Tax Tips for Individual Taxpayers Winter 2020/2021

Posted on: 6 . 1 . 2021

Economic impact payments

How will they affect your 2020 return?

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the IRS made economic impact payments (EIPs) to certain taxpayers. The eligibility for and the amount of an EIP generally depended on the taxpayer’s 2019 federal income tax return. If one wasn’t filed at the time of eligibility, the IRS used the taxpayer’s 2018 federal income tax return. If you received an EIP, the IRS mailed a Notice 1444 to your last known address. That form shows the amount of your EIP. Keep this notice with your tax records.

The EIP is considered an advance credit against your 2020 tax. You are not required to include the payment in taxable income on your 2020 tax return or pay income tax on the payment. When you file your 2020 federal income tax return next year, the EIP will not reduce your refund or increase the amount of tax you owe.

If the EIP was based on your 2018 tax return and your circumstances changed in 2019, you may claim any additional credit for which you are eligible on your 2020 return. This may occur, for example, if you had a child or if your income was lower in 2019. Conversely, if your payment was based on your 2018 return and circumstances changed so that you would have received a smaller amount based on your 2019 return, you are not required to repay the excess or reduce your 2020 refund.

Important Tax Deadlines

Tax Notes

The Social Security Administration (SSA) has announced that the wage base for computing the Social Security tax (OASDI) in 2020 increases from $132,900 to $137,700. The quarter cost-of-living adjustment (COLA) coverage amount will rise from $1,360 in 2019 to $1,410 in 2020. The increase in the quarter of coverage amount also serves to increase the lower and upper limits under the optional methods for computing self-employment tax.

Did You Know?

Veteran’s Day, which honors everyone who has served in the United States Armed Forces, is November 11. The date marks the end of the hostilities of World War I on the eleventh hour, of the eleventh day, of the eleventh month of 1918. Formerly known as Armistice Day, it became a national holiday in 1938.

Quote Corner

“It’s not whether you get knocked down, it’s whether you get up.”     ~ Vince Lombardi

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