There have been several tax changes due to the current Pandemic. The stimulus as you have probably heard it called which are Economic Impact Payments are not taxable income for federal income tax purposes. If you did not receive both stimulus payments, you may be able to claim what is called the Recovery Rebate Credit on your 2020 tax return. This rebate is based on your 2020 tax information. Generally, the credit will increase the amount of your tax refund or decrease the taxes that you owe. The IRS will begin accepting individual tax returns on February 12th. After spending almost 40 years in the accounting field and over 20 years in the tax field, I have never seen a year like 2020. The first stimulus payment was $1,200 or $2,400 for a married couple plus $500 for each qualifying child you had in 2020. The second was $600 or $1,200 for a married couple plus $600 for each qualifying child you had in 2020. The credit will be phased out or decreased if your adjusted income is $150,000 for married filing joint or a qualified widow or widower, $112,500 for head of household, or $75,000 if you use any other filing status.
You should have received IRS notice 1444 for the first stimulus and IRS notice 1444B for the second stimulus. These notices tell you the amount you received for each stimulus payment. If you are eligible for the recovery rebate credit, you will use the information from these notices to help you calculate the credit amount. If you do not have these forms 1444 and 1444B, you can get them if you sign up for an account at IRS.gov. To set up an account you will need, your full name, social security number, tax filing status, and current address. I have included a link below to the IRS website where you can create an account if you don’t currently have one. You must file forms 1040 or 1040 SR to claim the Recovery Rebate Credit even if you don’t normally file a tax return, i.e., for example, if you receive Social Security disability. The key is you cannot be claimed as a dependent on another person’s 2020 tax return. Also, you can elect to use your earned income from 2019 to figure your 2020 earned income credit if 2019 earned income was higher. Your earned income credit is based on the income you earned while working a job. This is important since many individuals received unemployment benefits which are not considered earned income.
New this year, you may qualify to deduct cash charitable contributions made to eligible organizations of up to $300 paid in 2020 even if you don’t itemize. This is a pretty good benefit since a lot of people no longer itemize due to the standard deduction sometimes being more than the itemized deductions. The standard deduction amount has increased from the previous year. For recordkeeping purposes and proof, one should get a receipt or acknowledgment letter from the charity before filing a return and retain a canceled check or credit card receipt. Be sure to seek the advice of a knowledgeable tax professional. As an individual who has prepared taxes for over 20 years, I know how important it is to have a competent tax professional prepare your tax return. The tax laws are constantly changing, and one has to keep abreast of these changes. I am also a certified divorce coach whose focus is on helping women age 50 and older emotionally heal during the divorce process and repair their lives so that they are even better once they come out on the other side. Let me know if I can be of assistance to you.
By Emmerstine Mackie
Divorce Coach for the Seasoned Woman
View Your Tax Account | Internal Revenue Service (irs.gov) To set up an IRS account.