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2021 tax filing season begins Feb. 12, 2021

Published On: 31st Jan, 2021

IR-2021-16, January 15, 2021

WASHINGTON ― The Internal Revenue Service announced that the nation's tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.

"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time," said IRS Commissioner Chuck Rettig. "Given the pandemic, this is one of the nation's most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible."

Last year's average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where's My Refund for their personalized refund date.

Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

Tips for taxpayers to make filing easier

To speed refunds and help with their tax filing, the IRS urges people to follow these simple steps:

  • File electronically and use direct deposit for the quickest refunds.
  • Check IRS.gov for the latest tax information, including the latest on Economic Impact Payments. There is no need to call.
  • For those who may be eligible for stimulus payments, they should carefully review the guidelines for the Recovery Rebate Credit. Most people received Economic Impact Payments automatically, and anyone who received the maximum amount does not need to include any information about their payments when they file. However, those who didn't receive a payment or only received a partial payment may be eligible to claim the Recovery Rebate Credit when they file their 2020 tax return. Tax preparation software, including IRS Free File, will help taxpayers figure the amount.
  • Remember, advance stimulus payments received separately are not taxable, and they do not reduce the taxpayer's refund when they file in 2021.

Key filing season dates

There are several important dates taxpayers should keep in mind for this year's filing season:

  • January 15. IRS Free File opens. Taxpayers can begin filing returns through Free File partners; tax returns will be transmitted to the IRS starting Feb. 12. Tax software companies also are accepting tax filings in advance.
  • January 29. Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
  • February 12. IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.
  • February 22. Projected date for the IRS.gov Where's My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.
  • First week of March. Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.
  • April 15. Deadline for filing 2020 tax returns.
  • October 15. Deadline to file for those requesting an extension on their 2020 tax returns

Filing season opening

The filing season open follows IRS work to update its programming and test its systems to factor in the second Economic Impact Payments and other tax law changes. These changes are complex and take time to help ensure proper processing of tax returns and refunds as well as coordination with tax software industry, resulting in the February 12 start date.

The IRS must ensure systems are prepared to properly process and check tax returns to verify the proper amount of EIP's are credited on taxpayer accounts – and provide remaining funds to eligible taxpayers.

Although tax seasons frequently begin in late January, there have been five instances since 2007 when filing seasons did not start for some taxpayers until February due to tax law changes made just before the start of tax time.

Important reminders before filing 2020 tax returns

Published On: 31st Jan, 2021

IR-2021-23, January 27, 2021

WASHINGTON — Following an unpredictable year with many changes and challenges, the Internal Revenue Service today shared important reminders for taxpayers who are about to file their 2020 federal tax returns.

Choose direct deposit

The safest, most accurate and fastest way to get a refund is to electronically file and choose direct deposit. Direct deposit means any tax refund is electronically deposited for free into a taxpayer's financial account.

Eight out of 10 taxpayers get their refunds by using direct deposit. It is simple, safe and secure. This is the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) can give qualifying workers with low-to-moderate income a substantial financial boost. EITC not only reduces the amount of tax someone owes but may give them a refund even if they don't owe any taxes or aren't required to file a return.

People must meet certain requirements and file a federal tax return in order to receive this credit. The EITC assistant on IRS.gov can help people determine if they qualify.

The IRS reminds taxpayers that they may elect to use their 2019 earned income to figure the EITC if their 2019 earned income is more than their 2020 earned income. For details, see Publication 596, Earned Income Credit. Taxpayers also have the option of using their 2019 income to figure the Additional Child Tax Credit for 2020.

Taxable unemployment compensation

Millions of Americans received unemployment compensation in 2020, many of them for the first time. This compensation is taxable and must be included as gross income on their tax return.

Taxpayers can elect to have federal taxes withheld from their unemployment benefits or make estimated tax payments, but many do not take these options. In that case, taxes on those benefits will be paid when the 2020 tax return is filed. Taxes can be paid throughout the year. For safe and secure ways to pay taxes electronically go to IRS.gov/payments.

