When To File Your 2020 Taxes
The 2021 Tax Season begins February 12, 2021 for all federal and state income tax incurred in the 2020 tax year. This is the date by which the IRS will be up and running to receive 2020 tax returns. As always, the final due date to file is one of the critical data points for taxpayers. What is the final deadline for 2020 taxes? Traditionally tax season ends April 15th, but that was altered in 2020 due to the pandemic. The IRS ended up delaying 2019 tax filing deadline to July 15, 2020.
Fiscal conditions have stabilized somewhat, in spite of the continuing pandemic. For 2021 the IRS has set the tax deadline to the traditional date of April 15th. With the return to a more brief tax preparation season, AB Financial is ready to assist a timely, comprehensive and accurate preparation for your 2020 tax returns. No matter the complexity, AB Financial can ease the pressure for a timely filing.
What to Keep in Mind When Filing 2020 Taxes
A unique set of issues may impact the 2020 tax return for individuals and businesses. Here are some to consider:
- Standard Deduction and Tax Bracket Changes: 2020 saw an increase in the standard tax deduction for all IRS taxpayers. The new amounts are $12,400 for individual filers, and $24,800 for married partners filing jointly. Due to inflation, tax brackets have also increased, with the highest bracket now at 37%.
- Electronic Filing and Direct Deposit: The IRS is encouraging more than ever the use of electronic filing and direct deposit to expedite the process during pandemic conditions. This is especially important given the backlog that continues from the 2019 tax filing season.
- Update Tax Information Online: The IRS has created easy access to the latest tax information on Economic Impact Payments (EIP) among other pandemic stimulus instruments. This comprehensive online information eliminates the need to spend time calling the IRS.
- TIP: for taxpayers who received the maximum EIP benefit, no information on the payment is required on the 2021 return.
- Recovery Rebate Credit: The online information provided by the IRS also contains the information needed by taxpayers who did not receive the maximum amount of Economic Impact Payments. Partial payment recipients may determine eligibility for the Recovery Rebate Credit, and a dollar amount that can be used as a credit on final tax due.
- Determining Eligibility / Rent Grads & Dependent Adults: Determining a recent college graduate or dependent adults eligibility for a full Economic Impact Payment requires some careful maneuvering. All other non-college age minors or student status young adults receive benefits through the family as a whole. Whether or not recent graduates and dependent adults are eligible is subject to a little more nuance. If a child “can” be claimed, or if someone over age 17 or older receives more than half of the annual support, they cannot receive a stimulus payment according to 2020 legislation.
These, along with several other issues impacting 2020 tax filing season, makes it even more important to have the right partner in your tax preparation. AB Financial can walk you through all of the relevant issues of this unique tax season.
How Your Taxes Could be Impacted from 2020 Stimulus Packages (PPP Loan / Stimulus Checks)
The impacts to individual and corporate tax returns are among the most unique in recent history. The pandemic created a lot of uncertainty and loss in the economy, across the board. Businesses, large and small will benefit from working with a tax preparation partner to navigate all the factors.
As referenced, individual stimulus checks, known as Economic Impact Payments, are not counted as income, but rather as a credit. As such, they are not taxable. On the other hand, Payment Protection Program (PPP) loans may become taxable income, at least in part, depending on how the loan was spent.
For full protection from additional tax liability, the PPP loan must be spent on the following:
- The expense of payroll
- Interest on business mortgage
- Payment of utilities for the business
- Facility rent payments
- Expenses related to operations, such as accounting, computing, technology
- Public disturbance property damage loss
- Cost of suppliers
- Worker compensation and other protection costs
In addition to PPP loans, Economic Injury Disaster Loans (EIDL) were made available to small businesses negatively impacted by COVID-19. In December 2020, it was determined that EIDL monies did not need to be included in taxable income. In addition, small businesses, with fewer than 500 employees may have taken advantage of the Employee Retention Credit (ERC) if they experienced a suspension of business due to COVID-19 or have experienced a 20% decline in revenue compared to the same quarter in 2019.
This collection of alphabet soup stimuli is enough to overwhelm a taxpayer during the 2021 tax season. Call AB Financial Group today, and we will take the confusion and stress out of the process: (970) 444-5586.