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Important 2020 Tax Updates

Important 2020 Tax Updates

March 19, 2021
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Over the past several days, there have been some major changes that impact 2020 tax returns.  Here is what you need to know:

Federal Tax Filing & Payment Deadline Extended for Individuals

On March 17, 2021, the IRS announced that it would extend the filing and payment deadlines for individual federal tax returns from April 15, 2021 to May 17, 2021.  But...

- Your state tax return and payment deadline may not be extended.  Look up your state's deadlines here (most states, including MO and KS, will need more time to respond to this late-breaking news).

- First Quarter estimated tax payments are still due on April 15, 2021 (this means you may still need file your return by April 15 if you pay estimates).

- If you cannot file your return by May 17, 2021, you can request an extension to October 15, 2021; however, your deadline to pay any balance due will not be extended. All balances due must be paid by May 17, 2021 or penalties and interest will apply.

- We are still awaiting IRS guidance regarding some additional important topics, such as whether this extension applies to the deadline for making your 2020 IRA contributions.  Without confirmation from the IRS, we must assume that the deadline remains April 15, 2021. Check our blog for more information about IRA contributions.  

Your 2020 Unemployment Income May Now be Non-Taxable

On March 11, 2021, President Biden signed The American Rescue Plan Act of 2021 (the "ARPA") into law.  The ARPA eliminated taxation on the first $10,200 of unemployment benefits for individuals with income below $150,000.  If you qualify, this will impact your 2020 tax return (which you may have already filed).  What now?

- If you qualify and have not filed your 2020 tax return, you should wait to file your 2020 return until the IRS releases additional guidance. The IRS is currently working with tax software providers to create and incorporate a new worksheet to properly account for this mid-tax season change.  If you dropped off your documents to us, we will hold your return until we have clear guidance from the IRS and our tax software provider.

- If you qualify but have already filed your 2020 tax return, the IRS has announced that no amended returns should be filed at this time. The IRS anticipates sending automatic refunds to affected taxpayers in the coming months without requiring an amended return, but this plan is not yet set in stone. You should do nothing until additional guidance is issued by the IRS. Once we learn more, we will reach out to our affected clients.

Marketplace Health Plan Excess Premium Subsidy Repayments Waived for 2020

The ARPA also waives the requirement that individuals who received excess premium subsidies for their marketplace health plan pay those excess subsidies back on their 2020 tax return.  This provision only applies for the 2020 tax year. What now?

- If you have not yet filed your 2020 tax return, you should wait to file until the IRS releases further guidance on this topic.  If you dropped off your documents to us, we will hold your return until our software allows us to file your return accurately.

- If you already filed your 2020 tax return, the IRS has announced that more information will be provided soon and that no amended returns should be filed for this reason until further guidance is announced.  We anticipate that amended returns will be required to obtain this refund.  Once we learn more, we will reach out to our affected clients.

Of the many recent changes, these are the ones that affect taxpayers most urgently.  There are still many questions to be answered by the IRS as these changes could impact other aspects of your tax return. For that reason, we strongly recommend that you follow the IRS guidance described above until more is known. 

What We're Doing in Response 

With the IRS delaying the tax filing start date by three weeks, COVID-19 forcing us to minimize in person appointments, and a series of new, tax-related legislation being issued over the past several months, this has been a very challenging tax season thus far!  As always, we're here to help you sort out the implications these new laws have on you and your tax return. 

After April 15, 2021, our office will go back to our normal business hours (9am to 5pm, Monday through Friday).  If you require an appointment outside of our normal business hours after April 15th, contact our office and we will do our best to accommodate you.

Last, but not least, our Shred Day will still take place on April 24th from 9am to noon as originally planned.  We hope to see you there!