6 tips to get a head start on your 2020 tax return – Forbes Advisor

The IRS has just announced that it is extending the personal income tax season until May 17. This year’s tax season comes with many changes mainly due to the Covid-19 pandemic, a unemployment tax relief to people who deposit at claim their missing stimulus checks, so this is a welcome change.

But if possible, it’s worth starting your taxes early. Getting ready now can save you time and money.

And if you expect your taxes to be more complicated than usual due to unemployment benefits, working more than one job, or receiving government aid, to name a few, it’s essential prepare in advance to file your taxes (especially because you can avoid late penalties).

Here are six tips to help you prepare for tax season 2021.

1. Organize your tax documents and financial records

Take the time to organize your tax and financial records, which can make the filing process faster and easier. Use your income tax return from the previous year as a starting point to determine your historical income, deductions and credits reported.

You can retrieve a copy of your income tax return for the previous year by requesting a copy through the IRS Online Portal or by logging into the tax software vendor you used last year. If you have worked with a CPA or another tax professional, it is likely that you received a copy of your return when you filed it. Digging up last year’s tax return helps ensure that you have the required documentation to prepare your tax return this year.

Everyone’s tax situation is different, but here is a list of common tax forms and records you should have before you file your tax return:

2. Create an online tax account with the IRS

Establishment of a online tax account with IRS is a great way to get your tax documents without having to contact the agency by phone or mail. This feature allows you to log into an account and check payment balances, set payment terms, and view previous year’s tax returns and reported tax forms.

This IRS function proved useful at the start of the Covid-19 pandemic epidemic. Last March, IRS notified taxpayers he had suspended his walk-in services and disabled their centralized toll-free number until further notice.

To ensure the safety and health of #IRS employees and taxpayers, all Taxpayer Assistance Centers are temporarily closed in response to the # COVID-19[FEMALE[FEMININE epidemic. Almost all tax issues can now be resolved online. Please find tools and resources at https://t.co/O58xEUkGZu

– IRSnews (@IRSnews) March 25, 2020

This function does not allow you to file your income tax return electronically.

3. Beware of big changes in your 2020 tax return

Tax season 2021 heralds big changes to stimulus payments and unemployment income.

If you haven’t received your economic impact payments (aka stimulus checks), you can claim them on your 2020 tax return via the Recovery rebate credit. The credit will increase your tax refund or reduce the amount you owe (and the credit will apply to the first and second stimulus payments).

To determine the amount of your claim, refer to your Reviews 1444, which provides the first stimulus check payment, and Notice 1444-B for the second set of stimulus checks.

The IRS sends these notices by mail to each recipient within 15 days of the release of the stimulus payments. This information must appear on the Recovery Refund Credit Worksheet when you complete your tax return. If you received the full Economic Impact Payment, you will not have to provide the recovery refund credit information on your tax return.

If you are one of tens of millions of Americans who received unemployment income in 2020, keep an eye on your Form 1099-G, “Certain Government Payments”. Since unemployment income is considered taxable income by the IRS, you are required to report it. This is the case if you had federal or state taxes withheld throughout the year.

4. Pay the taxes due before May 17th

If you expect to owe taxes when you file your tax return, it’s a good idea to pay as much as possible before the due date. For the 2020 tax season, you have more time to pay, but make sure you are always prepared for the new deadline. The IRS has extended the April 15 deadline to May 17 for filing individual tax returns and paying income taxes. The time limit does not apply to estimated tax payments, which are due April 15.

During the 2020 tax season at the height of the pandemic response, the IRS extended the deadline until July 15, 2020, giving taxpayers an additional three months to file their return.

Even if you aren’t able to pay the full amount you may owe, pay what you can as soon as possible. Since the penalty is usually charged at 0.5% of the unpaid tax, pay what you can reduced how much you will be penalized.

It’s important to note that asking for an extension to file your tax return before October 15 does not extend the time you have to pay your taxes.

5. Choose between CPA or do it yourself

One decision you need to consider is to hire a certified public accountant (CPA) or to do it yourself. As a CPA and former IRS agent, I recommend in certain situations that you use online tax software to file your own taxes. However, there are certain tax situations where I suggest establishing a relationship with a tax professional.

If you are a freelance writer, run a small business, or are an investor, it may be a good idea to seek the help of a CPA. Establishing a relationship with a CPA can help you navigate possible tax deductions, create tax strategies for the future, and be available to you if the IRS ever comes to audit your taxes.

On the other hand, if you have a very simple tax return, which includes a basic salary and income statement (W2) and some deductions, you may want to consider doing it yourself. It is also generally a much cheaper option.

Keep in mind that if you think you need the help of a CPA or a tax professional, now is the time to build that relationship. CPAs often stop taking new clients for the season when tax day approaches.

6. Find free ways to deposit

Depending on your income and the complexity of your tax situation, you may be entitled to IRS Free File Program.

Taxpayers who have an Adjusted Gross Income (AGI) of less than $ 72,000 (total income less certain deductions) may be eligible for the IRS Free File program, a partnership with the IRS and online tax software providers. Those suppliers include 1040Now Corp, ezTaxReturn.com, FileYourTaxes, Free Tax Return, Intuit, OnLineTaxes, Tax Act, TaxHawk, and TaxSlayer.

Although this program has been around since 2001, you may not have heard of it. Since online tax software providers donate these services, they tend not to advertise them. And while the IRS estimates that 70% of all taxpayers eligible for the program, only one small percentage of taxpayers have used Free File.

In addition to the IRS Free File Program, you may also be eligible for the IRS Volunteer Income Tax Assistance (VITA) program. This program offers free tax preparation assistance to eligible taxpayers.

Taxpayers earning $ 57,000 or less, who have a disability, or speak limited English are eligible for the program. Due to COVID-19, some VITA sites are closed. To find an open VITA office near you, visit IRS for more information.