The American Rescue Plan and your taxes: What you need to know
12th April 2021 · 0 Comments
By Jenny Manrique
Contributing Writer
THE IRS HAS EXTENDED THE DEADLINE FOR FILING TAX RETURNS UNTIL MAY 17. THE CHILD TAX CREDIT WILL BE ISSUED STARTING THIS SUMMER AND A PORTION OF THE UNEMPLOYMENT WILL NOT BE TAXABLE.
(EthnicMediaNews) — The Internal Revenue Service (IRS) extended the tax payment deadline from April 15 to May 17, at a time when the third round of stimulus checks surpassed $335 billion in payments reaching 130 million Americans.
This and other provisions approved in the American Rescue Plan, such as the child tax credit and the establishment of non-taxable unemployment benefits, seek to help families economically battered by the pandemic.
“As the pandemic continues, we remain focused on supporting the federal government’s efforts to help those experiencing financial changes and challenges,” said Ken Corbin, Commissioner at the IRS Wage and Investment Division, during a media briefing hosted by Ethnic Media Services.
“That’s one reason why we extended the due date: individuals have until May 17 to file and pay their 2020 taxes. No one will be penalized or charged interest if they file and pay by that date. This applies only to individuals, not to taxpayers like corporations,” Corbin explained.
This extension also applies to tax year 2020 contributions to an Individual Retirement Account (IRA) or Roth IRA, health savings account, Archer medical savings account, or Coverdell education savings account. However, for those making estimated tax payments for the first quarter of fiscal 2021, the April 15 deadline remains.
Since February 12, the IRS has received 85 million individual tax returns and issued over 56 million refunds totaling almost $164 billion. IRS officials recommend using direct deposit with E-filing as the most immediate way to complete the process and receive your refund in 21 days.
“We know that even with the vaccine rolling out, many folks may not be comfortable going into a brick and mortar office or dealing with their tax preparers (in person),” Corbin said. “We encourage you to E-file and choose direct deposit.”
There are several tax preparation softwares that allow individuals who earn less than $ 72,000 a year to file for free. The IRS one can be found here. The IRS2GO mobile app also allows you to find free assistance in preparing taxes, making payments, and checking the status of refunds.
Stimulus checks
Corbin highlighted the IRS’s work on the rapid disbursement of economic impact payments (EIPs), commonly known as tax-free stimulus checks: in the first round, more than $160 million reached American families, and in the second round that figure was $147 million.
Those who did not receive those payments of up to $1,200 and $600 per person, will be able to claim them through the recovery rebate credit on their tax return. Individuals can access information about their EIP’s through an online federal tax account which they can register for at irs.gov. The account also allows people to create a PIN as a layer of protection to avoid fraud with the use of social security numbers (SSN).
Under the third round of economic impact payments authorized under the American Rescue Plan, the IRS has made more than 130 million payments worth approximately $335 billion, for those who filed their taxes in 2019 or 2020. A new group of social security and other beneficiaries who haven’t filed a tax return may receive checks beginning on April 7. Veterans are also expected to receive their stimulus payments by mid of April.
“The majority (of payments) have been issued as direct deposits,” Corbin said. “But we are also mailing paper checks or EIP cards, which is a prepaid debit card. If we don’t have your bank account information, we encourage you to check your mail and be sure not to throw away that prepaid EIP card.”
Unemployment benefits and child tax credit
The rescue plan also included a new provision for those who received unemployment benefits in 2020: up to $20,400 in unemployment compensation for couples filing joint returns, and $10,200 for all other eligible taxpayers is now not taxable.
And those who have already declared the money received from unemployment through the 1099G form, before the approval of this new benefit, will receive the corresponding refund as of May.
“We are aware that there are many individuals out there whose identity has been compromised. And there have been fraudulent unemployment compensation claims issued in their name. So what we tell people to do is to only file for the actual unemployment compensation they have received,” Corbin added.
The other component of the rescue plan that increased the amount of the child tax credit beginning in fiscal year 2021 allows families to get an advance on that credit beginning in the summer. Even those families who had a new child in 2021 will be able to add him/her as a beneficiary on the IRS.gov portal.
Multilingual initiative
For this tax season, the IRS provided for the first time a new schedule for individuals who want to choose their language of preference for future IRS communications. This is the Limited English Proficiency schedule (LEP) that allows users to choose between 20 different languages: in addition to English and Spanish, they can find Korean, Vietnamese, Russian, Arabic, Haitian Creole, Tagalog, Portuguese, Polish, Farsi, French, Japanese, Punjabi, Premier or Urdu, Bengali, Italian, and two forms of Chinese both traditional and simplified.
According to Sue Simon, Director of Customer Assistance, Relationships and Education at the IRS Wage and Investment Division, the institution has begun translating basic information about taxes and taxpayer rights, as well as the requirements for their dependents, into all these languages.
Simon recalled that undocumented immigrants who are not eligible for a SSN, can fill out the W7 form to request an individual tax identification number (ITIN), which allows them to pay their taxes, a vital requirement for future immigration processes such as citizenship. “We are very careful with the information we receive,” explained Simon. “It is not our purpose to share it with other agencies.”
Simon also highlighted the volunteer program called VITA made up of nearly 90,000 people across the country, who work with community partners to engage them in free tax return preparation in their communities.
“Some of them are banks, colleges. AARP is a national partner and United Way is another partner,” Simon explained. “We also have a partner program called ‘text counseling for the elderly’, which helps with the electronic filing by text.”
While the pandemic has limited in-person assistance, there are currently 11,000 places where individuals can go to file their taxes by appointment for free. And there are also paid preparers who are accountants or tax attorneys working at low-income taxpayer clinics. The IRS website has recommendations on how to choose ethical preparers and a list of people with credentials and qualifications to help with this task.
“I cringe every time I watch a commercial that promises to get someone a bigger refund,” Simon said. “There is no such thing as a bigger refund. If your return is prepared correctly, you will get the refund that is correct for your circumstances.”
Simon warned of the most common scams that include calls or emails from alleged IRS officials asking for tax payments, even threatening to send the police, when the institution only sends collection bills through the mail. She recommended reporting anyone attempting to impersonate IRS personnel to the IRS treasury inspector general for tax administration, or to the Federal Trade Commission (FTC).
This article originally published in the April 12, 2021 print edition of The Louisiana Weekly newspaper.
