Recent tax legislation + provisions stand to impact 2020 tax returns
The Internal Revenue Service (IRS) announced that it will start accepting and processing 2020 tax returns on February 12, 2021. It stated that the start date was selected to ensure the security and readiness of key tax processing systems and to address the potential impact of recent tax legislation on 2020 tax returns. The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, included many tax provisions with a potential impact on 2020 tax returns.
- In 2020, the January 27 start date was impacted by the passage of the Consolidated Appropriations Act, 2020, enacted late in 2019
- In 2019, the January 28 start date was impacted by the government shutdown
- In 2018, the January 29 start date was impacted by the passage of the Tax Cuts and Jobs Act, enacted late in 2017
Delayed start date poses challenges for taxpayers and professionals
The start date is important for taxpayers looking to receive tax refunds as soon as possible and for tax return preparers looking to balance workload during the tax filing season. Factors to consider with the announced start date include the following.
- Year-end tax changes with a potential impact on 2020 tax returns include: additional economic stimulus payments; allowing the employee retention credit even if you have a Paycheck Protection Program (PPP) loan forgiven; deducting PPP expenses; allowing 2019 Adjusted Gross Income for the Earned Income Tax Credit or Additional Child Tax Credit; disaster relief; 30-year depreciation of residential rental property; and Covid-related expenses qualifying for the educator expense deduction
- Many of the tax changes enacted in 2020 could also impact 2018 and 2019 tax returns, so 2018 and 2019 amended tax returns should also be considered
- Some forms that taxpayers should start assembling for tax return preparation include: Form W-2; various Form 1099s, including the new Form 1099-NEC for non-employee compensation and Form 1099-G for certain government payments, such as unemployment benefits; and Notices 1444 and 1444-B for the recovery rebate credit
- Besides the new recovery rebate on Line 30 of Form 1040, also new on the form is a move of a virtual currency question to the top of Form 1040; the new charitable deduction for non-itemizers on Line 10b; and the reporting of estimated tax payments on Line 26
- The IRS is still prohibited by law from issuing tax refunds for tax returns claiming certain tax breaks until February 15, 2021 and estimates refunds for those returns will not be issued until early March
- The IRS continues to encourage electronic filing of tax returns and choosing direct deposit for faster refunds & more accurate returns
- The due date for individual tax returns is April 15, 2021, with no additional days due to weekends or holidays this year, although some tax preparers are requesting that, due to the later start date, the due date be correspondingly extended
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Wolters Kluwer Tax Briefing
Wolters Kluwer Tax & Accounting published the 2020 Tax Year-In‑Review expert briefing that highlights tax code changes made in 2020 and a look ahead for 2021 and beyond.
Federal tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, is available to discuss issues around the start of tax filing season.
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To arrange interviews with Mark Luscombe and other federal and state tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topic, please contact Bart Lipinski.