Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Winter storm disaster relief for Louisiana, Oklahoma and Texas

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA),  the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline. 

March 12, 2021

The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of Economic Impact Payments, the expanded Child Tax Credit, including advance payments of the Child Tax Credit, and other tax provisions will be made available as soon as possible on IRS.gov. The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.

The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who haven’t filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance.

IRS begins delivering third round of Economic Impact Payments to Americans

WASHINGTON – The Internal Revenue Service announced today that the third round of Economic Impact Payments will begin reaching Americans over the next week.

Following approval of the American Rescue Plan Act, the first batch of payments will be sent by direct deposit, which some recipients will start receiving as early as this weekend, and with more receiving this coming week.

Additional batches of payments will be sent in the coming weeks by direct deposit and through the mail as a check or debit card. The vast majority of these payments will be by direct deposit.

No action is needed by most taxpayers; the payments will be automatic and, in many cases, similar to how people received the first and second round of Economic Impact Payments in 2020. People can check the “Get My Payment” tool on IRS.gov on Monday to see the payment status of the third stimulus payment.

“Even though the tax season is in full swing, IRS employees again worked around the clock to quickly deliver help to millions of Americans struggling to cope with this historic pandemic,” said IRS Commissioner Chuck Rettig. “The payments will be delivered automatically to taxpayers even as the IRS continues delivering regular tax refunds. We urge people to visit IRS.gov for the latest details on the stimulus payments, other new tax law provisions and tax season updates.”

Highlights of the third round of Economic Impact Payments; IRS will automatically calculate amounts

In general, most people will get $1,400 for themselves and $1,400 for each of their qualifying dependents claimed on their tax return. As with the first two Economic Impact Payments in 2020, most Americans will receive their money without having to take any action. Some Americans may see the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.

Because these payments are automatic for most eligible people, contacting either financial institutions or the IRS on payment timing will not speed up their arrival. Social Security and other federal beneficiaries will generally receive this third payment the same way as their regular benefits. A payment date for this group will be announced shortly.

The third round of Economic Impact Payments (EIP3) will be based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered online at IRS.gov using the agency’s Non-Filers tool last year, or alternatively, submitted a special simplified tax return to the IRS. If the IRS has received and processed a taxpayer’s 2020 return, the agency will instead make the calculation based on that return.

In addition, the IRS will automatically send EIP3 to people who didn’t file a return but receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) or Veterans Affairs benefits. This is similar to the first and second rounds of Economic Impact Payments, often referred to as EIP1 and EIP2.

For those who received EIP1 or EIP2 but don’t receive a payment via direct deposit, they will generally receive a check or, in some instances, a prepaid debit card (referred to as an “EIP Card). A payment will not be added to an existing EIP card mailed for the first or second round of stimulus payments.

Under the new law, an EIP3 cannot be offset to pay various past-due federal debts or back taxes.

The IRS reminds taxpayers that the income levels in this new round of stimulus payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly.) The reduced payments end at $80,000 for individuals ($160,000); people above these levels are ineligible for a payment. More information is available on IRS.gov.

New payments differ from earlier Economic Impact Payments

The third round of stimulus payments, those authorized by the 2021 American Rescue Plan Act, differs from the earlier payments in several respects:

• The third stimulus payment will be larger for most people. Most families will get $1,400 per person, including all dependents claimed on their tax return. Typically, this means a single person with no dependents will get $1,400, while a family of four (married couple with two dependents) will get $5,600.
• Unlike the first two payments, the third stimulus payment is not restricted to children under 17. Eligible families will get a payment based on all of their qualifying dependents claimed on their return, including older relatives like college students, adults with disabilities, parents and grandparents.

Additional information is available on IRS.gov.

