Taxes

IRS begins delivering third round of Economic Impact Payments to Americans

WASHINGTON – The Internal Revenue Service announced today that the third round of Economic Impact Payments will begin reaching Americans over the next week.
Following approval of the American Rescue Plan Act, the first batch of payments will be sent by direct deposit, which some recipients will start receiving as early as this weekend, and with more receiving this coming week.
Additional batches of payments will be sent in the coming weeks by direct deposit and through the mail as a check or debit card. The vast majority of these payments will be by direct deposit.
No action is needed by most taxpayers; the payments will be automatic and, in many cases, similar to how people received the first and second round of Economic Impact Payments in 2020. People can check the “Get My Payment” tool on IRS.gov on Monday to see the payment status of the third stimulus payment.
“Even though the tax season is in full swing, IRS employees again worked around the clock to quickly deliver help to millions of Americans struggling to cope with this historic pandemic,” said IRS Commissioner Chuck Rettig. “The payments will be delivered automatically to taxpayers even as the IRS continues delivering regular tax refunds. We urge people to visit IRS.gov for the latest details on the stimulus payments, other new tax law provisions and tax season updates.”
Highlights of the third round of Economic Impact Payments; IRS will automatically calculate amounts
In general, most people will get $1,400 for themselves and $1,400 for each of their qualifying dependents claimed on their tax return. As with the first two Economic Impact Payments in 2020, most Americans will receive their money without having to take any action. Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.
Because these payments are automatic for most eligible people, contacting either financial institutions or the IRS on payment timing will not speed up their arrival. Social Security and other federal beneficiaries will generally receive this third payment the same way as their regular benefits. A payment date for this group will be announced shortly.
The third round of Economic Impact Payments (EIP3) will be based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered online at IRS.gov using the agency’s Non-Filers tool last year, or alternatively, submitted a special simplified tax return to the IRS. If the IRS has received and processed a taxpayer’s 2020 return, the agency will instead make the calculation based on that return.
In addition, the IRS will automatically send EIP3 to people who didn’t file a return but receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) or Veterans Affairs benefits. This is similar to the first and second rounds of Economic Impact Payments, often referred to as EIP1 and EIP2.
For those who received EIP1 or EIP2 but don’t receive a payment via direct deposit, they will generally receive a check or, in some instances, a prepaid debit card (referred to as an “EIP Card). A payment will not be added to an existing EIP card mailed for the first or second round of stimulus payments.
Under the new law, an EIP3 cannot be offset to pay various past-due federal debts or back taxes.
The IRS reminds taxpayers that the income levels in this new round of stimulus payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly.) The reduced payments end at $80,000 for individuals ($160,000); people above these levels are ineligible for a payment. More information is available on IRS.gov.
New payments differ from earlier Economic Impact Payments
The third round of stimulus payments, those authorized by the 2021 American Rescue Plan Act, differs from the earlier payments in several respects:
• The third stimulus payment will be larger for most people. Most families will get $1,400 per person, including all dependents claimed on their tax return. Typically, this means a single person with no dependents will get $1,400, while a family of four (married couple with two dependents) will get $5,600.
• Unlike the first two payments, the third stimulus payment is not restricted to children under 17. Eligible families will get a payment based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents and grandparents.
Additional information is available on IRS.gov.

Here are reasons taxpayers should file a 2020 federal tax return – and why e-file is best

Most people with gross income of $12,400 or more must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld. They may also be eligible for certain tax credits, like the earned income tax credit, the recovery rebate credit and others.

Pandemic-related tax topics
Here are a few important things for taxpayers to know this year.

• Anyone who is eligible for an Economic Impact Payment but did not get the payments or did not get the full amount, must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file.
• Unemployment benefits are taxable. People should watch their mail for a Form 1099-G. In some states, people may be able to get their Form 1099-G from the website where they signed up for benefits.
• There’s a new rule to help people who lost their job or had a change in income in 2020. Filers can use their 2019 earned income to figure their earned income tax credit, if their 2019 earned income was more than their 2020 earned income. This new rule also applies to the additional child tax credit.

Choose e-file with direct deposit to avoid delays
The IRS strongly encourages people to file electronically and choose direct deposit to avoid pandemic-related paper delays. IRS Free File offers online tax preparation, direct deposit of refunds and electronic filing, all for free. Some options are available in Spanish. These products help people find all the tax credits and deductions for which they qualify.

How to decide whether to file a tax return
In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.

If the answer to any of these questions is yes, a person might be due a refund, but they must file a tax return to get their money.

• Did an employer withhold federal income tax from their pay
• Did the person make estimated tax payments?
• Did they overpay taxes in 2019, and have their refund applied to 2020 taxes?

Some individuals may qualify for the recovery rebate credit
Most people who are eligible have already received the full amount for the recovery rebate credit as Economic Impact Payments. Some people may be eligible to claim the recovery rebate credit if they didn’t get Economic Impact Payments or received less than they were entitled. People must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file. Those who don’t normally file taxes can use IRS Free File to claim this credit. The maximum Economic Impact Payments for qualifying individuals were:

• $1,200 per person and $500 per qualifying child for the first payment
• $600 per person and $600 per qualifying child for the second payment

If they’re eligible for the recovery rebate credit, people will need the amount of any EIPs they received to calculate their credit amount using the RRC worksheet or tax preparation software. Individuals with an account on IRS.gov can view the amounts of the Economic Impact Payments they received.

Some may benefit from education credits
People who pay certain higher education expenses may qualify for one of these two education credits even if they don’t owe any taxes.

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Here’s what taxpayers should do if they have missing or incorrect documents

Taxpayers should double-check to make sure they have all their documents before filing a tax return.

