Tax Deductions and Credits to Consider for Tax Season 2021

Tax Deductions and Credits to Consider for Tax Season 2021

Here are some deductions and credits you might be able to claim on your 2020 tax return:

1. Charitable Deductions
If you like to give like no one else, we have some great news! In an effort to encourage more charitable giving, the CARES Act allows you to deduct up to 100% of their adjusted gross income (AGI), which is your total income minus other deductions you have already taken, in qualified charitable donations if you plan to itemize their deductions.3

What if you’re taking the standard deduction? Well, the CARES Act added a new “above-the-line” deduction that will help you write off up to $300 of charitable contributions you made in cash.4

2. Medical Deductions
If you spent a lot of time in the hospital or found yourself with some hefty medical bills last year, you might be able to find at least some tax relief.

You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken.5 For example, if your AGI was $100,000, you can deduct out-of-pocket medical expenses above $7,500 in 2020. But you have to itemize your deductions in order to write off those expenses on your tax return.

3. Business Deductions
If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use a part of your home to conduct business.6

But if you’re one of the millions of workers who were sent home to work remotely, you won’t be able to claim the home office deduction since it’s reserved for self-employed individuals only. Sorry!

4. Earned Income Tax Credit
The EITC is a refundable credit designed to help out low- and middle-income workers (workers earning up to $56,844 during the 2020 tax year might be eligible).7 Depending on your income, your filing status and how many children you have, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes. But here’s a crazy stat: About one out of five taxpayers who are eligible either don’t claim the benefit on their taxes or don’t file a tax return at all.8 Don’t let that be you!

5. Child Tax Credit
Got kids? Families can claim up to $2,000 per qualified child with this tax credit (the income limits for this credit are $200,000 for single parents and $400,000 for married couples). And since this is a refundable credit, your family can receive up to $1,400 per child as a refund.9

And there are plenty of other deductions and credits that might be up for grabs depending on your situation! If you don’t want to miss out on any tax savings, you’ll want to work with a tax advisor who can make sure you’re not leaving any deductions or credits on the table.

2021 tax filing season begins Feb. 12; IRS outlines steps to speed refunds during pandemic

2021 tax filing season begins Feb. 12; IRS outlines steps to speed refunds during pandemic

The Internal Revenue Service announced that the nation’s tax season will start on Friday, February 12, 2021, when the tax agency will begin accepting and processing 2020 tax year returns.

The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits.

This programming work is critical to ensuring IRS systems run smoothly. If filing season were opened without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.

To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. People can begin filing their tax returns immediately with tax software companies, including IRS Free File partners. These groups are starting to accept tax returns now, and the returns will be transmitted to the IRS starting February 12.

“Planning for the nation’s filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time,” said IRS Commissioner Chuck Rettig. “Given the pandemic, this is one of the nation’s most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible.”

Last year’s average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed this year, with the vast majority before the Thursday, April 15 deadline.

Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.

The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where’s My Refund for their personalized refund date.

Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return. The IRS urges taxpayers and tax professionals to file electronically. To avoid delays in processing, people should avoid filing paper returns wherever possible.

TAX TIP: Watch Out For Gift Card Scams This Holiday Season

TAX TIP: Watch Out For Gift Card Scams This Holiday Season

Watch Out For Gift Card Scam

Taxpayers should always be on the lookout for scams especially during the holidays. Crooks want to trick people in order to steal their personal information, scam them out of money, or talk them into engaging in questionable behavior with their taxes. Scam attempts can peak during tax season, but taxpayers need to remain vigilant all year.
Gift card scams are on the rise. In fact, there are many reports of taxpayers being asked to pay a fake tax bill through the purchase of gift cards.

Here’s how one scenario usually happens:

• Someone posing as an IRS agent calls the taxpayer and informs them their identity has been stolen.
• The fake agent says the taxpayer’s identify was used to open fake bank accounts.
• The caller tells the taxpayer to buy gift cards from various stores and await further instructions.
• The scammer then contacts the taxpayer again telling them to provide the gift cards’ access numbers.

Here’s how people can know if it is really the IRS calling. The IRS does not:

• Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card or wire transfer.
• Generally, the IRS will first mail a bill to any taxpayer who owes taxes.
• Demand that taxpayers pay taxes without the opportunity to question or appeal the amount they owe. All taxpayers should be aware of their rights.
• Threaten to bring in local police, immigration officers or other law-enforcement to have the taxpayer arrested for not paying.
• Revoke the taxpayer’s driver’s license, business licenses, or immigration status.

People who believe they’ve been targeted by a scammer should:

• Contact the Treasury Inspector General for Tax Administration to report a phone scam. Use their IRS Impersonation Scam Reporting web page. They can also call 800-366-4484.
• Report phone scams to the Federal Trade Commission. Use the FTC Complaint Assistant on FTC.gov. They should add “IRS Telephone Scam” in the notes.
• Report an unsolicited email claiming to be from the IRS, or an IRS-related component like the Electronic Federal Tax Payment System, to the IRS at phishing@irs.gov. The sender can add “IRS Phone Scam” to the subject line.

