The IRS announced that the 2021 tax season will start on Friday, February 12. The IRS will begin accepting paper and electronic tax returns that day. As of now, the deadline to file 2020 individual tax returns and pay any tax owed remains on Thursday, April 15, 2021.
Congress has made some last-minute tax changes and new rules related to the ongoing response to the coronavirus. Here are the new rules and changes that taxpayers should be aware of.
- Stimulus Payments
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act's relief package, the government sent up to $1,200 in the form of a stimulus check to millions of Americans. According to the IRS, the payments will not count as taxable income, will not impact your tax owed for 2020, and will not reduce your possible refund.
- Paycheck Protection Program (PPP) Loans
The CARES Act also help struggling small business owners by offering them Paycheck Protection Program (PPP) Loans. The IRS announced in December 2020 that any eligible expenses you paid from those PPP loans can be deducted from your taxable income - as long as those loans were used on certain business expenses, ex. payrolls, rents or utilities etc. (approval by the Small Business Administration required)
- Charitable Contribution Deductions
Normally, taxpayers can deduct charitable contribution (gifts/donations) only if they itemize their tax returns; however, for the 2020 tax year, the IRS allows taxpayers to take a deduction for charitable contrition's of up to $300 (if qualified) if they take standard deduction.
- Virtual Currency
The IRS has continued its focus on virtual currency tax compliance. If you engaged in a transaction involving virtual currency, you will need to file and answer the question on page 1 of Form 1040 (or 1040_SR). If any of the transaction that you invest in on a foreign exchange, you must also report the assets on the related foreign reporting forms.
- Other Inflation-related Adjustments
Finally, there are plenty of small tax law changes that reflect the impact of inflation. Among them are the following.
- Standard deductions rose to $12,400 for singles, $24,800 for married couples (joint-filers).
- Federal Income Tax Rates remain the same (10% to 37%) and the income limits will be adjusted for inflation.
- Exemption amounts for the Alternative Minimum Tax were also increased and indexed for inflation.
