Declaring your taxes this year is the key to getting the most benefit from Covid

Declaring your taxes this year is the key to getting the most benefit from Covid

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You could get more money back than you think, or at least lower your tax account. Several Covid relief clauses can be claimed in full only through your income tax return. Some tax credit rules have become more advantageous as a result of the pandemic. And you can consider yourself eligible for some tax incentives for the first time due to Covid.

The IRS will begin accepting returns on February 12, and the filing deadline is April 15, unless you request an automatic extension.
But by making the deposit on time, you will avoid being charged a late deposit penalty and potentially a non-payment penalty if you still owe taxes to the IRS.

Claiming the biggest stimulus you qualify for

If you earned less than $ 75,000 as a single person, $ 112,500 as a householder or $ 150,000 as a married couple in 2020 and have not yet received relief from Covid federal government payments, filing your federal income tax return will be the best way to get the full amount of the two economic impact payments to which you are entitled.
The IRS has sent two payments so far – the first was up to $ 1,200 per adult and the second up to $ 600, with even more money going to those who have dependent children.

But anyone who did not file a federal income tax return in 2019 or whose 2019 income was above the 2020 income eligibility limits for stimulus payments may not have received what is due. This is because the IRS, for reasons of speed, dispatched payments based on the 2019 tax information it had, as well as the information from Social Security beneficiaries.

The same situation may have affected parents who divorced in 2020, said Elaine Maag, one of the main research associations at the Urban-Brookings Tax Policy Center.

It is possible that the IRS has sent the full payment of the family incentive to the non-custodial parent.

In that case, noted Maag, the IRS will not require ex-spouses without custody to return any part of the money they received in error. And it will also send a duplicate payment to the father who can prove his custody status last year.

But to receive payment due, you must claim refundable recovery discount credit. The credit will be granted in the same amount as the stimulus payment for which you are eligible. Repayable credits reduce your dollar-to-dollar tax liability. If a credit exceeds your tax liability, the rest will be sent to you as a refund.

You may be eligible for an earned income tax credit

Given the financial hardship of 2020 for so many people, you can qualify for another tax break – the refundable amount Earned Income Tax Credit – which is intended to reward work for low and moderate income filers.

To be eligible for the EITC, your income must be below certain limits, depending on the number of children you have. For example, for fiscal 2020, your adjusted gross income cannot exceed $ 21,210 if you are a childless couple, but it can reach $ 56,844 if you have three children. (There are other factors that determine EITC eligibility detailed in this IRS Summary.)

The credit is worth up to $ 6,660 for couples with children and up to $ 538 for single, childless registrars.

In addition, the EITC rules have been adjusted to provide more relief from Covid to those who qualify. You can choose whether to base your EITC on your 2019 or 2020 revenue, whichever is more advantageous for you.
This same lookback arrangement also applies if you qualify for the refundable child tax credit.

“In both cases, if you earned less in 2020 than in 2019, you can calculate your credits based on earnings in 2019 or 2020. You can choose a different year for each credit,” said Maag.

Small business owners will enjoy supercharged deductions

Small business owners who have paid business expenses with money from a forgiven Salary Protection Program loan can still deduct those expenses from their federal income tax return as if they had paid for it with revenue.

And the forgiven loan will be treated as tax exempt for the small business owner.

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