It’s time to file your 2020 tax return. This will be one of the most important tax filings as we faced the pandemic in 2020. Here is what you need to know before filing 2020 tax returns. Here are the main topics we are covering:
1. What are the important filing dates?
2. Are stimulus checks taxable?
3. Are unemployment compensation taxable?
4. How to file tax return?
Important Dates
Below are important dates for 2020 tax return filing:
• February 12th is the first date the IRS will start receiving and processing tax returns.
• April 15th is the deadline to file your 2020 federal tax returns.
• October 15th is the extension deadline (if you filed for an extension), however, if you owe taxes, you must pay by April 15th, unless you arrange a repayment plan.
Last year, the average refund was $2,535 based on IRS.GOV website as of week ending November 20, 2020.
The best and fastest way to receive a tax refund is by filing electronically and receiving a direct deposit. Eight out of ten taxpayers get their refunds by using direct deposit. The IRS issues more than 9 out of 10 refunds in less than 21 days. You can track your refund by using the Refund Tracker, Where’s My Refund.
Stimulus Checks
- Due to the CARES Act, your first Economic Impact Payment was $1,200 ($2,400 if married filing jointly for 2020) plus $500 for each qualifying child you had in 2020; and.
- Due to the COVID Tax Relief Act, your second Economic Impact Payment was $600 ($1,200 if married filing jointly for 2020) plus $600 for each qualifying child you had in 2020.
If you did not receive any or only part of the economic impact payments, you can claim the difference as a Recovery Rebate Credit on your 2020 tax return. You will have to fill out the Recovery Rebate Credit Worksheet. This credit will either increase tax refund or reduce taxes owed. If you have received your full stimulus check payments, you don’t need to complete the Recovery Rebate Credit. I will include the link at the bottom to the IRS website that explains the Recovery Rebate Credit.
Unemployment Compensation
Yes, unemployment compensation is taxable and must be reported on your 2020 tax return as income. You can designate to have taxes withheld on this now to avoid owing taxes on this income when you file a federal income tax return.
Unemployment recipients should receive a Form 1099-G. The form will show the amount of unemployment compensation received in Box 1, and any federal income tax withheld in Box 4. This should be reported on the 2020 federal tax return.
Paycheck Protection Program (PPP) Loans
This provided low interest loans to small businesses and other businesses (including non profit organizations), if they met certain eligibility criteria, in order to cover payroll and other expenses (ie- mortgage interest, rent, utilities). These loans may have been eligible for loan forgiveness.
For tax purpose, loan forgiveness amounts are excluded from gross income, but forgiveness expenses are not deductible.
File 2020 Tax Return for Free
You can file your 2020 tax return online for free based on certain requirements by using an IRS free file partner. Adjusted Gross Income $72,000 and below:•Free federal tax filing on an IRS partner site•State tax filing (free with some offers)•Guided preparation – simply answer questions•Online service does all the math Below is the website link to the IRS File Free (Partner Offers):IRS File Free – Partner Offers
Other Online Software
Turbotax
Turbotax offers different options to file your 2020 tax return. You can do it yourself or get live experts to assist or to do it for you. Right now, Turbotax is offering on their website that if you file by February 15th, you will receive an expert review for free. This offer is for a limited time and again, you must file by February 15th. Free Filing Option: You have to meet certain criteria to file for free on turbotax. You have to file simple tax return, Form 1040 or Form 1040 + Unemployment Income and claiming standard deduction. There are other criteria as well that you can find on the website. Below is the link to turbotax. Please note, they are probably the most pricy of the software, approximately $60-120 (plus state cost). Turbotax link
H&R Block
H&R Block also offers a free version filing option meeting certain criteria. This is the less expensive and also a solid choice as online tax software. The price ranges are approximately $49.99 – $109.99 (plus state cost).H&R BLOCK Link
TAXACT
TAXACT also offers a free version filing option but has more restrictions. This is the least expensive of the three. The price ranges are approximately $17 – $47 (plus state cost). TAXACT Link Please note, I personally have used Turbotax for many years, but you have to determine what tax software is better suited for your tax situation. So I can comment that I have continued to use Turbotax since I am comfortable using the software and ease of use over the years. I also like the other suite of products that are offered by INTUIT. INTUIT offers other products such as Quickbooks, and Mint.com.Please note, I currently don’t have any affiliate links with Turbotax, H&R Block or TAXACT.
