Most taxpayers have become accustomed to the IRS beginning tax season in late January, but things are different this year.
The IRS stated in a Jan. 15 press release that the start of the nation's tax season has been delayed and will now start on Feb. 12. The IRS will not accept or process 2020 tax returns until that date.
When it is time to file, the IRS is also offering a free way to do so for those with an income of $72,000 and below. The IRS Free File Program is a public-private partnership between the IRS and many tax preparation and filing software companies that are providing their products for free. To take advantage of the free service, go to IRS.gov/freefile.
According to the IRS, the Feb. 12 delay gives the agency time to do additional programming and testing of IRS systems following the Dec. 27 tax law changes that provided a second round of stimulus payments and other benefits.
Jeannine Roberts, tax preparer with Wetumpka-based Lenny’s Tax Service LLC, said almost all of the clients she’s spoken with were unaware of the change.
“I’m preparing tax returns right now, but I can’t file them until Feb. 12,” she said. “A lot of people don’t know the date was pushed back and they are disappointed when they find out.”
There are a few other changes that taxpayers should be aware of this tax season, Roberts said. Those who are eligible and still have not received the second stimulus payment need to complete a form requesting the money to be added to their tax return. The money received from stimulus payments cannot be taxed, Roberts noted.
Also, the 10% penalty is being waived for people impacted by COVID who withdrew up to $100,000 from their employee-sponsored retirement accounts like 401(k)s and 403(b)s, as well as personal retirement accounts, such as traditional individual retirement accounts.
The penalty exemption is outlined in the CARES Act that allocated $2 trillion toward economic stimulus and relief in the wake of the COVID-19 pandemic.
Last year also marked a time when some Americans may have received unemployment benefits for the first time ever. Roberts said it’s important for those who received unemployment benefits to know that the money is considered taxable income.
Recipients can choose to have the taxes withdrawn from each unemployment disbursement or to defer tax payments. Those who chose to defer tax payments will owe money to the government, Roberts said.
“If you opted to have the taxes taken out, you will still likely owe money to the state because they only withdraw federal taxes, not state taxes,” Roberts said.
Although the tax season doesn’t begin until Feb. 12, the April 15 deadline to file has not changed.
“You can file an extension to extend your tax return deadline to Oct. 15, but an extension to file is not an extension to pay,” Roberts said. “That’s a common mistake that people make.”
To get the extension, taxpayers must estimate their tax liability on the form and should also pay any amount due.
“If it’s likely that you’re going to owe, then go ahead and pay something on it,” she said. “It seems crazy because if you haven’t filed then you don’t know exactly what you’re going to owe, but its best to send something to avoid a penalty.”
Roberts also urged taxpayers to file their taxes electronically and opt for direct deposit.
“If you file a paper return, it could take up to a year to get your money back because the IRS is so backed up,” she said.
For more information about this year’s tax season, go to IRS.gov.