7 Things You Need To Know When Filing Your Tax Return This Year




  • In Business
  • 2021-01-23 01:00:00Z
  • By GOBankingRates
PeopleImages / Getty Images
PeopleImages / Getty Images  

The realities of 2020 forced some important changes to how you'll file your taxes this year. Some changes are new for the 2021 tax season while others-like the original filing deadline-were changed last year on an emergency basis and are now going back to normal.

Find Out: Tax Year Deadline Dates You Need To Know

The IRS was forced to deal with a shortened tax season in 2020 thanks to a July 15 filing extension for tax year 2019 and then a last-minute blizzard of new legislation just as 2021 was about to begin. With the IRS under such heavy pressure, it's important that you're up to date with everything you need to know about filing your taxes if you want things to go smoothly.

1. The Tax Year 2020 Filing Deadline is Back to Normal

If you're motivated to file early, the federal tax filing season begins on Feb. 12, 2021, when the IRS begins accepting returns. The deadline to file taxes is April 15, 2021. There was an emergency three-month extension last year that let millions postpone paying and filing until July 15. There will be no extension this year so plan to file and pay by the traditional Tax Day.

If you need more time to file your taxes this year, you can apply for a tax extension that will give you an extra six months to file your return on Oct. 15.

2. You Can Kick Into an IRA Until Tax Day

Another important date to remember: The deadline for traditional or Roth IRA contributions. If you've put off contributing to your individual retirement account all of last year, you haven't missed the boat. A special provision allows you to make your contribution for the previous year as late as the tax-filing deadline for the current calendar year, which means you can make 2020 contributions to your IRA or Roth IRA through April 15, 2021. If you exceed your contribution limit for the year, you can withdraw the overage amount without incurring a tax penalty as long as you do so by April 15.

Read More: Here's How to Use Your IRA as a Last-Minute Tax Deduction

3. 11th Hour Changes Slowed the IRS

Feb. 12 is a relatively late start to tax season, which usually begins at the end of January. Congress threw the IRS a last-minute curve ball by changing the tax laws on Dec. 27, 2020, just as the new year was set to begin. The new legislation included a second round of stimulus funding, which forced the IRS to update some programs and protocols. That, in turn, slowed everything down. No one expects you to feel sympathy for the IRS, but do understand that it's an organization under intense pressure and strict deadlines. If you want to get your refund as quickly as possible, there are a few steps you can take to hurry things along. The IRS asks that everyone filing their 2020 tax returns:

  • File as early as possible

  • File electronically

  • Sign up for direct deposit if they haven't already

  • Don't call-visit IRS.gov for the latest news and updates

4. Refund Timelines Vary

The IRS issues nine out of 10 refunds within 21 days, although those who send in paper returns by mail or who aren't signed up for direct deposit can expect delays. Even some returns that are filed electronically with direct deposit can be delayed for a variety of reasons.

If 21 days pass before you receive your refund, use the IRS' "Where's My Refund?" tool to check your status.

As of 2017, the IRS is required to hold onto refunds until at least Feb. 15 for anyone claiming the Earned Income Tax Credit or the Additional Child Tax Credit. So if you're claiming those credits, your entire refund will be delayed - not just the portion attributable to the tax credits.

This year, the "Where's My Refund?" tool will update for those who claimed the EITC and ACTC on Feb. 22. Those taxpayers will start receiving refunds in the first week of March, provided they filed electronically, have direct deposit, and had their returns accepted with no issues.

Stay Safe: How To Protect Your Tax Refund From Being Stolen

5. Free Tax Help Comes With Income Limits

More than 70 percent of taxpayers qualify for assistance filing their taxes, according to the IRS.

The limit to qualify for Free File Software, a free tax preparation software, is now $66,000. It's open for use as of Jan. 15. If your income is above $66,000, you can still qualify for Free File Fillable Forms, which are similar to paper forms except that you can file your tax return online and send it electronically. Both options will not only save you money, but you're more likely to receive your refund sooner as well.

There is also the IRS's Volunteer Income Tax Assistance (VITA) program, which is limited to Americans over the age of 50 with incomes no greater than $57,000. A similar program, Tax Counseling for the Elderly (TCE), pairs those who qualify with professional tax help.

If you don't qualify for any of those IRS programs, you're still not out of luck. You can take advantage of many other cheap and free tax filing software and services.

6. Your Tax Bracket Might Have Changed

There are still seven tax brackets and the rates haven't changed over last year. Every year, however, the IRS adjusts the income requirements for each tax bracket to compensate for inflation. Here are the updated brackets and rates for tax year 2020, which you'll file by April 15, 2021.

7. You Might be Eligible For a Rebate

There were two rounds of stimulus payments made to the vast majority of Americans. If you didn't receive your first or second Economic Impact Payment (EIP), or didn't receive them in full, you might be eligible for the Recovery Rebate Credit, which allows you to claim the rest at tax time. If you claim this credit on your 2020 tax return, you'll receive the amount you're owed either as an addition to your refund or as a credit to your tax bill. Any money you received in EIP funds does not count toward your income and is not taxable. Keep in mind, however, that unemployment assistance is taxable, including the enhanced unemployment that was granted during the early outbreak under the CARES Act.

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Michael Keenan contributed to the reporting for this article.

Last updated: Jan. 22, 2021

This article originally appeared on GOBankingRates.com: 7 Things You Need To Know When Filing Your Tax Return This Year

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