Important Dates for The 2021 Tax Season
Here are the critical dates listed by the IRS that taxpayers should remember for the 2021 tax season:
Taxpayers can begin electronically filing returns; tax returns will be transmitted to the IRS starting February 12.
The IRS starts processing and accepting returns for the 2021 tax season.
The projected day that the IRS.gov Where’s My Refund tool will be updated for those claiming EITC and ACTC.
First Week of March
Tax refunds will begin coming in for those claiming EITC and ACTC for those who e-file with direct deposit, and there are no problems with their tax returns.
The deadline for filing 2020 tax returns.
2020 non-profit tax returns are due.
Partnership and S Corp returns that filed an extension are due.
The deadline to file for those that need an extension on their 2020 tax returns
How Will COVID-19 Affect My Taxes This Year?
Let’s dive into the basics for the 2021 tax season updates concerning COVID-19.
- Unemployment Benefits
Many taxpayers found themselves out of work due to the pandemic and received unemployment benefits for support. Those who collected unemployment benefits will need to pay income taxes on those funds.
If you chose not to have taxes taken from your unemployment when you signed up, you will either have to pay quarterly taxes or set aside enough money from your unemployment benefits to pay your taxes.
- Stimulus Checks
During the 2020 pandemic, the government sent a first round of $1,200 stimulus checks to millions of Americans (plus $500 per minor child). The second round of stimulus sent was $600 per taxpayer, with an additional $600 for each minor child.
Your stimulus check will not be taxed. Instead, it’s being counted as a refundable tax credit for 2020.
- Paycheck Protection Program (PPP) Loans
The CARES Act also offered small business owners Paycheck Protection Program (PPP) loans. These loans are “forgivable” if they were spent on certain business expenses. Initially, the IRS said that any expenses you paid with money from those PPP loans cannot be deducted from your taxable income. However, PPP Is now forgivable and does not impact income or expenses. This change was signed into law by the Trump Administration on December 27th, 2020.
- Educational Expenses: 529 Plans and ESAs
Any money taken out of an Educational Savings Account (ESA) or a 529 Plan must be used for educational expenses to be considered tax-free. Many universities went virtual or canceled classes this year—which means your university might have refunded your ESA or 529 money. If so, you had 60 days to put the money back in the account OR use it to cover other educational costs. If you didn’t do this, you might have to pay the taxes and a withdrawal penalty.
- Retirement Plans
There were several changes to retirement plans in 2020—and those changes could affect your taxes this year.
- The CARES Act permits people under age 59 1/2 to withdraw up to $100,000 out of their IRAs and 401(k)s in 2020 without penalty. The money you take out of these accounts will be taxed as ordinary income.
- If you have a traditional IRA, you must withdrawal some money once you reach a certain age. This is called required minimum distributions (RMDs). The SECURE Act increased the age for these RMDs from 70 1/2 to 72. The CARES Act also permits taxpayers to skip RMDs altogether in 2020 without any penalty fees. This could lead to considerable tax savings for retirees since the money taken out of a traditional IRA is taxable.
- The SECURE Act allows traditional IRA owners to keep adding money to their accounts past age 70 1/2 starting in 2020. This is a way to decrease how much of your income is taxed this year because the funds you put into a traditional IRA are tax-deductible. You will still be required to pay taxes on that money when you take it out.
If you did take funds out of a 401K or traditional IRA, you have three years to put that money back and get refunded for taxes paid on those funds. Reach out to a professional who can walk you through the process. If you need help, give us a call at 770-456-9980.
Get Your Taxes Done Right in 2021
Working with a tax professional is a smart choice, especially with all of these new chances to save money on your 2020 tax return. If you’re looking for a trustworthy tax pro near you, look no further. Our tax experts have many years of experience and can help you file your tax refund with confidence. Call us at 770-456-9980, or fill out the form to schedule an appointment today!