Oak Tree Advisory Services, Inc.

IRS Begins Issuing Refunds for Eligible Unemployment Benefits Recipients The American Rescue Plan Act (ARPA) retroactively excluded some 2020 unemployment benefits from taxable income. Generally, taxpayers with modified adjusted gross incomes below $150,000 do not have to pay tax on their first $10,200 of 2020 unemployment compensation. Unfortunately, many people who qualify for this exclusion filed their 2020 federal tax returns before the new law took effect in mid-March. T...he IRS has now begun to review and adjust the returns of taxpayers who reported 2020 unemployment income. If the filer overpaid as a result of paying tax on excluded unemployment benefits, the IRS will either issue a special refund or reduce the balance of tax owed. The IRS has begun to adjust the simplest returns affected by ARPA rules for 2020 unemployment benefits. Most of these returns belong to single filers without dependents who did not claim any refundable tax credits. After correcting all these returns and issuing appropriate refunds, IRS personnel will move on to adjust more complicated returns, such as joint returns filed by married couples. Refunds will be sent by direct deposit to those who provided banking information on their 2020 returns, and by paper checks otherwise. The refunds will be subject to offset rules, which allow the IRS to withhold refunds to cover past-due taxes, unpaid child support or other debts. Any taxpayer whose return is adjusted will also receive an IRS notice explaining the changes made. IRS officials have projected that this process will continue throughout the summer. In the meantime, most taxpayers who may have paid tax on excluded unemployment benefits do not have to take further action. Calling the IRS or filing an amended return will not result in a faster refund, and could even delay processing due to the need to reconcile multiple returns.

IRS Online Account Did You Know? All taxpayers who can properly verify their identity may set up a personal IRS online account. To create an account, simply visit the IRS View Your Account Information webpage (link below). Maintaining an online account can help you prepare for your federal tax returns, view payment history, see select IRS notices and stay on track with your tax planning and budgeting throughout the year. Setting up an online account will be particularly hel...pful if you are eligible to claim the Recovery Rebate Credit for 2020. The IRS offers this credit to those who qualified for Economic Impact Payments (EIPs, also called stimulus payments) in 2020, but received either no payments or smaller payments than they deserved. To apply for the credit, you need to know the amounts of any EIPs you received. Your IRS online account will display this information. Other information available from your online account includes any balance you owe to the IRS, your payment history (including pending payments), and digital copies of IRS notices you have received. You can also get key information from your most recent tax return, which you may need in order to get your 2020 return filed or determine your eligibility for certain credits and other programs. For detailed information from your past tax returns, you can request a transcript. To set up your account, you will need to go through an identity verification process. Once you have gathered the required documents, registration typically takes about 15 minutes. IRS View Your Account Portal: https://www.irs.gov/payments/view-your-tax-account. If your 2020 federal tax return is already filed, you may check on your refund status here: https://www.irs.gov/refunds.

Protecting Against Tax Fraud - Did You Know? The IRS will never: - Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer... - Demand that you pay the taxes without the opportunity to question or appeal the amount owed - Threaten to bring in local police, immigration officers or other law enforcement officers If an IRS agent shows up, they will always provide two forms of official credentials: a pocket commission and a government identification card. The IRS may also assign certain cases to private debt collectors, but only after giving you written notice. Any payment to the private debt collectors should be made payable to the U.S Treasury.

May 17 IRS Deadline Pay and/or File Now to Avoid Penalties The IRS has extended this year's deadline to May 17, 2021 for federal tax returns that were originally due on April 15. If you have not yet filed your 2020 tax return you should make every effort to do so by May 17. If you cannot submit your 2020 return by the deadline, you can apply for an automatic filing extension to October 15, 2021. The standard way to request the extension is to file IRS Form 4868 by May 17. B...ear in mind that this extension applies only to FILING your return; the payment due date will remain as May 17. Failing to pay the full amount you owe on or before May 17 may result in late fees, interest or other penalties. If you anticipate owing tax, you should estimate the amount and include payment with your Form 4868. Alternatively, if you pay your tax with a debit or credit card or use the IRS Direct Pay or Electronic Federal Tax Payment System portal (see links below), you can get the extension to complete your return by October 15 without filing Form 4868. Simply indicate that your payment is for an automatic filing extension for tax year 2020. If you cannot pay your tax right now due to pandemic-related hardships or other extenuating circumstances, the IRS offers installment payment options that may enable you to reduce or eliminate penalties. A tax professional can help you evaluate your options or get your return filed. IRS Direct Pay portal: https://www.irs.gov/payments/direct-pay Electronic Federal Tax Payment System (EFTPS) portal: https://www.irs.gov//eftps-the-electronic-federal-tax-paym Make IRS payments with a credit or debit card: https://www.irs.gov//pay-your-taxes-by-debit-or-credit-card

