2020 Abounds With Exceptional Tax Questions

By Joe Schoenmann

Published March 23, 2021 at 10:57 AM PDT

2020 was an unprecedented year, which will have an extreme impact on taxes.

The IRS has moved the tax deadline from April 15 to May 17.

But with what is likely a complicated tax year, it is probably a good idea not to delay dealing with your tax obligation.

That's not always easy considering the IRS has 800 different forms and schedules for everything from debt cancellation to long-term care benefits to a foreign person's U.S. source of income and, of course, student loan interest payments - not to mention PPP money for businesses and individual CARES Act payments.

One of the biggest questions is unemployment. It is taxed at the federal level, but a new law is helping.

Raphael Tulino is a spokesman for the IRS. He said the law allows for the exemption of the first $10,200 of unemployment retroactively for those that make $150,000 or less on joint returns.

"The software should be updated, for the most part, pretty soon if not already. Your tax professional should know about that if you have not filed yet," he said, "If you've already filed and you paid taxes on that unemployment based on this new law being retroactive, do not file an amended return."

He said there is more to come on that issue but the guidance right now is it is something the IRS will take care of internally so no one will have to file an amended return.

For those who haven't filed, he suggests waiting for some of the e-filing software like TurboTax to be updated with the new exemption before filing.

Another part of the unemployment question is potential fraud around the 1099 form from the state. Both Tulino and the Department of Employment, Training and Rehabilitation say if you suspect that you have an incorrect 1099 form, file what you believe is the correct amount and file a claim with DETR to get a corrected form.

Nakia McCloud is a special agent with the Las Vegas IRS field office. She said fraud has been a particular problem during the pandemic.

"One thing that did take place this past year based upon the CARES Act being passed to help businesses and individuals through this pandemic, there was a lot of fraud running rampant right around that project itself," she said, "We do have a lot of cases that we're investigating currently that people were applying for these PPP loans... that were fraudulently claimed. That put a lot of people in jeopardy of this past year."

McCloud said there more than 350 investigations into fraud related to the CARES Act alone, which accounted for $440 million in federal tax dollars.

Another issue with the CARES Act and the second relief bill that was passed in January and the most recent COVID rescue plan is people not getting the full amount.

Tulino suggests people indicate on their 1040 form that they did not get the full amount. It's called the Recovery Rebate Credit.

"Basically it's a backstop, if you will, for those who didn't get the full or partial amount of the first two payments and that happened to a lot of folks," he said.

He said the IRS was basing the payments on 2018 or 2019 returns but things might have changed for people during that time, and they could have missed on money owed to them according to the law.

RESOURCES:

IRS Economic Impact Payment line at 800-919-9835

irs.gov - Coronavirus Tax Relief and Economic Impact Payments

irs.gov

Nevada Free Taxes Coalition

TOP TEN TIPS FROM THE IRS:

Gather your records: Round up any documents you will need when filing your taxes, including receipts, canceled checks and other documents that support income or deductions you will be claiming on your tax return. Store them in a safe place.

Report all your income: You will need all your Forms W-2, Wage and Tax Statements, and 1099 income statements to report your income when you file your tax return. To ensure you don’t misplace them, add them to your other records.

Get answers to questions: Use the Interactive Tax Assistant tool available on the IRS website to find answers to your questions about tax credits and deductions.

Use Free File: There is at least one option available for everyone to prepare and e-file a tax return at no cost. Let IRS Free File do the work for you with brand-name tax software or online fillable forms. It's available exclusively at IRS.gov. If your income was $57,000 or less, you qualify to use free tax software. If your income was higher, or you are comfortable preparing your own tax return, there's Free File Fillable Forms, the electronic version of IRS paper forms. Visit IRS.gov/freefile to review your options.

Try IRS e-file: IRS e-file is the best way to file an accurate tax return. It’s safe, easy and the way most taxpayers file their return. Last year, more than 80 percent of taxpayers used IRS e-file. Many tax preparers are now required to use e-file. If you owe taxes, you have the option to file early and pay by July 15.

Weigh your filing options: You have several options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free, face-to-face help at a volunteer site. Weigh your options and choose the one that works best for you.

Use direct deposit: Combining e-file with direct deposit is the fastest and safest way for you to get your refund.

Visit the IRS website: The IRS website at IRS.gov is a great place to find everything you need to file your tax return. This includes many online tools, filing tips, answers to frequently asked questions, the latest tax law changes, forms and publications.

Remember number 17: Check out Publication 17, Your Federal Income Tax, on the IRS website. It’s a complete tax resource that includes information such as whether you need to file or how to choose your filing status.

Review your return: Don’t rush. We all make mistakes when we rush. Mistakes slow down the processing of your return. Be sure to double-check all Social Security numbers and math calculations on your return as these are the most common errors. If you run into a problem, remember the IRS is here to help. Start with IRS.gov.