Filing your taxes this year is key to getting the most relief

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You could recover more money than you think, or at least reduce yours tax invoice. Only a number of Covid relief provisions can be claimed in full through your tax return. Some tax credit rules have become more advantageous as a result of the pandemic. And you may consider yourself eligible for some tax breaks for the first time due to Covid.

The IRS will begin accepting returns on February 12 and the submission deadline is April 15, unless you request an automatic extension.
But filing on time will prevent you from being fined for filing late and potentially a penalty for non-compliance if you still owe taxes to the IRS.

Claim the stimulus for which you can choose

If you earned less than $ 75,000 as a single person, $ 112,500 as a head of household, or $ 150,000 as a married couple in 2020 and have not yet received relief from Covid federal government payments, filing the federal tax return will be the best way to get the full amount of the two economic impact payments for which you are eligible.
So far, the IRS has sent two payments: the first was up to $ 1,200 per adult and the second up to $ 600, with even more money for those who had dependent children.

However, anyone who has not filed a federal tax return in 2019 or whose 2019 income exceeds the 2020 income eligibility thresholds for incentive payments may not have received what is due. This is because the IRS, for reasons of speed, sent payments based on the 2019 tax information it had, as well as the information it had for Social Security recipients.

The same situation may have affected parents who divorced in 2020, said Elaine Maag, a leading research association at the Urban-Brookings Center for Fiscal Policy.

The IRS may have sent the full payment of family incentives to noncustodial parents.

In this case, Maag noted, the IRS will not require ex-spouses who were not in custody to return any of the money they mistakenly obtained. And it will still send a double payment to parents who can prove their custody status last year.

But to get the payment they owe you, you must claim the refundable recovery bonus credit. The credit will be granted in the same amount as the stimulus payment for which you are eligible. Repayable credits reduce your tax liability dollar by dollar. If a credit exceeds your tax obligation, the rest will be sent to you as a refund.

You can opt for a tax credit for the income earned

Given the economic hardship of 2020 for so many people, you may be eligible for another tax credit: the refundable Income tax credit obtained: aimed at a rewarding job for those with low and moderate incomes.

To be eligible for EITC, your income must be below certain thresholds based on the number of children you have. For example, for fiscal year 2020, your adjusted gross income may not exceed $ 21,210 if you are a married couple without children, but it can be as high as $ 56,844 if you have three children. (There are other factors that determine EITC eligibility detailed in this paper IRS Summary.)

The credit is worth up to $ 6,660 for married couples with children and up to $ 538 for unmarried applicants without children.

In addition, EITC rules have been modified to provide more covid relief for those who meet the requirements. You can choose whether to base your EITC on your 2019 or 2020 income, whichever is more advantageous. you.
This same retrospective provision will also apply if it meets the requirements the refundable tax credit for children.

“In both cases, if you earned less in 2020 than in 2019, you can calculate your credits based on 2019 earnings or 2020 earnings. You can choose a different year for each credit,” Maag said.

Small business owners will enjoy overburdened deductions

Small business owners who paid business expenses with money from a forgiven Payroll Protection Program loan can still deduct those expenses on their federal tax return as if they were paying them for income.

And the forgiven loan will be treated as tax free for the small business owner.

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