Filing taxes is one of the most important things that people need to do in the New Year. This time, however, it will be even more important because of the stimulus checks. Considering this, the IRS has come up with a press release to help people file their 2020 taxes, especially those who didn’t get coronavirus stimulus checks, or got less than what they expected.
Get The Full Series in PDF
Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.
Coronavirus stimulus checks and 2020 taxes
Millions of Americans got $1,200 in stimulus checks after Congress approved the CARES Act in March. Along with the $1,200, people also got $500 for each qualifying child.
The IRS is asking people to keep the Notice 1444, sent out at the same time as the payments, for their records. As per the agency, the direct payment sent under the CARES Act is not taxable.
However, there were many who didn’t get the stimulus checks even though they were eligible, or got less than what they qualified for.
Many of those who didn’t get the checks were those who didn’t file a tax return in 2018 or 2019, or those who failed to send their information to the IRS before the deadline. Those who were eligible but didn’t get the checks, or got less than intended, are still eligible to get the payment as a credit when they file their 2020 tax return, in the form of a Recovery Rebate Credit.
“If a taxpayer didn't receive the full amount of the Economic Impact Payment for which they were eligible, they may be able to claim the Recovery Rebate Credit when they file in 2021,” the IRS says.
Further, the IRS says people are not required to provide details on the Recovery Rebate Credit on tax year 2020 Form 1040 or 1040-SR at the time of filing 2020 taxes, unless they are “eligible to claim an additional credit amount.”
Interest on refund taxable
Along with the stimulus checks, the IRS also answered some of the most asked questions, such as, if the interest on their 2020 refund is taxable or not.
In 2020, there were many who received refunds after they filed their 2019 return by the July 25, 2020 deadline. Such taxpayers also were paid interest, because the tax filing deadline was extended due to the coronavirus pandemic.
As per the IRS, such interest payments are taxable and the taxpayers need to report it. The IRS will be sending out Form 1099-INT to those who received interest of $10 or more.
Separately, the agency also reminded taxpayers of a new charitable deduction change. As per the IRS, the taxpayers who don't itemize deductions can deduct up to $300 in donations to qualifying charities without the need to itemize.
“We encourage people to explore this option to help deserving tax-exempt organizations – and the people and causes they serve,” IRS Commissioner Chuck Rettig said last month.
The IRS also cautioned taxpayers not to depend on getting a refund by a specific day, especially when thinking about big purchases or paying bills.