Tax Organizers
We will be sending out tax organizers during the week of January 11th, 2021. Please let our office know if you do not receive one by January 15th, 2021 or if you want one sooner.
IRS Opening Date for 1040 Electronic Filing
At the present time, the IRS is continuing to update its programming and processing systems for 2021 amidst the coronavirus pandemic. They have not formally announced when their systems will be ready to receive tax returns. Furthermore, the IRS continues to closely monitor potential legislation that could affect the start of the 2021 tax season.
Recovery Rebate Credit/Economic Impact Payment
If you received an economic impact payment it will not be taxable. If you received an Economic Impact Payment, you will receive Notice 1444, Your Economic Impact Payment, with your 2020 tax records. You may be eligible to claim the Recovery Rebate Credit on your tax year 2020 federal income tax return if:
- you didn’t receive an Economic Impact Payment, or
- your Economic Impact Payment was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018), plus $500 for each qualifying child they had in 2020.
If you did not receive the full amount of the Economic Impact Payment for which you were eligible, you may be able to claim the Recovery Rebate Credit when they file your 2020 tax return.
Interest on refunds taxable
Taxpayers who received a federal tax refund in 2020 may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.
Charitable deduction changes.
New this year, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, read Publication 526, Charitable Contributions.
Unemployment Compensation
In 2020, many people received unemployment compensation authorized under the Coronavirus Aid, Relief and Economic Security Act (CARES). Unemployment compensation is taxable and must be reported on your income tax return. Unemployment benefit recipients should receive Form 1099-G, Government Payments, from their state tax agency in January 2021 either by mail or electronically.
Check your state’s unemployment compensation website for more information. Form 1099-G reports the amount of unemployment compensation received in Box 1 and any federal income tax withheld in Box 4.
MINNESOTA UPDATE
As of January 9, 2021, Minnesota has not adopted many of the new federal tax provisions. For instance, many of the Coronavirus Stimulus Initiatives (ex. PPP Loans, EIDLE Advances, SBA Loan Repayment Programs) that are not taxable at the federal level may be taxable at the state level.
The Minnesota Legislative session started January 5th, 2021 and Legislators have until May 17th, 2021 to complete their work and pass a state budget. Legislators typically take the entire session to pass a budget and tax bill, including any conformity with federal law changes. If passed in May, those changes may be retroactive.