Today, the IRS published the latest executive column, “A Closer Look,” which features Frank Nolden, Stakeholder Partnership, Education and Communications Director, discussing the benefits and history of  volunteer tax preparation sites. “The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs…help millions of low-to-moderate income taxpayers accurately prepare and file their tax returns for free with help from IRS-certified volunteers,” said Nolden. Read more here. Read the Spanish version here

“A Closer Look” is a column from IRS executives that covers a variety of timely issues of interest to taxpayers and the tax community. It also provides a detailed look at key issues affecting everything from IRS operations and employees to issues involving taxpayers and tax professionals.

People should be on the lookout for identity theft involving unemployment benefits

The IRS urges taxpayers whose identities may have been used by thieves to steal unemployment benefits to file a tax return claiming only the income they actually received.

In 2020, millions of taxpayers were affected by the COVID-19 pandemic through job loss or reduced work hours. Some taxpayers applied for and received unemployment compensation from their state. By law, unemployment benefits are taxable.

Scammers also took advantage of the pandemic by filing fraudulent claims for unemployment compensation
using stolen personal information of individuals who had not filed claims. Payments made as a result of these fraudulent claims went to the identity thieves.

Taxpayers who receive an incorrect Form 1099-G should contact the issuing state agency to request a revised form. If they’re unable to get a timely, corrected form from states, they should still file an accurate tax return, reporting only the income they received. They should save whatever documentation they have regarding their attempts to receive a corrected form from their state agency.

What people should if they think they might be an identity theft victim
People should visit Identity Theft Central for more information about the signs of identity theft.

Taxpayers do not need to file a Form 14039, Identity Theft Affidavit, with the IRS about an incorrect Form 1099-G. An affidavit should only be filed only if the taxpayer’s e-filed return is rejected because a return using the same Social Security number already has been filed.

If a taxpayer is concerned that their personal information has been stolen and they want to protect their identity when filing their federal tax return, they can request an identity protection PIN from the IRS.

An Identity Protection PIN is a six-digit number that prevents someone else from filing a tax return using a taxpayer’s Social Security number. The IP PIN is known only to the taxpayer and the IRS, and this step helps the IRS verify the taxpayer’s identity when they file their electronic or paper tax return.

States should not issue Forms 1099-Gs to taxpayers they know to be victims of identity theft involving unemployment compensation.

Purpose:
The purpose of Volunteer Tax Alerts (VTAs) is to update, correct or clarify tax law topics. VTA messages are valuable educational tools that are highly beneficial when delivered immediately to you as our intended audience, IRS VITA and TCE partners and certified volunteers. 

Link(s) to latest VTA:  VTA 2021-07 Claiming Recovery Rebate Credits

Key Messages for IRS VITA/TCE Partners: 
Site/local coordinators are to ensure all VTAs are reviewed and discussed with all volunteers. It is recommended that you hold daily debriefings with your volunteers to review identified trends. This is also a good time to allow your volunteers the opportunity to read the alert(s), ask questions or discuss any concerns surrounding their tax preparation experience.

Contact information: 
Partners are encouraged to direct any questions or concerns to their Relationship Manager.

VITA/TCE Volunteer Tax Alert

VTA 2021-05, Economic Impact Payments for Residents of U.S. Territories

Purpose:

To alert VITA/TCE volunteers about Economic Impact Payments (EIPs) and the Recovery Rebate Credit for residents of U.S. territories.

Message to Volunteers:
Special rules in the law apply to Puerto Rico, the U.S. Virgin Islands, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. In general, the tax authorities in each U.S. territory will make payments to eligible residents. Individuals who are residents of one of these U.S. territories with questions about a payment should contact their local tax authority.

Individuals who received an EIP from more than one jurisdiction:
Resident of a U.S Territory: Individuals who received a payment from the IRS and a U.S territory tax agency and are residents of a U.S. territory for the 2020 tax year should consult with their U.S. territory tax agency concerning information about an incorrect or duplicate payment.

