IRS is issuing third round of Economic Impact Payments

The IRS started issuing the third round of Economic Impact Payments. No action is needed by most taxpayers. The IRS will issue payments automatically by direct deposit and through the mail as a check or debit card.

Many people will receive the third payment the same way they received the first and second Economic Impact Payments. Because these payments are automatic for most eligible people, there’s no need to contact financial institutions or the IRS. People can check the Get My Payment tool on IRS.gov for status of their third stimulus payment.

Highlights of the third Economic Impact Payments
In general, most people will get $1,400 for themselves and $1,400 for each qualifying dependent claimed on their tax return. As with the first two Economic Impact Payments, most people will receive their third payment without having to take any action.

The third Economic Impact Payment is based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered at IRS.gov using the agency’s Non-Filers tool last year or submitted a simplified tax return. If the IRS received and processed a taxpayer’s 2020 return before issuing someone’s third Economic Impact Payment, the amount is based on the 2020 return.

Those who received the first or second payment but don’t receive a payment by direct deposit will generally receive a check or a prepaid debit card, referred to as an EIP Card. The IRS will not add the third payment to an existing EIP card that people received for the first or second round of stimulus payments.

Under the new law, the IRS can’t apply the third Economic Impact Payment to past-due federal debts or back taxes.

Who is eligible for the third Economic Impact Payment
Generally, U.S. citizens or U.S. resident aliens are eligible for the full amount of the third Economic Impact Payment if they and their spouse, if they’re filing jointly, are not a dependent of another taxpayer and have a valid Social Security number and their adjusted gross income on their tax return does not exceed:

  • $150,000, if married and filing a joint return or if filing as a qualifying widow or widower.
  • $112,500, if filing as head of household.
  • $75,000 for eligible individuals using any other filing statuses, such as single filers and married people filing separate returns.

The payments phase out — or reduce — above those AGI amounts. This means taxpayers will not receive a third payment if their AGI exceeds:

  • $160,000, if married and filing a joint return or if filing as a qualifying widow or widower.
  • $120,000, if filing as head of household.
  • $80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns.

More details about the third round of Economic Impact Payments are available on IRS.gov.

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NEW YORK STATE Income Tax Filing Due Date

The Commissioner of the New York State Department of Taxation and Finance has extended the due date for personal income tax returns, and related tax payments, for the 2020 tax year from April 15, 2021, to May 17, 2021.

Accordingly, 2020 personal income tax returns originally due on April 15, 2021, and related payments of tax, will not be subject to penalties or interest if filed and paid by May 17, 2021.

Note: This relief does not apply to estimated tax payments for the 2021 tax year that are due on April 15, 2021. These payments are still due on April 15, 2021.

To view the guidance issued, visit N-21-1Announcement Regarding Extension of the Deadline to File Personal Income Tax Returns for Tax Year 2020.

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

But be aware only Federal gives you an extended deadline, not every state follows.

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Winter storm disaster relief for Louisiana, Oklahoma and Texas

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA),  the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline. 

For more information about this disaster relief, visit the disaster relief page on IRS.gov.

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Things #taxpayers should know when choosing between #standard and #itemized deductions

Deductions reduce the amount of taxable income when filing a federal income tax return. In other words, they can reduce the amount of tax someone owes.
Most taxpayers have a choice of either taking the standard deduction or itemizing their deductions. The standard deduction may be quicker and easier, but, itemizing deductions may lower taxes more, in some situations. It’s important for all taxpayers to look into which deduction method best fits them.

New this year
Following tax law changes, cash donations of up to $300 made by December 31, 2020 are deductible without having to itemize when people file a 2020 tax return.

Here are some details about the two methods to help people decide deduction to take:

Standard deduction
The standard deduction is an amount that reduces taxable income. The amount adjusts every year and can vary by filing status. The standard deduction amount depends on the taxpayer’s filing status, whether they are 65 or older or blind, and whether another taxpayer can claim them as a dependent. Taxpayers who are age 65 or older on the last day of the year and don’t itemize deductions are entitled to a higher standard deduction.

Taxpayers benefit from the standard deduction if their standard deduction is more than the total of their allowable itemized deductions. They can use the Interactive Tax Assistant, How Much Is My Standard Deduction? to determine the amount their standard deduction and if they should itemize their deductions.

Itemized deductions
Taxpayers may itemize deductions because that amount is higher than their standard deduction, which will result in less tax owed or a larger refund. In some cases, they not allowed to use the standard deduction.

Tax software can guide taxpayers through the process of itemizing their deductions. Taxpayers who itemize file Schedule AForm 1040, Itemized Deductions or Form 1040-SR, U.S. Tax Return for Seniors.

A taxpayer may benefit by itemizing deductions if any of following apply to their tax situation, they:

  • Had large uninsured medical and dental expenses
  • Paid interest and taxes on their home
  • Had large uninsured casualty or theft losses
  • Made large contributions to qualified charities

Individual itemized deductions may be limited. Schedule AForm 1040, Itemized Deductions can help determine what limitations may apply.

More information:
Publication 501, Dependents, Standard Deduction, and Filing Information
Topic No. 551, Standard Deduction


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#EITC Awareness Day: Critical #tax_credit provides a significant refund boost to millions

IRS YouTube Videos:
Earned Income Tax Credit – Get it Right – English | Spanish | ASL

WASHINGTON – The Internal Revenue Service and partners across the nation remind taxpayers about the Earned Income Tax Credit today on “EITC Awareness Day” 2021. The IRS and partners nationwide urge people to check to see if they qualify for this important credit.

