Category: FATCA

Most people with gross income of $12,400 or more must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld. They may also be eligible for certain tax credits, like the earned income tax credit, the recovery rebate credit and others.

How to decide whether to file a tax return
In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.

If the answer to any of these questions is yes, a person might be due a refund, but they must file a tax return to get their money.

• Did an employer withhold federal income tax from their pay
• Did the person make estimated tax payments?
• Did they overpay taxes in 2019, and have their refund applied to 2020 taxes?

Some individuals may qualify for the recovery rebate credit
Most people who are eligible have already received the full amount for the recovery rebate credit as Economic Impact Payments. Some people may be eligible to claim the recovery rebate credit if they didn’t get Economic Impact Payments or received less than they were entitled. People must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file. Those who don’t normally file taxes can use IRS Free File to claim this credit. The maximum Economic Impact Payments for qualifying individuals were:

• $1,200 per person and $500 per qualifying child for the first payment
• $600 per person and $600 per qualifying child for the second payment

If they’re eligible for the recovery rebate credit, people will need the amount of any EIPs they received to calculate their credit amount using the RRC worksheet or tax preparation software. Individuals with an account on IRS.gov can view the amounts of the Economic Impact Payments they received.

Choose e-file with direct deposit to avoid delays
The IRS strongly encourages people to file electronically and choose direct deposit to avoid pandemic-related paper delays.

Excerpt IRS COVID Tax Tip 2021-13

Early January 2021, the Treasury Department and the IRS started sending the second round of Economic Impact Payments to millions of Americans as part of the implementation of the Coronavirus Response and Relief Supplemental Appropriations Act.

Taxpayers don’t need to take any action to receive these payments. Economic Impact Payments are automatic for eligible taxpayers who filed a 2019 tax return and those who receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and Veterans Affairs beneficiaries who didn’t file a tax return.

These second round of payments follow the successful delivery of more than $270 billion in CARES Act Economic Impact Payments to about 160 million Americans in 2020.

Eligible individuals who did not receive an Economic Impact Payment – either the first or the second payment – can claim a Recovery Rebate Credit when they file their 2020 taxes this year. The IRS urges taxpayers who didn’t receive an advance payment to review the eligibility criteria when they file their 2020 taxes; many people, including recent college graduates, may be eligible for a credit.

Eligible individuals who didn’t receive the full amount of both Economic Impact Payments should claim the missing amount as a credit. Anyone who did receive the full amount for both Economic Impact Payments should not include any information about their payment when they file their taxes – they’ve already received the full amount of the Recovery Rebate Credit as advance payments.

For the latest IRS forms and instructions, visit the IRS website at IRS.gov/forms.

You can visit IRS.gov for the latest information about the Economic Impact Payments and filing your 2020 tax return.

Excerpt from IR-2021 Bulletin 12 Jan. 2021

In October 2019, as part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 and frequently asked questions (FAQs). It supplements the guidance the IRS issued on virtual currency in Notice 2014-21 that describes how virtual currency is treated for federal tax purposes.

In addition, the IRS has now issued the second early release draft of the 2019 Form 1040, Schedule 1, Additional Income and Adjustments to Income, which includes the following checkbox question:

At any time during 2019, did you receive, sell, send, exchange or otherwise acquire any financial interest in any virtual currency? ◊ Yes ◊ No

Taxpayers who file Schedule 1 to report income or adjustments to income that can’t be entered directly on Form 1040 should check the appropriate box to answer the virtual currency question. Taxpayers do not need to file Schedule 1 if their answer to this question is NO and they do not have to file Schedule 1 for any other purpose.

The related draft Form 1040 instructions, also now available on IRS.gov, include instructions to help taxpayers determine how they should answer this new question.

Taxpayers can access Where’s My Refund? anytime to track their refunds. They can find this tool on both IRS.gov and the IRS2GO app. The IRS issues most refunds in less than 21 days, although some require additional time. Agency customer service representatives can’t answer refund questions unless it has been:

• 21 days or more since the taxpayer e-filed
• 6 weeks or more since the taxpayer mailed their return

Also, in some cases “Where’s My Refund” may tell the taxpayer to contact the IRS.

Taxpayers can also call the automated IRS refund hotline at 800-829-1954.

Validate identity
Taxpayers who call the IRS with questions about their account should be ready to verify their identity. IRS telephone assistors may ask a series of questions to confirm the identity of callers. Many of the answers to these questions come from the taxpayer’s prior year tax return.

 

Excerpt from: IRS Tax tip 2019-09

Standard Deduction Chart for Most People*