Taxpayers who haven’t received a W-2 or Form 1099 should contact the employer, payer or issuing agency and request the missing documents. This also applies for those who received an incorrect W-2 or Form 1099.

If they can’t get the forms, they must still file their tax return on time. To avoid filing an incomplete or amended return, they may need to use Form 4852, Substitute for Form W-2, Wage and Tax Statement or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

If a taxpayer doesn’t receive the missing or corrected form in time to file their tax return, they can estimate the wages or payments made to them, as well as any taxes withheld. Then use Form 4852 to report this information on their federal tax return.

If they receive the missing or corrected Form W-2 or Form 1099-R after filing their return and the information differs from their previous estimate, they must file Form 1040-X, Amended U.S. Individual Income Tax Return.

Most taxpayers should have received income documents near the end of January, including:

• Forms W-2, Wage and Tax Statement
• Form 1099-MISC, Miscellaneous Income
• Form 1099-INT, Interest Income
• Form 1099-NEC, Nonemployee Compensation
• Form 1099-G, Certain Government Payments; like unemployment compensation or state tax refund

Incorrect Form 1099-G for unemployment benefits Many people received unemployment compensation in 2020. For some, this may have been the first time they ever received unemployment. These taxpayers need to know that unemployment compensation is taxable and must be included on their tax return.

Taxpayers who receive an incorrect Form 1099-G for unemployment benefits they did not receive should contact the issuing state agency to request a revised Form 1099-G showing they did not receive these benefits. Taxpayers who are unable to obtain a timely, corrected form from states should still file an accurate tax return, reporting only the income they received.

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Common and costly errors taxpayers should avoid when preparing a tax return

Electronically filing a tax return reduces errors because the tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers claim valuable credits and deductions.

Using a reputable tax preparer – including certified public accountants, enrolled agents or other knowledgeable tax professionals – can also help avoid errors.

The IRS urges all taxpayers to file electronically and choose direct deposit to get their refund faster and avoid pandemic-related paper delays. IRS Free File offers online tax preparation, direct deposit of refunds and electronic filing, all for free. Some options are available in Spanish.

Here are some common errors taxpayers should avoid when preparing a tax return:

Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.
Misspelled names. Likewise, a name listed on a tax return should match the name on that person’s Social Security card.
Incorrect filing status. Some taxpayers choose the wrong filing status. The Interactive Tax Assistant on IRS.gov can help taxpayers choose the correct status especially if more than one filing status applies. Tax software also helps prevent mistakes with filing status.
Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software does it automatically.
Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit, and recovery rebate credit. If someone is eligible for a recovery rebate credit – and either didn’t receive Economic Impact Payments or received less than the full amounts – they must file a 2020 tax return to claim the credit even if they don’t usually file. The Interactive Tax Assistant can help determine if a taxpayer is eligible for tax credits or deductions. Tax software will calculate these credits and deductions and include any required forms and schedules.
Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for a taxpayer to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.
Unsigned forms. An unsigned tax return isn’t valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney. Taxpayers can avoid this error by filing their return electronically and digitally signing it before sending it to the IRS.
Filing with an expired individual tax identification number. If a taxpayer’s ITIN is expired, they should go ahead and file using the expired number. The IRS will process that return and treat it as a return filed on time. However, the IRS won’t allow any exemptions or credits to a return filed with an expired ITIN. Taxpayers will receive a notice telling the taxpayer to renew their number. Once the taxpayer renews the ITIN, the IRS will process return normally.

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What taxpayers need to know to claim the earned income tax credit

The earned income tax credit can give qualifying workers with low-to-moderate income a substantial financial boost. In 2019, the average amount of this credit was $2,476. It not only reduces the amount of tax someone owes but may give them a refund even if they don’t owe any taxes or aren’t required to file a return. People must meet certain requirements and file a federal tax return in order to receive this credit.

EITC eligibility

• A taxpayer’s eligibility for the credit may change from year to year, so it’s a good idea for people to use the EITC Assistant to find out if they qualify.
• Eligibility can be affected by major life changes such as:
o a new job or loss of a job
o unemployment benefits
o a change in income
o a change in marital status
o the birth or death of a child
o a change in a spouse’s employment situation
• Taxpayers qualify based on their income and the filing status they use on their tax return. The credit can be more if they have one or more children who live with them for more than half the year and meet other requirements.

New this tax season
There’s a new rule to help people impacted by a job loss or change in income in 2020. taxpayers can use their2019 earned income to figure your EITC, if their 2019 earned income was more than their 2020 earned income. The same is true for the additional child tax credit. For details, see the instructions for Form 1040.

2020 Maximum credit amounts allowed
The maximum credit amounts are based on whether the taxpayer can claim a child for the credit and the number of children claimed:

• Zero children: $538
• One child: $3,584
• Two children: $5,920
• Three or more children: $6,660

2020 income limits
Those who are working and earn less than these amounts may qualify for the EITC:

Married filing jointly:
• Zero children: $21,710
• One child: $47,646
• Two children: $53,330
• Three or more children: $56,844

Head of household and single:
• Zero children: $15,820
• One child: $41,756
• Two children: $47,440
• Three or more children: $50,954

Taxpayers who are married filing separately can’t claim EITC.

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Local IRS Offices

York
2670 Industrial Hwy, York, PA 17402
Monday-Friday 8:30am - 4:30pm
(Closed for lunch 12:30pm - 1:30pm)
(717) 757-4977

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(Closed for lunch 12:30pm - 1:00pm) (717) 777-9650

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(717) 291-1994










NATP

National Association of Tax Professionals