More: The new regime will help those who lost their jobs in 2020 qualify for important tax credits
More: Tax season 2021: how to get a bigger, faster tax refund
More: Well-known Michigan identity card stolen in Ohio unemployment fraud
Here are some tips to keep in mind as you prepare to submit these returns:
Some news about taxes in Michigan
This week Michigan announced a modest tax break for those who were unemployed and received unemployment benefits in 2020 but didn’t withhold enough taxpayers’ money last year.
The news is important to the millions of people who received unemployment benefits over the past year after restaurants, factories and other businesses closed during the pandemic.
If you have accrued state unemployment in the past year but did not pay enough income tax into the system, the state of Michigan will not charge you a penalty or interest related to underpayment of the estimated taxes.
The Michigan Treasury Department has granted an automatic waiver of all penalties and interest related to underpaid estimated tax payments by taxpayers who received unemployment benefits in 2020.
Michigan state law requires taxpayers to make estimated quarterly tax payments if the annual tax due is expected to exceed $ 500 or more. Taxpayers who fail to pay an estimated quarterly tax payment typically face penalties and interest.
The IRS will accept 2020 income tax returns starting February 12, 2021. FILE – This 2019 photo shows part of a 1040 federal tax form that is reprinted on the Internal Revenue Service website in Zelienople, Pennsylvania. (AP Photo / Keith Srakocic, file) (Photo: Keith Srakocic, AP)
Mark Luscombe, lead analyst at Wolters Kluwer Tax & Accounting, said the IRS hadn’t announced a similar reduction in federal income taxes until February 10.
Some people who have received unemployment benefits could still face an “estimated tax penalty” on their federal taxes for not prepaying Uncle Sam enough money in 2020.
If they owe more than $ 1,000 in federal income taxes on their return in 2020, Luscombe warned, they could face a federal fine.
Corbin of the IRS said Thursday that the IRS currently has no plans to enact “blanket exemptions” on the unemployment benefits collected but has not withheld enough taxes.
But Corbin left a door open by which some taxpayers may individually request waivers of such penalties. He noted that exceptions to “reasonable grounds” can be granted on a case-by-case basis. He said the IRS will monitor the situation related to taxable unemployment benefits and possible penalties related to the lack of tax withholding during 2020.
Check your records three times
While the postal service seems to have improved in some areas, some people are still seeing delays in the mail.
Therefore, the IRS is reminding taxpayers to make sure they have all tax documents in place, including Forms W-2 and Form 1099, before filing a tax return. Review last year’s tax return and consider your 2020 sources of income, especially when You were a freelancer.
Some forms can be obtained online through an employer or a bank.
“If other options are not available, taxpayers who have not received a W-2 or Form 1099 should contact their employer, payer or issuing body directly to request the missing documents before filing their 2020 tax return” said the IRS.
Corbin said taxpayers should try to resolve issues first and not contact the IRS until late February if they continue to have issues with these forms, many of which should have been received by now.
The IRS also reminds taxpayers that they can securely access their IRS account information through their individual online account at IRS.gov.
The IRS stated, “For example, people can now review the amounts on their Economic Impact Payments (EIPs) to help them accurately calculate any refund credit they may be entitled to on their 2020 tax returns. You can find the EIP amounts on the Tax Documents tab. ”
Under “Economic Impact Payment” you are looking for the economic payment from last year and then for “Additional Economic Impact Payment” for the second payment that was sent in early 2021.
The IRS noted that each spouse must log into their own account in order to access their share of economic impact payments.
Crooks are still out to file false tax returns
As part of a hot program in 2021, identity thieves are increasingly targeting tax professionals by sending out an email that appears to be from the IRS.
The wrong email relates to “IRS Tax E-Filing” and the verification of key e-file information.
Crooks say things like, “In order to protect you and your customers from unauthorized / fraudulent activity, the IRS requires that you review all authorized e-file creators before sending returns through our system. This means we need your EFIN (e-file identification number) verification and driver’s license before the e-file. “
Ken Corbin is the new Chief Taxayer Experience Officer, a newly created position designed to help the agency better serve taxpayers. Corbin suggests taxpayers risk the potential for major delays by filing a paper return in 2022. He recommends electronic submission. (Photo: Supplied by the Internal Revenue Service)
More: Stop! Don’t do your taxes until you find this number
When tax professionals fall for this case, the IRS determines that fraudsters can use information given to them to make fraudulent declarations by posing as tax advisors.
The email tries to get tax advisors to open a link or attachment. The danger is that if they fail to do so, their ability to e-file will be disabled.
However, these links or attachments are set up to steal information or download malware onto the tax professional’s computer.
Individuals are reminded to watch out for unscrupulous individuals who may offer to prepare their taxes but also steal important identification information – or part of your tax refund – from you.
Contact Susan Tompor vhe email@example.com. Follow her on Twitter @Tompor. To register, please go to freep.com/specialoffer. R.Read more about the business and subscribe to our business newsletter.
Read or share this story: https://www.freep.com/story/money/personal-finance/susan-tompor/2021/02/11/tax-returns-irs-stimulus/4467517001/