Claiming the Recovery Rebate Credit Did You Know? With the May 17 deadline to file 2020 federal tax returns rapidly approaching, many eligible Americans who don't file may risk losing out on a crucial tax credit. The Recovery Rebate Credit is offered to all taxpayers who file their 2020 returns and were underpaid when the IRS distributed 2020 Economic Impact Payments (EIPs, also called stimulus payments). For a variety of reasons, some taxpayers may not have received the EI...Ps that they qualified for in 2020. Others received EIPs, but in smaller amounts than they deserved. Often, this problem occurred because the IRS had outdated information about the person's income or family size. For example, if a child was born or adopted into your family in 2020, the IRS likely did not have this information when calculating EIP amounts. The first round of stimulus payments, called EIP1, included payments of up to $1,200 per individual and $500 per qualifying child. The IRS began sending these payments in spring 2020 and continued sending them throughout the year. The second round (EIP2) included payments of up to $600 per individual and $600 per qualifying child. Most recipients got their EIP2s in January 2021. If the IRS underpaid you during either 2020 EIP round, the Recovery Rebate Credit enables you to receive the balance that you are owed as an IRS refund. However, you can only claim the credit by filing a 2020 tax return, even if you owe no tax and are not usually required to file. A tax professional can help you prepare and file your return electronically so you receive your payment as quickly as possible. You will need to know the amounts of any EIPs you received, which you can get from IRS Notice 1444 (1444-A or 1444-B), or by setting up an online IRS account (link below). Create an online IRS account: https://www.irs.gov/payments/view-your-tax-account.

Refund Amounts - Did You Know? If your refund amount is different than stated on the filed tax return, part or all of your refund may have been used to pay off (offset) past-due federal tax, student loans, state income tax or other past-due debts. You'll receive a notice from the IRS if such an offset occurs that will show the original tax refund amount, the offset amount, as well as the name, address and telephone number of the agency receiving the payment.... If you haven't received your refund yet, you may be able to check the status using the IRS' "Where's my Refund?" tool: https://www.irs.gov/refunds.

Tax Filing Season Start - Did You Know? The IRS has announced that the individual tax filing season will start on Friday, February 12, 2021 and the current deadline to file 2020 tax returns and pay any taxes owed is Thursday, April 15, 2021. Although the IRS systems open for processing on February 12, you do not have to wait until then to begin preparing for your tax return.

Quarterly Estimated Tax Payments - Reminder If you are making quarterly estimated tax payments to the IRS, the due date for the September 1st - December 31st quarter of the year is January 15th. You may be able to skip the January 15 payment if you file your 2020 return by February 1, 2021 and pay all tax due. For payments made using IRS Direct Pay, you can make payments until 8PM EST, and for payments using a credit or debit card, payments can be made up to midnight on the due date.

What's ahead for 2021

IRS & Treasury Delivering Second Round of Stimulus Payments Did You Know? Under the Coronavirus Response and Relief Supplemental Appropriations Act, the federal government has authorized a second round of 2020-2021 Economic Impact Payments (EIPs, also called stimulus payments) for many Americans. The IRS has already begun sending these new EIPs by direct deposit and mailed checks. In most cases, individuals with an adjusted gross income (AGI) of $75,000 or below will receiv...e a new EIP of $600. Joint filers with a combined AGI of $150,000 or less will generally get $600 apiece. In addition, many households may receive additional payments of $600 per qualifying child. Those with higher incomes may receive a smaller EIP or no payment at all. Note that dependents age 17 or older are not eligible for EIPs. The vast majority of eligible Americans, including everyone who received a previous 2020 EIP, should receive these new stimulus payments automatically. There is no need to call the IRS or your bank. Simply watch for a direct deposit to your bank account, an IRS check in the mail or, in some cases, a prepaid debit card in a white envelope bearing an official U.S. Treasury seal. For various reasons, some people who qualify for these EIPs may not receive automatic payments. If you believe you are entitled to a payment but do not receive one, a tax professional may help you claim the amount you are owed as a credit on your 2020 tax return.