The IRS on Tuesday encouraged taxpayers to take necessary actions in the final weeks of the year to help file federal tax returns timely and accurately in 2021. Credit unions can share the IRS information with members and employees as they prepare to file their 2020 tax returns
Some key items to consider involving credits, deductions and refunds, according to the IRS, include:
Recovery rebate credit/economic impact payments. Taxpayers who received an economic impact payment, should keep Notice 1444 with their 2020 tax records. They may be eligible to claim the recovery rebate credit on their tax year 2020 federal income tax return if they didn’t receive an economic impact payment, or their 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.
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.
Refunds. Some returns may require additional review and processing may take longer, particularly as the IRS continues to strengthen security reviews to help protect against identity theft and refund fraud.
More information about steps taxpayers can take to make tax filing easier in 2021 can be accessed on the IRS website.