Tax filing season for calendar year 2020 opens Feb. 12, a few weeks later than usual. Unlike last year, when the deadline to file and pay any tax owed was extended to July, this year, we revert to good ol' April 15, so it's time to get organized.
If you didn't learn the lesson of electronic filing last year, this is the year to dump the paper. Those who had electronic files with the Internal Revenue Service got stimulus checks faster than paper filers. To make the process seamless, choose direct deposit, "the safest, most accurate and fastest way to get a refund," according to the IRS.
If you received an Economic Impact Payment of $1,200 ($2,400, if married and filing jointly for 2020, plus $500 for each qualifying child), it is not taxable! If you did not receive the payment (or think you were shortchanged on the amount), focus on Line 30 of Form 1040 and Form 1040-SR, "the Recovery Rebate Credit." Even if you did not earn enough income to file a return, you may have to do so to get your credits, which can increase any refund you would have otherwise received or lower the amount of tax you owe.
The IRS says "unemployment compensation is taxable and must be reported on a 2020 federal income tax return." That includes all state unemployment benefits, as well as all emergency federal benefits awarded under the CARES Act. You should have received Form 1099-G, which highlights the amount of unemployment that you received.
There are 15 states that do not levy taxes on unemployment: Alabama, Alaska, California, Florida, Montana, Nevada, New Hampshire, New Jersey, Pennsylvania, South Dakota, Tennessee, Texas, Virginia, Washington and Wyoming. If you don't live in one of the 15, you will also be on the hook for state taxes on your unemployment benefits.
If you are a W-2 employee, you are not eligible for the home-office deduction, even if you are working from home. If you are self-employed, the home-office deduction is still available as long as you use of a portion of the home for conducting business on a regular basis and your home is your principal place of business.
If you worked from home in a different location, you could see tax benefits — or penalties — for that change. Check your primary state/city rules about other jurisdictions and make the necessary adjustments.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is geared toward low-to-moderate income workers. The EITC reduces the amount of tax someone owes, but here's the cool part: Even if you don't owe any taxes or aren't required to file a return, you can get the money. The amount of the credit (a maximum of $6,660 for three children or more) is based on whether you have kids. To find out if you qualify, use the EITC assistant at IRS.gov.
IRS Free File
The IRS works with a number of tax preparation companies to offer free online products for those who make $72,000 or less. Each provider sets its own eligibility rules for products based on age, income and state residency, so you need to do some homework. Go to IRS.gov/FreeFile and use the "Free File Online Look up" tool to find the right product.
- The Volunteer Income Tax Assistance (VITA): Free tax help to people who make $57,000 or less, persons with disabilities and those who have limited English language abilities
- Tax Counseling for the Elderly (TCE): Tax help for individuals who are 60 and older
- "Where's My Refund?" tool: irs.gov/refunds
- IRS2Go phone app: irs.gov/newsroom/irs2goapp
- IRS Withholding Estimator: irs.gov/individuals/tax-withholding-estimator
Jill Schlesinger, CFP, is a CBS News business analyst. She welcomes comments and questions at email@example.com.