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Tax filing season will officially begin on February 12, later than usual Fri, January 15, 2021, 12:30 PM The 2020 tax filing season is delayed until February 12, so the Internal Revenue Service can do additional programming and testing following the December tax law changes.... If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers, the Internal Revenue Service said in a press release. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

New things taxpayers should consider as they get ready to file taxes in 2021 When people get ready to file their federal tax return there are new things to consider when it comes to which credits to claim and what deductions to take. These things can affect the size of any refund the taxpayer may receive. Here are some new key things people should consider when filing their 2020 tax return.... Recovery rebate credit Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them: They didn't receive an Economic Impact Payment in 2020. They are single and their payment was less than $1,200. They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400. They didn't receive $500 for each qualifying child. Refund interest payment People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10. New charitable deduction allowance New this year, taxpayers who don't itemize deductions can take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, people should review Publication 526, Charitable Contributions. Other refund-related reminders Taxpayers shouldn’t rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some tax returns may require additional review and processing may take longer. Refunds for taxpayers claiming the earned income tax credit or additional child tax credit can’t be issued before mid-February. This applies to the entire refund, not just the portion associated with this credit. The fastest and most secure way to receive a refund is to combine direct deposit with electronic filing, including the IRS Free File program. Taxpayers can track the status of their refund using the Where’s My Refund? tool.

Here’s what taxpayers can do now to Get Ready to file taxes in 2021 There are steps people can take now to make sure their tax filing experience goes smoothly in 2021. First, they can visit the Get Ready page on IRS.gov. Here are a few other things people can do now:...Continue reading

Terms to help taxpayers better understand Individual Retirement Arrangements Many taxpayers may have heard of Individual Retirement Arrangements, or IRAs, but some don’t know how IRAs help them save for retirement. People can set up an IRA with a bank or other financial institution, a life insurance company, mutual fund or stockbroker. Here’s a list of basic terms to help people better understand their IRA options.... Contribution. The money that someone puts into their IRA. There are annual limits to contributions depending on their age and the type of IRA. Distribution. The amount that someone withdraws from their IRA. Required distribution. There are requirements for withdrawing from an IRA: Someone generally must start taking withdrawals from their IRA when they reach age 70. Per the 2019 SECURE Act, if a person’s 70th birthday is on or after July 1, 2019, they do not have to take withdrawals until age 72. Special distribution rules apply for IRA beneficiaries. Traditional IRA. An IRA where contributions may be tax-deductible. Generally, the amounts in a traditional IRA are not taxed until they are withdrawn. Roth IRA. This type of IRA that is subject to the same rules as a traditional IRA but with certain exceptions: A taxpayer cannot deduct contributions to a Roth IRA. For some situations, qualified distributions are tax-free. Roth IRAs do not require withdrawals until after the death of the owner. Savings Incentive Match Plan for Employees. This is commonly known as a SIMPLE IRA. Employees and employers may contribute to traditional IRAs set up for employees. It may work well as a start-up retirement savings plan for small employers. Simplified Employee Pension. This is known as a SEP-IRA. An employer can make contributions toward their own retirement and their employees' retirement. The employee owns and controls a SEP. Rollover IRA. This is when the IRA owner receives a payment from their retirement plan and deposits it into a different IRA within 60 days.

IRS highlights higher penalties for some tax returns filed after Sept. 14 WASHINGTON The Internal Revenue Service today urged individuals who owe taxes but have not yet filed for 2019 to act now to avoid larger penalties that, by law, start after Sept. 14. The tax deadline was July 15 this year. Taxpayers who submitted an extension have until Oct. 15 to file and do not face the failure to file penalty if they file their taxes by that deadline. But taxpayers need to remember... that an extension to file is not an extension to pay. Any taxes they owed after the July 15 deadline are subject to the failure to pay penalty and interest. Those taxpayers who didn’t request an extension, and still owe taxes, face both the failure to file and the failure to pay penalties. They should file now and pay what they can before larger penalties take effect after Sept. 14. The penalty for not filing a federal tax return by the due date, or extended due date, is generally 5% of the unpaid tax for each month or part of a month that a tax return is late, up to 25% of the unpaid tax. However, if the return is more than 60 days late, a minimum penalty applies. If no return has been filed after 60 days, the minimum penalty that can be charged is $435 or 100% of the unpaid tax, whichever is less. This year, that important 60-day date occurs after Sept. 14. In addition to penalties, interest will also be charged on any tax not paid by the July 15 due date. Remember, if a refund is due, no penalty is charged on the late return filed by a taxpayer. IRS Free File is available on IRS.gov through Oct. 15 to prepare and e-file a 2019 individual return. Penalty relief may be available Taxpayers who have not been assessed any penalties for the past three years often qualify to have penalties abated. A taxpayer who does not qualify for the first-time penalty relief may still qualify for penalty relief if their failure to file or pay on time was due to reasonable cause and not willful neglect. By law, interest cannot be abated.