Not a resident of a U.S. Territory: Individuals who received a payment from more than one jurisdiction and who are NOT residents of a U.S. territory for the 2020 tax year should return any incorrect or duplicate payment received from the U.S. territory tax agency to the IRS following the instructions about repayments. Go to the Economic Impact Payment Information Center on IRS.gov, Topic I: Returning the Economic Impact Payment for instructions.

Individuals who did not receive an EIP or believe they did not receive the correct amount:

For residents of a U.S. territory, don’t complete the Recovery Rebate Credit Worksheet and don’t enter an amount on line 30 of Form 1040 or Form 1040-SR. In general, the tax authorities in American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, and the Northern Mariana Islands will provide the Recovery Rebate Credit to eligible residents. Territory residents should direct questions about Economic Impact Payments or the 2020 Recovery Rebate Credit to the tax authorities in the territories where they reside.

Completing the return of a resident of a U.S. territory using TaxSlayer:

Select “SKIP” on the Recovery Rebate Credit screen. This will allow you to prepare the return without completing the Recovery Rebate Credit Worksheet.

Resources:
■ Tax Year 2020 Form 1040 and Form 1040-SR Instructions
■ Economic Impact Payment Information Center

For additional questions, please talk to your site coordinator, partner or IRS SPEC relationship manager.

Thank you for volunteering and for your dedication to top QUALITY service!

VITA/TCE Volunteer Tax Alert

VTA 2021-02 Certification Testing and Using Practice Lab – UPDATE
Purpose

Volunteers should use caution when completing their certification tests using the Practice Lab.

Identified Issues
The Practice Lab has incorporated additional 2020 tax law changes, including the rebate recovery calculation to account for the first and second economic impact payments. These updates will have an impact on the Link and Learn online certifications answers.

Messages to Volunteers
1. Final revisions of the Form 6744, VITA/TCE Test-Retest, have already printed/posted. Because of this, specific questions regarding the economic impact payment/recovery rebate credit will not be updated. In the initial rollout of the online certifications and published Form 6744, we included the following disclaimer:

“Note: Congress may have enacted additional legislation that will affect taxpayers after this publication went to print. Please answer questions based on the information provided in Publication 4491, VITA/TCE Training Guide, and Publication 4012, VITA/TCE Resource Guide.”

Regardless of the calculation using the Practice Lab or other software, volunteers should follow this guidance. These questions can be answered without using software and using the publications stated above with the 10-2020 Revision date.

Also, there are some questions where the additional economic impact payment/recovery rebate credit will impact calculations for bottom line amounts. These questions will not be updated either. However, you can enter these answers to score correctly:

■ Basic Scenario 7, Test Question 24 – Emma has a balance due of $________ on her 2020 tax return. Answer: 289

■ Advanced Scenario 7, Test Question 27 – What are the total payments reported on the Kennedys’ Form 1040? $________. Answer: 4385

■ Advanced Scenario 7, Retest Question 27 – What are the total payments reported on the Kennedys’ Form 1040? $________. Answer: d. $4,385

2. The following disclaimer was added for Advanced Scenario 6, Question 17, with the initial release of the Practice Lab:
“Note: In the initial release of the Practice Lab, last year’s Federal Poverty Line amount is used to calculate Form 8962, Premium Tax Credit. Enter 1646 as the correct answer.”

3. New and more specific information has been released regarding the deferral for certain Schedules H and SE filers. Taxpayers can’t defer amounts they’ve already paid, which includes:
■ Federal income taxes withheld
■ Estimated taxes
■ Amounts paid with request for extension to file
■ Excess social security and tier 1 RRTA taxes withheld
This information changes an answer:

■ Advanced Scenario 8, Test Question 35. – Which of the following statements is true? Answer: d. Richard does not have the option to defer half of his share or the employer share of Social Security tax.

Resources
Practice Lab
VITA/TCE Central

For additional questions, please talk to your site coordinator, partner or IRS SPEC relationship manager.

Thank you for volunteering and for your dedication to top QUALITY service!