Taxpayers can find more details on taxable unemployment compensation in Tax Topic 418, Unemployment Compensation, or in Publication 525, Taxable and Nontaxable Income, on IRS.gov.

Interest is taxable income

Many individual taxpayers who received a refund on their 2019 tax returns also received interest from the IRS. The interest payments were largely the result of the postponed filing deadline of July 15 due to the COVID-19 pandemic.

The 2019 refund interest payments are taxable, and taxpayers must report the interest on their 2020 federal income tax return.

The IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10. The average refund interest amount is $18, but the amount for each taxpayer varies based on the tax refund that the taxpayer received. Form 1099-INT will be issued no later than February 1, 2021.

Home office deduction

The home office deduction is available to qualifying self-employed taxpayers, independent contractors and those working in the gig economy.

However, the Tax Cuts and Jobs Act suspended the business-use-of-home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home. IRS Publication 587, Business Use of Your Home, provides more on the home office deduction.

Workers moving into the gig economy

Many people found different employment in 2020, including jobs in the gig economy. Taxpayers must report income earned in the gig economy on their tax return. However, gig-economy workers generally do not have taxes withheld from their pay as salaried workers normally do. The IRS encourages people earning income in the gig economy to consider making quarterly estimated tax payments to stay current with their federal tax obligations.

Charitable donation deduction for people who don't itemize

Individuals who take the standard deduction generally cannot claim a deduction for their charitable contributions. However, the CARES Act permits these individuals to claim a limited deduction on their 2020 federal income tax returns for cash contributions made to certain qualifying charitable organizations and still claim the standard deduction. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify.

Before making a donation, the IRS reminds people they can check the special Tax Exempt Organization Search (TEOS) tool on IRS.gov to make sure the organization is eligible for tax-deductible donations.

Under this change, individuals can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2020. This deduction does not apply to donated property. The maximum deduction is $150 for married individuals filing separate returns. More information is available in Publication 526, Charitable Contributions, on IRS.gov.

Disasters such as wildfires, flooding or hurricanes

Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area. Some 2020 tax deadlines in certain counties have been extended into 2021 due to recent wildfires, hurricanes or flooding.

What You Need to Know This Tax Filing Season- California

Published On: 31st Jan, 2021

Phone

916-845-4800
Public Affairs Office

01/06/2021

Sacramento —  Tax season kicks off this week at the Franchise Tax Board (FTB). Every year, FTB provides taxpayers with a list of important updates and reminders for the upcoming tax season.

“We encourage all Californians to make use of our online services, including the ability to file a state return online for free and quickly secure a refund,” said State Controller and FTB Chair Betty T. Yee. “More people than ever will qualify for key state tax credits, including the expanded California Earned Income Tax Credit and the Young Child Tax Credit. Combined, these refundable credits can total hundreds or even thousands of dollars. We hope more Californians will claim these credits, especially those who do not earn enough to be required to file. COVID-19 has affected everyone to varying degrees. We encourage people to file as early as possible and check their eligibility for each tax credit to get the full refund they deserve.”

For free help with your tax return and a list of the Volunteer Income Tax Assistance (VITA) program locations throughout California, go to ftb.ca.gov. In-person VITA services may be limited and are subject to change due to COVID-19 safety measures. Please confirm your VITA site is open on the day of your planned appointment before arriving, and practice any public health measures in place at that time.

Main Street Small Business Tax Credit

The Main Street Small Business Tax Credit provides financial relief to qualified small businesses for the economic disruption in 2020, resulting in unprecedented job losses. Taxpayers can use the credit against income taxes, or can make an irrevocable election to apply the credit against sales and use taxes. The credits are allocated by the California Department of Tax and Fee Administration (CDTFA) on a first-come, first-served basis until the credits are exhausted. CDTFA will accept applications for a tentative credit reservation through January 15, 2021Click here for more information about the tax credit.