“This year marks the 15th annual EITC Awareness Day,” said IRS Commissioner Chuck Rettig. “For more than 45 years, this tax credit has been helping hard-working Americans and their families. We want to thank our partners around the country who help us reach out to those low- and moderate-income people who may qualify and not even know about it.”

The IRS earlier announced that it will begin accepting 2020 tax returns on Feb. 12. In the meanwhile, people can file their taxes electronically using IRS Free File or other name-brand software. Once filing season officially opens, the returns will be electronically submitted for processing. The IRS reminds taxpayers that the quickest way to get a tax refund is by filing electronically and choosing direct deposit for their refund.

New look-back rule
Under the COVID-related Tax Relief Act of 2020, taxpayers can use their 2019 earned income to figure their 2020 EITC if their 2019 earned income was more than their 2020 earned income. To qualify for EITC, people must have earned income, so this option may help workers who earned less in 2020, or received unemployment income instead of their regular wages, get bigger tax credits and larger refunds in the coming year. 

Also, any Economic Impact Payments received are not taxable or counted as income for purposes of claiming the EITC. Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit on their 2020 tax return. See IRS.gov/rrc for more information.

Vital refund boost
The EITC is the federal government’s largest refundable federal income tax credit for low- to moderate-income workers. For those who qualify, and if the credit is larger than the amount of tax they owe, they will receive a refund for the difference. While the majority of those eligible claim EITC every year, IRS estimates that one of five eligible taxpayers do not claim the credit.

Taxpayers earning $56,844 or less can see if they qualify using the EITC Assistant tool at www.irs.gov/eitc. The EITC Assistant, available in English and Spanish, helps users determine if they are eligible, have a qualifying child or children and  estimates the amount of the EITC they may get. If an individual doesn’t qualify for the EITC, the Assistant explains why.

Nationwide in 2020, more than 25 million taxpayers received over $62 billion in EITC. The average EITC amount received was $2,461 per return. The EITC is worth as much as $6,660 for a family with three or more children or up to $538 for taxpayers who do not have a qualifying child.

Refunds
By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the Additional Child Tax Credit (ACTC). The IRS must hold the entire refund − even the portion not associated with EITC or ACTC and the Recovery Rebate Credit if applicable. This helps ensure taxpayers receive the refund they deserve and gives the agency more time to detect and prevent errors and fraud. 
 
‘Where’s My Refund?‘ on IRS.gov and the IRS2Go app will be updated with projected deposit dates for most early EITC/ACTC refund filers by Feb. 22. Therefore, EITC/ACTC filers will not see an update to their refund status for several days after Feb. 15. The IRS expects most EITC or ACTC related refunds to be available in taxpayer bank accounts or on debit cards by the first week of March, if they choose direct deposit and there are no other issues with their tax return.
 
Workers who can claim the EITC
Workers at risk for overlooking this important credit can include taxpayers:

  • Without children
  • Living in non-traditional families, such as a grandparent raising a grandchild
  • Whose earnings declined or whose marital or parental status changed
  • With limited English language skills
  • Who are members of the armed forces
  • Living in rural areas
  • Who are Native Americans
  • With disabilities or who provide care for a disabled dependent

Life events or changes may make people eligible for certain tax benefits like the EITC. The IRS urges people to use the EITC Assistant to check their eligibility for this valuable credit.
 
How to claim the EITC
To get the EITC, workers must file a tax return and claim the credit. Eligible taxpayers are urged to claim the credit even if their earnings were below the income requirement to file a tax return. Free tax preparation help is available online and through volunteer organizations.

Those eligible for the EITC have these options:

  • Free File on IRS.gov. Free brand-name tax software is available that leads taxpayers through a question-and-answer format to help prepare the tax return and claim credits and deductions, if they are eligible. Free File also provides online versions of IRS paper forms, an option called Free File Fillable Forms, best suited for taxpayers comfortable preparing their own returns.
  • Free tax preparation sites. EITC-eligible workers can seek free tax preparation at thousands of Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) sites. To locate the nearest site, use the search tool on IRS.gov, the IRS2go smartphone application, or call toll-free 800-906-9887. They should be sure to bring along all required documents and information.
  • Find a trusted tax professional. The IRS also reminds taxpayers that a trusted tax professional can prepare their tax return and provide helpful information and advice. Tips for choosing a return preparer and details about national tax professional groups are available on IRS.gov. EITC recipients should be careful not to be duped by an unscrupulous return preparer.

The IRS reminds taxpayers to be sure they have valid Social Security numbers (SSN) for themselves, their spouse, if filing a joint return, and for each qualifying child claimed for the EITC. The SSNs must be issued before the due date of the return, including extensions. There are special rules for those in the military or those out of the country.

Avoid errors
Taxpayers are responsible for the accuracy of their tax return even if someone else prepares it for them. Since the rules claiming the EITC can be complex, the IRS urges taxpayers to understand all of them. People can find help to make sure they are eligible by visiting a free tax return preparation site, or using Free File software or by using a paid tax professional.

Beware of scams
Be sure to choose a tax preparer wisely. Beware of scams that claim to increase the EITC refund. Scams that create fictitious qualifying children or inflate income levels to get the maximum EITC could leave taxpayers with a penalty.

Visit IRS online
IRS.gov is a valuable first stop to help taxpayers get it right this filing season. Information on other tax credits, such as the Child Tax Credit, is also available.

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