Last week, I wrote about how this tax season will have some differences, because that’s just how 2020 treated us. I tried to keep it concise and hit the highlights, but then I kept coming up with more things that might have been worth saying. So consider this week a continuation of those ideas.
Traveling 2020 was difficult for many, and this led to a higher number of people than usual taking money out of a retirement account to get through the trying times. There were many rules implemented to help make this less painful. A big piece of this is that the additional 10% tax one usually faces when pulling money early out of a such an account will not apply. There is also additional leeway given concerning repaying this money and how it is taxed. This is not the place to get that deep into it, but if you are in this situation and have some questions, the IRS has put together an FAQ page here.
Another deduction that some should think about is out-of-pocket expenses for educators. This will include unreimbursed expenses for items meant to stop the spread of COVID-19 in classrooms. This includes things that range from face masks, disinfectant, and hand soap to physical barriers, markers to guide social distancing, and air purifiers. If it is something you had to bring into the classroom due to the unique nature of this school year, it could qualify.
Finally, I want to spend a little time talking about the timing of this tax season. The open of the season was delayed and the IRS will not start accepting returns until Friday, February 12. This is primarily due to the need for the agency to incorporate updates necessary when Congress passed a relief bill late in December. Currently, there has been no action taken to push back the conclusion of tax season, though, as happened last year.
Even so, however, there is a push for another relief ball that could make its way through Congress by the end of tax season, even if it remains on April 15. Could there be anything in that bill that could affect one’s tax picture from the 2020 calendar year? Well, it is possible. Does that mean one should wait to file, though?
I think the answer there could depend on one’s situation. Of course, many are looking forward to a refund and filing their tax return early and getting that money as soon as possible will ease their situation. If you find yourself in that spot, then push forward quickly, get that refund, and we can later deal with any changes that could have helped your situation.
If you are not in that situation, though, I would still counsel not procrastinating too long in getting a start on your tax return. We have been hit by enough surprises due to this pandemic and it is probably naïve to think that we have seen the last of them. So get things moving, get your information gathered and submitted to your tax preparer, and get your return started even if you do not want to immediately file. Then you will be in a situation where you are best prepared for any surprises that may still come.
And as always, please do not hesitate to come to us with any questions as you navigate this season.
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