ITIN Users Are Now Eligible for the California Earned Income Tax Credit (CalEITC)

New this year, CalEITC eligibility expands to taxpayers with an Individual Taxpayer Identification Number (ITIN). Additionally, taxpayers who qualify for CalEITC and have at least one qualifying child under the age of six can get up to a $1,000 Young Child Tax Credit (YCTC). These cash-back state tax credits can lower the amount of tax owed or put money back into the pockets of California workers. When combined with the federal EITC, CalEITC and YCTC can be worth thousands of dollars to families. For more information about CalEITC, YCTC, and the federal EITC, visit www.ftb.ca.gov/caleitc.

Health Care Coverage Penalties for Tax Returns in 2021

Last year, a new state law required Californians to have qualifying health insurance coverage throughout the year. Those who do not maintain qualifying medical coverage are subject to a penalty of $750 or more when they file their tax returns. The penalty for a dependent child is half of what it would be for an adult. A married couple without coverage could see a penalty of $1,500 or more, and for a family of four with two dependent children, it could be $2,250 or more. You can still get health coverage and financial help at CoveredCA.com. It is crucial to get health coverage now to avoid a penalty in 2022. For information, visit ftb.ca.gov/healthmandate.

State Tax Deduction for Losses from a Disaster

Disaster loss rules apply to victims in governor-declared or presidentially-declared disaster areas, most notably in areas hit by wildfires. Taxpayers may claim a disaster loss in the tax year when the disaster occurred, or by filing an amended or original return from the year before the disaster occurred. Upon request, FTB will provide replacement state tax documents for free for those who lost them due to a disaster. For more information and a complete list of all disasters declared by the governor, visit ftb.ca.gov and search for disaster loss.

Beware of Scams

FTB encourages taxpayers to protect themselves from scam artists seeking to steal refunds and identities this tax filing season. Scammers often prey on taxpayers by impersonating Internal Revenue Service (IRS) or FTB employees. Through phone calls and email, these fraudsters attempt to, among other things, trick taxpayers into sending money not owed or into providing personal information that may be used to file fraudulent returns and steal refunds.

If FTB or IRS staff need to reach a taxpayer to verify a return or discuss a bill, both agencies begin by sending letters via postal mail. If the taxpayer does not respond, the FTB or IRS may reach out by phone, with courteous agents identifying themselves and never threatening a person. Further, neither agency will demand immediate tax payment over the phone or demand payment with a third-party or pre-paid debit card.

If you receive a letter from FTB or the IRS that appears suspicious, contact the FTB at 800.852.5711 or the IRS at 800.829.1040 to verify authenticity. Taxpayers may also check the FTB “Letters” webpage and the “Understanding Your IRS Notice or Letter” webpage.

FTB Services

FTB’s MyFTB service allows users to view their tax documents, check balances due, access tax calculators, send secure messages to FTB staff, and more. FTB offers free electronic filing for state tax returns through CalFile, an easy-to-use tool available to more than 6.5 million taxpayers. CalFile allows taxpayers to file directly with FTB and provides instant confirmation. Taxpayers can check their qualifications for CalFile or find a list of other filing options at ftb.ca.gov. You can also make your estimate payment, tax payments, and bill payments.

FTB’s tax programs help collect more than 70 percent of the state’s General Fund. For more information on other taxes and fees in California, visit taxes.ca.gov.

We are continually updating our COVID-19 page with the latest information regarding deadlines and other important tax information. Please make sure to visit this page for the latest news regarding the tax filing season.

FTB administers two of California’s major tax programs: Personal Income Tax and the Corporation Tax. FTB also administers other non tax programs and delinquent debt collection functions, including delinquent vehicle registration debt collections on behalf of the Department of Motor Vehicles, and court–ordered debt. Annually, FTB’s tax programs collect more than 70 percent of the state’s general fund. For more information on other taxes and fees in California, visit: taxes.ca.gov.