IRS extends Economic Impact Payment deadline to Nov. 21 to help non-filers

IRS extends Economic Impact Payment deadline to Nov. 21 to help non-filers

The Internal Revenue Service announced today that the deadline to register for an Economic Impact Payment (EIP) is now November 21, 2020. This new date will provide an additional five weeks beyond the original deadline.

The IRS urges people who don’t typically file a tax return – and haven’t received an Economic Impact Payment – to register as quickly as possible using the Non-Filers: Enter Info Here tool on IRS.gov. The tool will not be available after November 21.

“We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities,” said IRS Commissioner Chuck Rettig. “The IRS is deeply involved in processing and programming that overlaps filing seasons. Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The Non-Filers portal has been available since the spring and has been used successfully by many millions of Americans.”

Special note: This additional time into November is solely for those who have not received their EIP and don’t normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline date remains October 15.

To support the ongoing EIP effort, many partner groups have been working with the IRS, helping translate and making available in 35 languages IRS information and resources on Economic Impact Payments.

To help spread the word, the IRS sent nearly 9 million letters in September to people who may be eligible for the $1,200 Economic Impact Payments but don’t normally file a tax return. This push encourages people to use the Non-Filers tool on IRS.gov.

“Time is running out for those who don’t normally file a tax return to get their payments,” Rettig added. “Registration is quick and easy, and we urge everyone to share this information to reach as many people before the deadline.”

While most eligible U.S. taxpayers have automatically received their Economic Impact Payment, others who don’t have a filing obligation need to use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.

The Non-Filers tool is secure and is based on Free File Fillable Forms, part of the Free File Alliance’s offering of free products on IRS.gov.

The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.

Anyone using the Non-Filers tool can speed the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check.

Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov.

Oct. 15 deadline nears for taxpayers who requested tax filing extensions

Oct. 15 deadline nears for taxpayers who requested tax filing extensions

The Internal Revenue Service today reminds taxpayers who filed an extension that the Oct. 15 due date to file their 2019 tax return is near.

Taxpayers should file their tax returns on or before the Oct. 15 deadline. For those who still owe, pay as soon as possible to reduce any penalties and interest.

Convenient electronic filing options, including IRS Free File, are still available. Taxpayers and tax professionals should continue to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.

Although Oct. 15 is the last day for most people to file, some taxpayers may have more time. They include:

Members of the military and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due.
Taxpayers in federally declared disaster areas who already had valid extensions. For details, see the disaster relief page on IRS.gov.

Boosting Hispanic Small Business Owners During National Hispanic Heritage Month

Boosting Hispanic Small Business Owners During National Hispanic Heritage Month

 

BOOSTING HISPANIC ENTREPRENEURS DURING NATIONAL HISPANIC HERITAGE MONTH

National Hispanic Heritage Month runs from September 15 through October 15, and it’s the perfect time to celebrate the contributions of Hispanic small business owners to our nation’s economy and discuss how we can help them thrive and grow their businesses.

Hispanic-owned businesses generate significant economic benefit, spurring innovation and building wealth in diverse communities throughout America. Hispanic-owned small businesses are opening at a rate far above the national average, with the Hispanic share of all U.S. business owners growing 46% between 2007 and 2012. To encourage these positive trends, the small business community should offer more support, training and resources that enable Hispanic entrepreneurs to build and expand their businesses.

Fortunately, many small business assistance centers do already provide education focused on the Hispanic community, including many that offer resources in Spanish. Read on for a list of organizations that offer assistance specifically to Hispanic business owners:

  • The United States Hispanic Chamber of Commerce (USHCC) represents more than 4.37 million Hispanic-owned businesses through its network of 200 local chambers of commerce. USHCC and its local affiliates offer information and networking opportunities for Hispanic entrepreneurs. They also offer education on policy issues facing Hispanic small business owners, like access to capital, international trade, immigration, education and workforce development, and infrastructure.
  • The Minority Business Development Agency, part of the U.S. Department of Commerce, oversees a network of business centers that offer help in finding capital, securing government contracts and other aspects of expanding your small business.
  • The National Hispanic Business Group is one the nation’s largest networking organizations for Hispanic businesses of all sizes.
  • The National Minority Supplier Development Council works nationwide to help minority-business owners expand through a national network of minority suppliers.
  • Centro Community Partners is an organization that helps entrepreneurs launch their business ideas through a number of programs. Many of these programs, including their basic program to build a small business and their app for developing a business plan, are available in Spanish.
  • Code2040—named in recognition of the fact that the U.S. will be majority people of color in 2040—is a group working to support black and Latinx technology entrepreneurs with a goal of making tech more inclusive and representative.
  • SCORE Mentors is a national nonprofit organization that matches entrepreneurs with mentors who can help them navigate the process of starting a business, and you can filter by language to find Spanish-speaking mentors.
  • Your local Small Business Development Center (SBDC) or economic development agency likely offers resources in Spanish, especially if you live in a Hispanic-majority community. Find your local SBDC to see if they can provide support to your small business.
  • Many national small business organizations have dedicated Spanish-language resources:

This list is far from exhaustive, but it’s a good place to start looking for organizations that work to promote and inspire Hispanic entrepreneurs. As we celebrate National Hispanic Heritage Month, we should focus on how we can better support this community by helping current business owners grow their businesses and empowering aspiring entrepreneurs.

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