Here are two important dates for the upcoming tax season: April 15th, 2021 is the deadline for filing your 2020 return. However, if you’re expecting a refund, the more important question is “What is the fastest time to submit?” The IRS will begin accepting and processing returns on February 12th.
Of course, whether you’re preparing your own return or hiring a professional, it’s never too early to gather the information you need. Just over half of all taxpayers use a paid preparer – 53% according to IRS statistics for 2018, the last available year. Let’s look at a few points that you need to consider:
Stimulus tests: This does not count as taxable income and therefore does not have to be shown in your tax return. However, your tax advisor or tax software will ask you how much you received. This is because some people may receive additional incentive funds and can now claim it when they return in 2020. Here are a few examples.
- If your 2019 income was over $ 75,000 (individual) or $ 150,000 (married), you did not receive a full stimulus check. However, if your 2020 income has dropped below these amounts, you may be eligible for $ 1,200 per person and $ 500 per child from the first round and $ 600 per person from the second round.
- If you were 17 or older and were dependent on your parents’ return in 2019, neither you nor your parents received a stimulus check on your behalf. If you are no longer dependent in 2020, you can submit feedback to request a stimulus check of $ 1,200 from the first round and another $ 600 from the second round.
- If you had a baby in 2020, they weren’t included in your stimulus testing. However, you are entitled to the $ 500 from the first round and the $ 600 from the second round.
- If you did not receive a stimulus check because you changed bank or changed bank, you can claim it on your return.
- Don’t worry if you received a stimulus check but your 2020 income makes you ineligible. you don’t have to give it back.
Documents: On the income side, a W-2 from your employer shows your wages. Banks and other investment companies send out 1099 in several different flavors: 1099-INT if you have interest income, 1099-DIV for dividend income, 1099-B for stock deals, 1099-R for retirement income, or 1099-SA for cash you spend from your health account , not to be confused with an SSA-1099 for social security payments.
A new form this year is the 1099-NEC, which stands for Non Employee Compensation. You may get one of these if you are self-employed or if someone has paid you more than $ 600 for services provided. Of course, the 1099-MISC is also available for various other amounts that you may have received. You may have received a 1444 notice regarding stimulus testing.
Deductions: I’m going to give you a list of things that are deductible and then point out that seven out of eight taxpayers don’t end up deducting them. First the list:
- Medical and dental costs (including insurance premiums)
- State income taxes
- Property taxes on your house and your car (and possibly your yacht)
- Mortgage rates on your home
- Charitable gifts (cash or property)
There are more, but these are the main ones, collectively known as single prints. You can closely track all of the above for the year. However, if the total is less than $ 12,400 (if you are single) or $ 24,800 (if you are married), you will likely be claiming the standard deduction instead of listing your actual deductions. As noted above, the vast majority of taxpayers – 87% according to 2018 IRS statistics – keep no data.
One big change for 2020 (there is always a different “however” in tax law), however, is that anyone can deduct up to $ 300 in charitable donations, whether they list them or not. Unfortunately, only cash qualifies, not donations in kind.
In the past year, the IRS processed just over 154 million individual tax returns. About 73% of them showed a refund. We hope you will be in this group in 2020.
Tom Stauder, CPA, is Professor of Accounting at Columbia College.