The birds are chirping, the flowers are blooming and Tax Deadline is fast approaching. This tax year much like last has been a challenge for tax professionals and individuals with the vast amount of changes that have occurred. Here at Abacus, we have been busy bees but instead of making honey, we have been preparing tax returns.
Here is a short list of changes that have occurred recently that might impact you.
Economic Impact Payments (EIP, aka Stimulus): There have been 3 rounds of EIP within the last year
EIP/Stimulus Round 1 & 2: If you did not receive EIP/Stimulus checks 1 or 2 at all or in full then you can file a Recovery Rebate Credit (RRC) in 2020. There is an important difference between the RRC and EIP/Stimulus that you need to be aware of, for instance, the EIP/Stimulus was regardless of previous taxes owed. The RRC offsets the taxes due. Also, EIP/Stimulus 1 was offset by outstanding child support so be sure to inform your tax preparer if the reason you didn’t receive the full amount was due to child support owed because you can’t claim the RRC for the difference.
EIP/Stimulus Round 3: If you didn’t receive your EIP/Stimulus 3 the IRS is still processing payments to individuals and much like claiming the recovery rebate credit in 2020 for EIP/Stimulus 1&2 you did not receive you will be able to do the same on your 2021 tax return.
Marketplace health insurance advanced overpayment suspended for 2020 tax year
If you enrolled in Marketplace health insurance in 2020 and received a credit on your health insurance premiums that you were not eligible for because your income exceeds the eligibility amount you are NOT required to pay the difference back on your 2020 tax return. If you already filed your return before this change went into effect the IRS will be adjusting the return and sending refunds to those clients who paid it that are no longer required to do so. If you owed on your tax return and the amount owed included the repayment the IRS will adjust it but I would also advise getting the updated amount from your tax professional so you do not overpay.
Refundable Tax Credit to Self Employed Individuals who were impacted by COVID-19
If you were self-employed and were unable to work due any day(s) during the period of time April 1, 2020 through December 31, 2020 for one of the reasons listed below you may be eligible to claim a refundable credit on your income tax return, criteria include:
- Unable to work due to federal, state, or local quarantine orders related to COVID-19.
- Seeking medical guidance from a healthcare provider for exposure, symptoms, and or testing for COVID-19.
- Unable to work due to child care/school being closed due to COVID-19.
- Caring for a dependent child that was seeking medical guidance from a healthcare provider for exposure, symptoms, and or testing for COVID-19.
Unemployment Compensation Exclusion for Federal Income Tax returns
Individuals can exclude up to $10,200 in unemployment income from their federal income tax returns, and Married couples can exclude up to $20,400, the max exclusion depends on the taxpayer’s modified adjusted gross income (AGI) for the year. If you already filed an income tax return before this change was implemented don’t WORRY the IRS is working on adjusting the tax return and issuing refunds. It is also important to be aware that not ALL states are implementing the exclusion so discuss with your tax professional the changes your 2020 unemployment compensation will impact you.
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